Today we have the 4th and final post in my online business terminology series – eCommerce.
In the 3 previous weeks we’ve covered:
By eCommerce terminology I mean terms used when you have your own website/online shop and shopping cart.
While many of these terms may seem very basic for experienced online traders I’m sure that newbies will find my explanations valuable, especially if you haven’t started an online shop and just planning on doing so in the near future (if you have just purchased my eCommerce Magnates course for example).
So without further ado, let’s get started with the most common eCommerce terms that every online seller should know about!
Shopping Cart – this is the software that you use to build & manage your online shop. Without a shopping cart you really can’t build a fully functional online shop. A shopping cart will provide your store front design (your website/product pages etc.) as well as your back-end admin infrastructure where you manage all settings, process orders and do many more tasks.
There are two major types of shopping carts:
- Hosted carts (like Big Commerce) where your shop is hosted on the shopping cart company’s servers.
- Self hosted carts (like Open Cart) where you host the shop on your own server space.
I strongly recommend that you use a hosted cart instead of a self hosted one, especially if you’re new to all this. With self hosted carts there is a lot of extra work involved and they are in general more complicated and buggy compared to hosted carts.
Payment Processor – company that provides payment processing facilities. By payment processing I mean the process when customers enter their credit card details into your checkout page and then their card gets charged.
Merchant Account – financial institution where the money you charge customers is held and then transferred to your bank account. There are many companies that offer both Merchant Accounts and Payment processing solutions in one place to make the whole set-up and managing of transactions even easier (a classic example would be PayPal – offering your payment processor and merchant account services in one place).
Abandoned Cart – a situation where a customer adds items to their shopping cart, maybe even starts entering their details on the checkout page BUT leaves your website without making the payment.
Cart abandonment is a HUGE issue in the eCommerce world and you’ll find many tools online that help sellers to recover those customers and make them go back and complete their checkout. The most popular of which is to send an email after the customer abandons their shopping cart offering them some sort of incentive to complete the checkout, such as a coupon code.
Newsletter – when you run an online shop, you quickly start to accumulate a list of customers and more specifically – an email list of your customers. A newsletter is a way to send out batch emails to all your customers OR as with more advanced carts, you can create various segments and send specific messages to those customers.
For example you may want to send an email to customers who haven’t purchased anything from you in the last 2 months OR customers who have purchased a specific product in the last 2 weeks. The opportunities are endless and by cleverly segmenting your customers based on their actions, location, spending habits etc. you can create very effective email campaigns to get those repeat sales in.
Customer Acquisition Cost – this is the amount of money you have to spend to secure one customer. This indicator is very important and shows how aggressive you have to be with marketing/paid promotions to get customers.
It’s even more important when you sell a subscription type of service/product as if you know your customer acquisition cost and the average time each customer stays with your service, you can easily calculate your margins, allocate a marketing budget etc.
Traffic – no, this is nothing to do with cars! Traffic in the eCommerce world means all the people that visit your website/online shop.
Traffic is the BIGGEST obstacle every online shop owner faces! With no traffic there are no sales, as simple as that. Building an online shop is the easy part – getting traffic, lots of traffic, to it is the hardest part. Generating traffic to your shop is the most crucial part to any website operation and if you have no idea about how to generate traffic, there’s no point in starting an online shop in the first place.
Views – a view is when a person visits a page on your shop. This is mostly used in relation to product pages where you want to analyse how many VIEWS it takes to get a sale.
If you’re already selling on eBay & Amazon, you’ll know that we have Views on those two platforms too.
Conversion rate – this basically means Sales to Views ratio. For example, if you get 5 sales from 500 views, that means your conversion rate is 1% (5 divided by 500 and multiplied by 100 to get it as a percentage).
As a shop owner you’ll constantly work on conversion rate optimisation, which means changing/testing elements on your website, pricing, checkout pages, ads etc. to aim for higher conversion rates. As it’s not enough to just get traffic to your shop – you need to convert that traffic into sales!
Obviously the quality of traffic you get will play a huge role in conversion rates too. The more targeted the traffic, the higher conversion rates you’ll get. For example – if you sell Blue Shoes and you run two ads – one for Shoes and one for Blue Shoes., the blue shoes ad will generate a much higher conversion rate as the ad itself pre-qualifies visitors to ones that are interested specifically in Blue Shoes.
Refund – giving back money for a purchase. Refunds are a part of any online selling activity – be it eBay, Amazon or your own online shop. With some niches and products refunds can actually be a major problem – for example with clothing/shoes where there’s a very high return rate due to wrong sizes/colours etc.
Chargeback – this is a situation every seller tries to avoid. Chargeback means that a customer has informed their bank/credit card company that they didn’t make that purchase – basically reporting an unauthorised transaction.
