I don’t know about you but I love cheat sheets that are straight to the point and that can guide me through this tech maze! When I first started my business I was speaking with marketers, agencies, wholesalers and a variety of different platforms. A bunch of these terms were thrown around as if I were supposed to know them already. Back then, these words were as unfamiliar to me as “meconium” or “latch” may be to a childless college student.
These words may be out of your comfort zone now, but that is no reason to be put off! I’ve put together this guide so that you can use and understand these terms with ease as you move forward with your e-commerce business.
If you have a term that you would like me to add to the list, please comment below with your suggestions! I want to make sure that this list is the internet’s ultimate guide to terms used in e-commerce and dropshipping.
Table of Contents
A/B testing is an experiment where you show your customer two variations of something. After a while, usually a month, you take a look at how well each variation did and you analyze which variation has higher sales. Sometimes the differences between the two versions are very small – like whether your buttons are yellow or red – but you’d be surprised by how much of a difference these small changes can make to your sales!
One place where you can use A/B Testing is on your website. Websites usually have a landing page that promotes your product or service. To test what sells your products best, you can create two versions of that page with different colour schemes, content, or layout. Some of the visitors would see one version of the page and the other half would see a second option. Then, you would be able to see which version of the page sold your product or service better through your analytics.
This is a marketing strategy wherein your e-commerce business would partner with another online publisher or website to encourage and promote their products through a designated link. In return, that company or person, called an affiliate, would receive a commission for every visitor to the other website, or for each sale from the promotion that came through their link.
Often, affiliate links will show up on blog posts that tell you to click on a link to purchase something that the affiliate recommends.
AVERAGE TIME ON SITE:
Behaviour targeting is very similar to interest targeting in that it relies on data from the analytics of various search and social platforms. However, its difference is in what exactly it is monitoring. While interest targeting shows what kinds of things a consumer likes, behaviour targeting focuses on what kinds of things a user clicks on, reads, or pays attention to. This allows consumers to be shown things that are relevant to them.
When a visitor bounces from your webpage, that means that they simply took a quick look at it, and immediately went to look at another page instead, perhaps by hitting the back button and returning straight to their Google results. Whatever they saw on your webpage, it either wasn’t what they thought it would be, or it wasn’t interesting enough to them for some reason.
Clients can bounce for perfectly good reasons, but if a lot of people are looking at your website and immediately getting off of it, then there’s usually a mismatch between what people are expecting or hoping to see, and what they actually see on your page.
Step 1: Awareness
The first step in the buyer’s journey is awareness. This is when the person who wants to buy something even realizes that there’s some kind of issue. If you were grocery shopping, this would be the moment you looked in the fridge and realized you wanted to make pasta but you had no tomatoes for your sauce.
Step 2: Consideration
The second step is consideration. The buyer now knows that there is a problem, and they know what the problem is. At this point, they have begun to look for a solution.
If we were to go back to the grocery shopping example, you now need to figure out if you’re going to buy canned tomatoes or fresh tomatoes, and if so, what brand? Does it make a difference? Which brand has less salt? Do you want to pay extra for organic tomatoes?
This stage is all about comparing your options.
Step 3: Decision
The final step in the buyer’s journey is the decision. After sifting through their options, the buyer has chosen what they will actually do.
If we were to go back to grocery shopping, this would be the point at which you would put the fresh Roma tomatoes in your grocery basket.
When a business owner thinks deeply about their buyer’s journey, they can include smart features in their product to make it more useful for their client, and they can also position their marketing so that their client is able to find the right information at each part of the journey.
Going back to the grocery example, let’s say you grow tomatoes. If the person who is going to go grocery shopping doesn’t already know what kind of tomato is best for pasta, it would be clever to anticipate this kind of decision and write an article online that answers the question, “What kind of tomato is best for pasta sauce?” Then, when the shopper is searching online for an answer to exactly that question, your article may pop up first, and you’ll be able to help them make that choice. As a result, a lot of inbound marketing strategies are orientated towards the consideration stage.
To be ready at the decision stage, you’ll want it to be easy for shoppers to find your tomatoes if they search something like “Roma tomatoes near me.” You would also want your tomatoes to be physically at the store, and located in a more obvious part of the store. Buyers will often choose what is available and easy to find. If you can’t find the tomatoes you wanted, you’ll probably buy some other tomatoes instead.
Then, if at the grocery store all you can find is Hot House tomatoes when you were looking for Roma tomatoes, and you choose to buy Hot House tomatoes instead (and if there’s also a sale on Hot House tomatoes to add to it), then that’s an example of those Hot House tomato sellers using the buyer’s journey to sell their tomatoes.
