E-Commerce Industry Terminology

A/B Testing

A controlled experiment that splits traffic between two or more page, offer, or flow variants to determine which performs better against a defined metric (e.g., conversion rate, revenue per visitor).

We A/B tested the hero image and saw a 7% lift in checkout completion; Run a 14-day A/B test with 95% significance; Variant B increased AOV by $5.

Abandoned Cart

When a shopper adds items to the cart but does not complete checkout. Measured as a rate and often addressed with remarketing and email/SMS automations.

Our cart abandonment rate is 68%; Trigger a 3-step abandoned cart email flow; Offer an exit-intent discount to reduce abandonments.

API (Application Programming Interface)

A set of protocols for software components to communicate. In e-commerce, APIs connect storefronts, payment gateways, OMS/WMS, PIM, analytics, and logistics services.

Integrate the carrier rates via the shipping API; Create orders programmatically using the Shopify Admin API; Send webhooks to the OMS when an order is paid.

Attribution Model

A rule set that assigns credit for conversions to marketing touchpoints (e.g., first click, last click, linear, data-driven) to evaluate channel effectiveness.

Switching from last-click to data-driven attribution changed our ROAS by channel; Use a 40/40/20 multi-touch model; Paid social is under-attributed in last-click.

Average Order Value (AOV)

Average revenue per order. Calculated as total revenue divided by number of orders. Often increased via bundling, cross-sells, and thresholds.

Our AOV is $78 this quarter; Raising the free shipping threshold nudged AOV up 9%; Bundles increased AOV on PDPs.

Buy Now, Pay Later (BNPL)

A checkout option that lets customers split payments into installments. Providers include Affirm, Klarna, and Afterpay; can boost conversion and AOV with added risk/cost.

Add BNPL messaging on PDPs to improve conversion; BNPL accounts for 12% of orders; Evaluate BNPL provider fees and chargeback policies.

Chargeback

A forced refund initiated by the cardholder’s bank that reverses a transaction. Driven by fraud or customer disputes and incurs fees and operational workload.

Keep chargeback rate below 0.9%; Submit compelling evidence for ‘item not received’ disputes; Implement 3DS to reduce friendly fraud.

Click-Through Rate (CTR)

The ratio of clicks to impressions for an ad, email, or link. Indicates engagement and heavily influences ad platform costs and delivery.

Email CTR averages 3%; Low CTR is hurting our Quality Score; Test new ad creative to lift CTR.

Content Management System (CMS)

Software that lets non-engineers create and manage site content (pages, blogs, PDP copy). In headless architectures, a CMS powers the front end via APIs.

Marketing can launch landing pages via the CMS; Our headless CMS feeds PDP content; Localize content in the CMS for EU stores.

Conversion Rate Optimization (CRO)

A structured approach to improving the percentage of visitors who complete desired actions (add-to-cart, purchase) via research, testing, and UX improvements.

A CRO sprint lifted conversion rate by 0.4pp; Prioritize hypotheses with an ICE score; Run usability tests before redesigning checkout.

Cross-Selling

Encouraging customers to buy complementary products to increase order value and satisfaction (e.g., accessories with a primary item).

Cross-sell cables with cameras on the PDP; Add in-cart cross-sell modules; Recommend complementary SKUs in post-purchase email.

Customer Acquisition Cost (CAC)

Total marketing and sales spend divided by the number of new customers acquired in a period. A core unit economics metric.

Our blended CAC is $42; CAC by channel shows paid social at $58; Lower CAC by improving landing page relevance.

Customer Lifetime Value (CLV)

Projected net revenue or contribution margin generated by a customer over their relationship with the brand. Often evaluated by cohort and compared to CAC.

Target CLV of $180 per cohort; Subscriptions increased CLV by 25%; Use predicted CLV to bid higher for high-value segments.

Customer Relationship Management (CRM)

Processes and systems used to manage customer data, communications, and relationships across channels (email, SMS, support, loyalty).

Sync order events into the CRM; Build VIP segments in the CRM; Trigger post-purchase journeys from the CRM.

Demand Forecasting

Predicting future product demand to plan inventory, purchasing, and capacity. Uses historical data, seasonality, promotions, and external signals.

Use a 12-week moving average to forecast demand; Apply event uplift for Black Friday; Forecast drives PO timing and safety stock.

