Common Terms and Jargon in the E-Commerce Industry

Objectives

By the end of this lesson, learners will be able to:

• Identify and explain common e-commerce terms and jargon.
• Understand the roles and functions of key e-commerce components.

Introduction

The e-commerce industry is filled with specific terms and jargon that are essential to understand for effective communication and operation within the field. This lesson introduces and explains these key terms, providing a solid foundation for more advanced topics.

Shopping Cart

A shopping cart is a software application that allows customers to select and purchase products on an e-commerce site. It functions as a virtual basket where users can store items they wish to buy before proceeding to checkout. The shopping cart keeps track of selected items, calculates the total cost, and facilitates the payment process, ensuring a seamless shopping experience for customers.

Payment Gateway

A payment gateway is a service that authorises and processes online payments, ensuring secure transactions between customers and merchants. It acts as an intermediary between the e-commerce site and the financial institution, encrypting sensitive information such as credit card details to prevent fraud. Payment gateways are crucial for maintaining trust and security in online transactions.

Fulfillment

Fulfilment refers to the process of receiving, processing, and delivering orders to customers. It encompasses various activities, including inventory management, packaging, shipping, and handling returns. Efficient fulfilment is essential for ensuring customer satisfaction and loyalty, as it directly impacts the speed and accuracy of order delivery.

Drop Shipping

Drop shipping is a retail fulfilment method where a store doesn’t keep the products it sells in stock. Instead, it purchases items from a third party and has them shipped directly to the customer. This model allows businesses to operate with lower inventory costs and reduced risk, making it an attractive option for small and medium-sized e-commerce ventures.

SEO (Search Engine Optimization)

Search Engine Optimization (SEO) is the practice of optimizing a website to rank higher in search engine results pages (SERPs) to increase organic traffic. SEO involves various techniques, such as keyword research, content creation, and link building, to enhance a site’s visibility and attract more visitors. Effective SEO strategies are crucial for driving traffic and generating leads in the competitive e-commerce landscape.

PPC (Pay-Per-Click)

Pay-Per-Click (PPC) is an online advertising model where advertisers pay a fee each time one of their ads is clicked. PPC campaigns are commonly used on platforms like Google Ads and social media networks to drive targeted traffic to e-commerce sites. This model allows businesses to reach potential customers actively searching for products or services, making it a cost-effective marketing strategy.

Conversion Rate

 The conversion rate is the percentage of website visitors who take a desired action, such as making a purchase or signing up for a newsletter. It is a key metric for measuring the effectiveness of an e-commerce site’s design, content, and marketing efforts. Higher conversion rates indicate a successful user experience and effective call-to-action strategies.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) refers to the total cost of acquiring a new customer, including marketing and sales expenses. Calculating CAC helps businesses understand the efficiency of their marketing strategies and allocate resources effectively. Lowering CAC while maintaining or increasing customer acquisition is a common goal for e-commerce businesses aiming for sustainable growth.

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is the total revenue a business can reasonably expect from a single customer account throughout the business relationship. CLV helps businesses understand the long-term value of their customers and make informed decisions about marketing, sales, and customer retention strategies. Increasing CLV is essential for maximising profitability and achieving long-term success in e-commerce.

Summary

Familiarity with e-commerce terms and jargon is essential for understanding the industry and effectively managing online business operations. This knowledge will support further learning and practical application in e-commerce.