A buyer persona is a semi-fictional representation of a potential customer based on market research and real data about the business’s existing customers. When choosing products or preparing a buyer persona, it is important to get into the head of your potential clients to understand why they’d buy your product, when, and what kinds of steps they’d have to take to get to the point of wanting to buy your product.
A campaign is an organized effort to bring about some kind of specific end result. The activities will vary, but all the activities have the intention of creating the same result.
In your day-to-day life, the goal of the campaign may be something like getting the kids to sleep. To get the kids to sleep, you may give them their daily baths, get them to brush their teeth, take away any devices, and read a bedtime story before leaving the room and turning off the lights. If you are successful and your kids go to sleep, then that’s a successful campaign.
Similarly, for a marketing campaign, your end goal might be to promote your new line of multifunctional bags. The end goal is to increase the number of people who buy bags. To get people to buy bags, you might send out some emails, run ads on Facebook and Instagram, and run some Pay Per Click (PPC) ads on Google. If, after these actions you do manage to increase the number of people who bought your bags, then you have a successful campaign.
These are text files a website sends to a visitor’s browser to store information related to that particular visitor's interaction with the website.
It is through these cookies that websites gather information for interest and behavioural marketing. Now, next time you “accept cookies” you’ll know why!
COST PER ACQUISITION (CPA):
Cost per acquisition is a metric that measures the total cost of acquiring a new customer via a specific channel or campaign.
To calculate your cost per acquisition, you can do this calculation:
Total Campaign Cost
Number of Conversions
Cost Per Acquisition
DISCLAIMER! Although using this method aims to also track other holistic metrics like website conversion rate to get an accurate picture of the revenue they are generating, the CPA does not give you the full story.
Extensions are apps and plugins that you can add onto your e-commerce store for a small fee. These extensions will work to improve your store in some way, whether that be through your store’s design, your store’s customer experience personalization, or by connecting your store with production companies, as with Oberlo on Shopify.
This is a marketing approach that blends analytics, traditional marketing and product engineering to sell products, advertise services, and gain exposure rapidly. With high-speed experimentation and the use of social metrics, growth hackers are able to optimize products for the market and ensure that a company is able to grow extremely quickly.
This concept originated with Sean Ellis whose work with companies like Dropbox made him realize that certain kinds of companies could grow through vastly different means compared to traditional marketing. He was the first to coin himself as a start-up growth hacker, and soon earned the honorific of ‘extraordinaire.’
The inbound marketing model revolves around the idea of using social media, search engine optimization, and other techniques to help the right clients find the right content for their needs. Then, once they find the things that they’re interested in, and you keep them interested by providing value and meaningful insight, they may choose to buy from you.
In other words, in inbound marketing you attract the right customers to you with honey instead of by running around with a net.
For example, if you’re a business that sells hemp bracelets, you can target your ads to people who like hemp bracelets, or even the types of people who like hemp bracelets. Platforms might include people who like linen pants or people who like handmade jewellery in their interest targeting.
This will help you to show your products to people who would genuinely be interested in it.
The exact webpage that they see when they click on a link in Google is your landing page. An e-commerce website will want a landing page to be a purchase page, whereas, for buyers still in the consideration phase of the buyer’s journey, that same website will want to have inbound informational content that will help their buyer make the best decision for themselves. In that page, they may include some kind of free tool, or ‘lead magnet,’ that will incentivize their customer to give them their email address.
When the customer buys something, gives their email address, or completes some other kind of action, the goal of the landing page is accomplished. In marketing, this goal achievement is called a “conversion.”
A lead magnet is something that draws a lead – or someone who may buy something from you – to your site. This may be a free promotion, valuable information that they needed, market insights, or a useful tool that would be helpful to them.
LOOKALIKE AUDIENCE (LLA):
If you already have an audience on social media or another platform, then you can use that information within the same platform to look for another audience that is similar to the first. To do so, the platform will look for similarities between the people who follow you and others on their platform, whether those similarities are in age, gender, interests, or behaviours.
You can maximize this tool’s potential by choosing to show the platform your most engaged audience members, helping it to look for the kinds of people who would be just as engaged as the excited people who were in your audience before.
PAGE POST ENGAGEMENT (PPE):
This is the total number of actions people take involving your ads.
Let’s say your target audience is women in New York who are interested in spa products. If you post an ad targeted to this group, it’s important to know whether or not it did well, as this will determine whether or not you will run it again.