Dropshipping

A fulfillment model where the merchant sells products that are shipped directly from the supplier to the customer, reducing inventory risk but adding complexity.

Test new SKUs through dropshipping before stocking; Expect longer lead times with dropship suppliers; Ensure MAP compliance with vendors.

Dynamic Pricing

Adjusting prices in near real-time using rules or algorithms based on demand, inventory, competitor prices, or customer segments.

Reprice daily based on competitor changes; Offer markdowns to clear slow-moving SKUs; Use price elasticity modeling to protect margin.

Email Marketing Automation

Behavior- or lifecycle-triggered email sequences that nurture, convert, and retain customers using audience segments and personalized content.

Build welcome, post-purchase, and winback flows; Trigger replenishment emails at day 30; Segment by engagement to protect deliverability.

First-Party Data

Customer data collected directly by the brand from its owned channels (site, app, CRM). Preferred for privacy, performance, and durability versus third-party data.

Collect preferences via a quiz to build first-party audiences; Model lookalikes from 1P purchasers; Use server-side tagging to improve 1P data quality.

Fraud Prevention

Tools and processes to detect and prevent fraudulent transactions (AVS/CVV checks, device fingerprinting, risk scoring, 3D Secure, velocity checks).

Enable 3DS in high-risk markets; Use risk scores and rules to auto-decline; Route suspicious orders to manual review.

Gross Merchandise Value (GMV)

Total sales value of goods sold over a period, typically before returns, discounts, and taxes. A key topline measure for marketplaces and platforms.

Marketplace GMV grew 18% YoY; Calculate take rate as revenue ÷ GMV; GMV excludes returns and taxes in our reporting.

Headless Commerce

An architecture that decouples the front end from the commerce back end, connected via APIs, enabling flexibility in UX, performance, and channel delivery.

Next.js front end with a headless Shopify back end; Use GraphQL Storefront API for PDPs; Swap search provider without replatforming.

Influencer Marketing

Partnering with creators or publishers to promote products and drive awareness or sales, typically tracked via unique links or codes.

Track revenue via UTM and discount codes; Whitelist creator content for paid social; Launch an affiliate program for influencers.

Last-Mile Delivery

The final leg of the delivery from a local node to the customer’s address. A major cost driver and customer experience lever.

Offer same-day delivery in urban zones; Use micro-fulfillment to reduce last-mile costs; Improve delivery ETA accuracy at checkout.

LTV:CAC Ratio

A benchmark comparing lifetime value to acquisition cost. Indicates the efficiency and sustainability of growth.

Aim for a 3:1 LTV:CAC ratio; Ratio dipped after ad costs rose; Improve ratio via retention programs and AOV lifts.

Marketplace

A platform where multiple sellers list products for buyers (e.g., Amazon). Value comes from network effects, assortment, and trust mechanisms.

List SKUs on Amazon and Walmart marketplaces; Build a curated third-party marketplace on our site; Monitor marketplace policy compliance.

Merchant of Record (MoR)

The legal entity responsible for processing transactions, taxes, refunds, and chargebacks. Offloading MoR reduces compliance burden for cross-border selling.

Use an MoR provider to handle global VAT/GST; The platform acts as the MoR and manages chargebacks; MoR status affects tax nexus.

Mobile Optimization

Designing and engineering the storefront for mobile devices to maximize speed, usability, and conversion (responsive UX, mobile wallets, performance).

Simplify nav and enlarge tap targets; Enable accelerated mobile checkout with wallets; Compress images to improve LCP.

Omnichannel

Providing a seamless customer experience across online and offline channels with unified data, messaging, and operations.

Buy online, pick up in store (BOPIS); Use unified inventory across channels; Offer BORIS for easy returns.

Order Management System (OMS)

Software that orchestrates orders across channels and nodes: capturing, routing, allocating inventory, and managing fulfillment and returns.

OMS assigns orders to the closest warehouse; Split shipments for multi-SKU orders; Power BOPIS and ship-from-store via the OMS.

Out-of-Stock (OOS)

A state where inventory is unavailable for purchase. Impacts conversion, customer satisfaction, and can harm SEO if poorly handled.

Add ‘notify me’ to OOS PDPs; Exclude OOS SKUs from ads; Use backorders to avoid OOS during peak.

Pay-Per-Click (PPC)

An advertising model where advertisers pay when users click, commonly used in search, shopping, and social ad platforms.