In most cases this ends with you having to refund the transaction, paying a processing/penalty fee on top and the buyer keeping the item!
There are genuine chargeback cases and there are fraudulent ones – where people take advantage of online sellers and simply get stuff for free. There’s also a chance that someone has indeed stolen credit card data and used it in a scam of course.
In recent years there have been some improvements in this with address verification systems in place and other security measures but still – be ready to get a chargeback case from time to time.
RMA – Return Merchandise Authorisation. This term is simply used to describe the returns process in a shopping cart. Most carts now offer a built in RMA system which allows users to start a returns process, print out a shipping label and send goods back to the seller.
Then you, as a seller, can also see the process in your dashboard and issue a refund when the item is returned and even add the inventory back to your stock (if it’s returned brand new and un-opened).
This is much easier and more efficient than dealing with each return case manually via customer support, especially when you reach the stage of having hundreds and thousands of orders per month.
Sitemap – a XML file that lists all the URLs (links) for any given website. Basically it contains information about all the pages in your shop, in an easy to understand, list format.
Sitemap is something most carts will generate for you automatically and even submit to Google so that it’s easier to index all pages on your website.
Apps – many shopping cart systems nowadays allow 3rd party developers to create special tools/software that can be used WITHIN the shopping cart environment. Basically this means that your shopping cart gets connected to other applications to offer more functionality.
The most popular apps are related to:
- Shipping process management
- Email marketing
For example you can connect Mail Chimp’s email service to your online shop to better manage your email communication and newsletters with buyers.
Such 3rd party apps are very valuable as often in-built functionality for specific tasks in shopping carts are not that advanced, hence you want to use a standalone application for such specific tasks.
SKU – stock keeping unit. Each product/product variation you have in your shop will have a SKU number. This can be made of numbers or letters or both and will help you identify each unique product you have in stock.
Google Shopping – these are basically product ads built in to Google’s search results. If you have an online shop, you can sign up for a Google Shopping account, submit all your products to Google and basically pay Google for your products to be shown in search results.
Most shopping carts will have built in tools for connecting your shop to Google Shopping but you’ll still have to manage your bids directly from your actual Google Shopping account.
Analytics – tools/software that help you analyse various processes on your website – like traffic, conversion rates, order values, ad returns and many more!
While some shopping carts offer basic built in analytics, in most cases it’s better to integrate Google Analytics as they provide much more in-depth tools for such analysis.
SSL Certificate – these are special scripts that are installed to make any page, folder or whole website secure. SSL works by encrypting the data shown on your website so that, for example, when people enter credit card details on your checkout page, hackers can’t steal that information.
If you want to process payments directly on your checkout page, you’ll have no choice but to buy a SSL certificate. Just like with domain names, SSL certificates incur a yearly fee which usually starts at around $100 and goes up to thousands for specific applications. Most online shops don’t need complex SSL set-ups so generally the cheapest SSL your cart offers will be good enough!
FTP – File Transfer Protocol. This is a system that allows you to transfer files from your computer to your website WITHOUT using a web based file management system. You can simply install FTP software (like File Zilla) on your computer and transfer files to and from your website from your desktop.
Web DAV – it’s a similar system to FTP and basically does the same thing. Web DAV is considered a more secure system than FTP so many shopping carts use Web DAV instead.
WYSIWYG Editor – it sounds complicated but it’s actually a simple acronym for What You See Is What You Get editor.
Long gone are the times when we had to work with HTML, PHP and other codes directly to create a website or format a page. Nowadays all shopping carts will have a visual, WYSIWYG editor built into your admin panel where you can simply write products pages, category pages and everything else in a simple, Word-like interface.
SEO – Search Engine Optimisation. Basically this means doing everything to get your online shop and product/category pages as high in Google search results as possible.
There are two main SEO categories:
- ON-page SEO. This relates to all the things you can do with your website/online shop to make it rank well in Google search results.
- OFF-page SEO. This relates to everything you can do OUTSIDE your shop to improve your rankings! This mostly means quality content distribution and building high quality back-links to your shop.
If you want to make your shop a success and don’t want to just rely on paid advertising, it’s crucial to learn how to do SEO properly as in my opinion SEO is the BEST traffic generation strategy for any online business. As once you get those rankings, you get FREE traffic every single day without paying a penny!
And there you go – a list of the most important terms used in the eCommerce World! I’m sure I’ve missed a number of important ones out so if you have any suggestions on what terms I should include in this list, please leave your ideas below this post, in the comments box.
And don’t forget to check out the 3 previous posts in this series:
I really hope these 4 posts were valuable for both newbies and more experienced online sellers!