Actions that are included as part of PPE are:
- Clicks: How many people clicked on a link in your post
- Comments: How many people commented on your post
- Reach: How many people saw your post
- Shares: How many people shared your post on their page or with a friend
- Video views: How many people watched your video
- Video Reach: How many saw that you had a video
Hmmmm so then what do these numbers mean? There are two types of engagement:
Active Engagement: This is thoughtful engagement, like commenting on a post, if someone direct-messages (DM’s) you, or if someone shares your post on their story or with a friend.
Passive Engagement: This is non-thoughtful engagement, including likes and clicks on links.
Total Engagement: This is the combined total of your active and passive engagement.
PAY PER CLICK (PPC) MARKETING:
Pay Per Click is a way to use search engine advertising to generate clicks to your website. Most marketers will use this in combination with Search Engine Optimization (SEO), which is done by creating content that helps people find them organically.
PPC is, as the name implies, sponsored ads on Google that show up when you type in a particular keyword. You know that they’re sponsored because it says “Ad” next to the link.
Publishers like Google, Facebook, and Bing get paid to put an advert on their platform. Meanwhile, a visitor can view the ad. If they choose to click on the ad, the advertiser pays the publisher for each click. The cost of each click can range anywhere from 10 cents to 10 dollars.
REPEAT VISITOR RATIO (RVR):
A repeat visitor ratio is a useful way to figure out if the visitors to your website are getting what they wanted from your site, and whether or not they continue to want more of it.
Simply put, it’s the number of people who go to your website more than once.
To calculate this number, divide the number of repeat visitors by total visitors. Then, multiple that number by 100 to get the percent. If you have 2000 visitors, and 698 are repeat visitors then the equation would be:
(698 ÷ 2000) ✕ 100 = 34.9%
RETURN ON AD SPEND (ROAS):
ROAS can tell you a lot about your marketing campaigns, though the understanding that it does give you isn’t very deep. Nevertheless, what it does tell you can give you some insight as to where you might find a blip.
SEARCH ENGINE MARKETING (SEM):
This term refers to paid digital advertising. Other names for this are PPC (pay per click) or paid search. Customers and marketers experience search engine marketing quite differently.
As a Customer:
Let’s say you’re looking to buy some accessories for your bathroom, so you go to a search engine like Google and type in “Chrome Bathroom Accessories.” Those words that you typed into Google are your search terms.
Then, in Google, you’ll see your search results page. At the top will be some ads from companies whose keywords match the keywords you wrote. If the ads match what you’re looking for, because you see them first there’s a strong chance that you’ll click on them.
As a Marketer:
As a marketer, search engine marketing allows you to take control of who finds your product when they’re looking for the kind of thing that you offer.
Once you’ve chosen where you’ll be putting your ad – Google, Bing, or somewhere else – you can bid on the keyword you’ve chosen. Ultimately, what you pay for is a “click,” so you only pay Google for your ad if someone actually clicks on it.
What’s interesting about this process is that it’s not a fixed price. You are bidding on that keyword, almost as though you’re sitting in an auction house with an auctioneer rattling off a list of features. Except, instead of that auctioneer telling you that it’s an original Vermeer painting, the auctioneer is telling you that this is a keyword that will let your ad be shown to people living in Alabama who type “chrome bathroom accessories” into Google.
The final amount that you bid is what you will pay for the ad each time someone clicks on it. If this is a popular search term, this can be a lot of people!
SEARCH ENGINE OPTIMIZATION (SEO):
Search engine optimization is an organic way to get more people on your website. This is done in several ways. The first is by creating content that is highly relevant to people searching on search engines like Google or Bing. The second is by giving your visitors a very good experience once they actually get onto your page.
For example, some “black hat” techniques for SEO can trick a search engine into thinking that their website is the best and most useful one for that search term. However, if a visitor actually clicks on that site, they may not see what they were looking for, and may return to Google quite quickly.
Google is actually able to monitor that behavior from visitors, and so if they see that people are often jumping off your site as soon as they get on, they’ll mark your site as not useful for that search term, and drop it lower in the search results.
While this isn’t the only black hat method to be wary of, some basic principles will help you keep your methods of the “white hat” variety. Make content that:
- Loads quickly
- Has relevant alternative text for accessibility and image loading issues
- Is extremely useful to visitors
As with all inbound marketing techniques, the number one question to ask yourself as a business for SEO is “how can I make this genuinely helpful?”