Increase PPC bids on high-CLV keywords; Segment Shopping campaigns by margin; Pause low-CTR ad groups.

Payment Gateway

A service that authorizes and routes online payments between the merchant, acquiring bank, card networks, and issuing banks.

Use Stripe as our gateway; Enable 3DS via the gateway; Set up retries to reduce soft declines.

PCI DSS (Payment Card Industry Data Security Standard)

A set of security standards for handling cardholder data. Compliance reduces breach risk and can limit liability and costs.

Stay in SAQ A by using hosted fields; Annual PCI attestation; Scope reduction by tokenizing card data.

Personalization

Customizing content, offers, and experiences based on user data, context, or behavior to increase relevance and conversion.

Show personalized recommendations on PDPs; Dynamic homepage by segment; Use zero-party data to tailor promotions.

Product Information Management (PIM)

A centralized system for creating, enriching, and distributing product data and media across channels and regions.

Enrich attributes and assets in the PIM; Syndicate product feeds to marketplaces; Localize PDP content via the PIM.

Remarketing/Retargeting

Serving ads or messages to people who previously interacted with your site or content but did not convert, to bring them back to purchase.

Run dynamic product ads to cart abandoners; Suppress recent purchasers; Use 7-day vs 30-day retargeting windows.

Repeat Purchase Rate

The percentage of customers who make more than one purchase within a defined time window. A key retention metric.

90-day repeat purchase rate is 32%; Subscriptions increased repeat rate; Track repeat rate by acquisition channel.

Return Merchandise Authorization (RMA)

A standardized process (and identifier) for approving, tracking, and processing customer returns and exchanges.

Generate RMA labels automatically; 30-day RMA policy; Offer instant exchanges via the RMA portal.

Sales Tax Nexus

A legal connection to a jurisdiction that obligates a seller to collect and remit sales tax, triggered by physical presence or economic thresholds.

Reached economic nexus in CA at $500k; Marketplace facilitator rules apply; Register in new states after crossing thresholds.

Search Engine Optimization (SEO)

Practices to improve organic visibility and traffic from search engines through technical, content, and authority enhancements.

Implement PDP schema markup; Fix crawl budget issues; Build authoritative backlinks.

SKU (Stock Keeping Unit)

A unique identifier for a specific product variant used to manage inventory, pricing, and merchandising.

Bundle requires its own SKU; Track shrinkage at the SKU level; Map SKUs to barcodes and locations.

Social Proof

Evidence that others have purchased or endorse a product, used to build trust and increase conversion (reviews, UGC, badges).

Display reviews and ratings on PDPs; Show UGC galleries; Use ‘X people bought this today’ responsibly.

Subscription Commerce

Recurring revenue model where customers receive products or services on a schedule (subscriptions, memberships, auto-replenishment).

Offer subscribe-and-save with flexible cadence; Reduce churn with skip/pause; Measure MRR and churn cohorts.

Third-Party Logistics (3PL)

Outsourced warehousing and fulfillment services that store inventory and pick, pack, and ship orders on a merchant’s behalf.

Onboard to a multi-node 3PL; SLA requires 99% same-day pick/pack; Send ASN before inbound to 3PL.

Unit Economics

Per-order financials that assess profitability after variable costs (COGS, shipping, payment fees, pick/pack, CAC, returns).

Positive unit economics at $60 AOV; Contribution margin V2 includes variable overhead; Sensitivity analysis on shipping costs.

User-Generated Content (UGC)

Content created by customers (photos, videos, reviews) that brands repurpose to build authenticity and drive conversion.

Collect rights for UGC featuring our brand; Curate UGC to PDPs; Incentivize UGC via contests.

Warehouse Management System (WMS)

Software that manages warehouse operations: receiving, putaway, slotting, picking, packing, cycle counts, and shipping.

WMS supports wave picking; Improve bin location accuracy; Integrate WMS with OMS for real-time inventory.

Web Accessibility (WCAG)

Guidelines and practices to ensure websites are usable by people with disabilities, reducing legal risk and expanding reach.

Achieve WCAG 2.2 AA; Add alt text and focus states; Ensure full keyboard navigability and sufficient contrast.

Zero-Party Data

Data a customer intentionally and proactively shares (preferences, intents), providing high-quality signals for targeting and personalization.

Use a preference center to collect zero-party data; Run a quiz to capture style and fit; Power personalization with declared intents.