For example, if you’re buying a car, you may see an advertisement for a new family-sized vehicle in October. Then, you might start experiencing car issues in January. In February your mechanic may tell you that you need a new vehicle. In March you may start looking at your options, being sure to check out the car you saw in that ad in October. Perhaps you visit several dealers, until finally in April you settle on purchasing that vehicle you saw advertised in October. This would be an example of a 6-month time lag.
VISITS TO PURCHASE (VTP):
Advanced tracking data can measure how many times one visitor will visit your website before making a purchase. More visits to your site before purchasing may indicate that a visitor needs more information during the consideration phase of their buyer’s journey.
WEBSITE CONVERSION / CONVERSION RATE (WC):
A website conversion is when someone visits your website and completes a desired action. For example, they may sign up for your mailing list, buy something, or share your content. The action that is defined as a conversion depends on the goal of your website.
If you want to calculate your conversion rate, here is the formula to do so:
(Number of Visitors Who Completed Your Desired Goal ➗ Number of Visitors)✖️ 100
Number of Visitors
Number of Visitors Who Completed the Goal
In the example above, your equation would be: (78 ➗ 2594)✖️ 100 = 3
This would mean that your conversion rate is 3%.
Although it is based in China, Ali Express retailers are from all over the world. Notably, it does not allow for mainland Chinese buyers to purchase the products on their site.
Amazon is the world’s largest online marketplace. I’m sure you knew this! When doing e-commerce with Amazon, you can either hire them to handle your fulfilment for a fee, or you can handle the fulfillment with a third party yourself.
BUSINESS TO BUSINESS (B2B) E-COMMERCE:
When we shop online, we often assume that transactions are between businesses and individual consumers. However, a large number of business transactions are actually between businesses and other businesses. In fact, these transactions gross more revenue than transactions between a business and individual consumers.
These kinds of transactions range from services that help businesses manage their sales, to helping with the streamlining of transactions and inventories, to affiliate purchases and transactions between merchants and distributors.
An example of a B2B service that you will likely come across as an e-commerce entrepreneur is Order Fulfilment. In this situation, your business would purchase services from a third party who would help your business store your products in a warehouse and deliver those same products to your customers.
BUY TO DETAIL RATE (BTDR):
Have you ever looked at or shopped on a website on your laptop, but then found that when you tried to use your phone it was not as good as an experience (or even plain old looked much uglier?). Usually, the issue is that the theme the website is using isn’t responsive.
This is the practice of encouraging customers to purchase a comparable high end or premium version of a product, or an add-on to the product they’re already planning to buy. A typical example is when an online resource offers a basic version of their product for free, but they offer the option of unlocking premium desirable features for a fee.
In a brick-and-mortar store, this refers to the small, cheap trinkets on your way to the checkout counter. At Sephora, this might be lip balms at the counter, while at the grocery store this might be a bag of chips or a magazine by the till. You’re already purchasing something, but an upsell asks the customer, “What about one more thing?”
VIRTUAL ASSISTANT (VA):
A Virtual Assistant is an independent contractor who provides a wide range of services for their client, all while working remotely. Their business is to help other businesses thrive through administrative, digital, or clerical support.
Woo Commerce is a free platform that allows you to sell anything beautifully. In addition, it also gives store owners and developers complete control. However, it is important to note that this ability to customize requires users to have a stronger knowledge of coding than other platforms.
An anchor price is the original normal price of a product. Often, retailers will list this anchor price alongside a discount price in order to show a customer how much money they will be saving by buying something right now.
Assortment refers to the products that a retailer offers. When someone talks about an assortment strategy, meanwhile, it refers to how they choose those products. Much like a living room table, your product category is defined by its width and depth.
A wide product assortment means there are a lot of different products, whereas a deep product assortment means that there are a lot of options for variation within the same product.
For example, if you go to The Body Shop their selection of body butters is deep, because you can get the same body butter in about ten different scents. Their product selection is also pretty wide because in addition to body butter you can also get toner, makeup, moisturizers, and the like.
BACKORDER vs OUT OF STOCK:
The main difference between an item that is on backorder and an item that is out of stock is actually the industry that you’re in. In some industries, your customers will not wait for an out-of-stock item.
For example, if someone was ordering kitchen sponges and they were told that it might take them two months to arrive there is no way they would wait two months for those sponges. The dishes must be washed! Instead, they would just get sponges elsewhere. In this kind of industry, it just makes more sense to say that the item is out of stock.
Meanwhile, an item that’s on backorder is usually something that a customer might feel is worth waiting for. One example is a custom-made eco-friendly dress. If that takes two months you’re impatient and excited, but not annoyed; after all they sewed it by hand to fit your measurements!
The main tip to deal with backorders is clarity, clarity, clarity. If you set your expectations honestly and realistically in advance, then it’s harder for your customer to be mad when you do exactly what you said you were going to do.
Each brand is inherently attached to the corporation, but each one has its own personality. That unique personality attached to a brand is branding. Like their brand-children, each corporation also has its own branding-personality.
Buybacks are a very common practice in the publishing industry, and also part of the reason why you can sometimes get genuinely ridiculous sales on hardcovers about a year after they come out.
If your ecommerce business is in the dropshipping model, this isn’t something you need to worry about because you are only paying the wholesaler for products that have already been bought by a customer.
COLLECT ON DELIVERY / CASH ON DELIVERY (COD):
Although generally an uncommon practice for retailers operating primary markets in the US, cash on delivery in ecommerce is basically the same in theory as it is when you order a pizza delivery. The customer pays for their product when they get it, either with cash or with a physical machine.
This payment method has some pros and cons. For the seller, the pros are primarily to be able to reach new markets. For the buyer, pros generally revolve around internet security and accessibility to online markets without credit or debit cards.
Cons for the seller are, of course, a level of risk that you may ship something out to someone and they may decide against purchasing. For the buyer, the cons are often that there is an additional charge for this method of purchasing to negotiate that risk.
A chargeback occurs when a customer calls their credit card company and says that whatever the ecommerce retailer charged them was fraudulent, was not the thing that they thought they were buying, or was damaged. On top of having to refund a customer in this case, you would also have to pay the credit card company a $10-15 fee for the chargeback itself. They are not good.
A good way to prevent chargebacks is by ensuring full transparency at every step of the process. Tell and show the customer exactly what they’re getting, exactly how long it’s going to take, and exactly what to do if they’re unhappy for any reason.
It is much better for your business if they decide to tell YOU that they’re unhappy than if they’re talking to a credit card company. YOU can fix it, the credit card company is just going to lower your trust score and, if it happens enough, decide not to work with you.
CHARM PRICING (PSYCHOLOGICAL PRICING):
While this may seem like a silly thing to do, data shows that charm pricing can increase sales by 24%.
24% is nothing to sniff at.
COST OF GOODS SOLD (COGS) / COST OF GOODS MANUFACTURED (COGM):
Cost of goods sold refers to exactly how much it cost the manufacturer to make their product. This DOES includes direct costs like materials and labour. It does NOT include indirect costs like sales and marketing.
Total Material Cost + Total Labor Cost + Additional Costs and Overhead = Cost of Goods Manufactured
Collections are items that are grouped together to help buyers find the right things. For example, if you’re looking for women’s clothing, one collection might be titled ‘Women’s Clothing,” and the clothes in there would all be for women. Other collections may include ‘Babies Clothing’ or ‘Accessories.’
In Shopify, collections can be curated automatically or manually.
Competitive pricing is when you check how much your competitor is selling something for, and then make your item just a little bit cheaper. This helps to sway your customer to buy your product instead of your competitor’s.
However, always being cheaper isn’t always a good thing. Especially if you’re a smaller store, this can put you at a greater risk. You’ll have to sell more items to make just as much with lower prices, which may be difficult depending on your product.
And this may not even suit the customers you want to reach. After all, customers don’t always want the cheapest thing, anyway. Sometimes, they want the best value thing, or simply the best.
Consignment is a common model for thrift stores. In consignment, you might choose to sell your vintage purse in a consignment store. The consignment store would tell you that they, the consignment store, would give you a platform or space to sell your product. They’ll put it out on their shop floor, and if anyone buys it, you’ll share the profits. They’ll usually take something between 10-50%.
DISCOUNT PRICING / PENETRATION PRICING:
Discount pricing is when you offer a product for a cheaper price. This price is usually temporary, and done for the purpose of getting more people to pay attention to your brand or to bring some hype to a new product. Be careful about doing this too often, though, as if you sell things cheaply’ too often then you’ll make that discount the anchor price and customers will no longer spend the amount of money with you that you’d like them to.
For example, if you always see a sale on peanuts at Walmart and then one day you go back to Walmart but there’s no longer a sale on peanuts, you’re not going to buy peanuts at that more expensive price. Instead, you’re going to wait until they’re cheaper again. In your head, you’ll even think to yourself, “The peanuts are overpriced today!” even if that’s actually the regular price for peanuts.
Dropshipping is a popular but competitive ecommerce model. In dropshipping, when a customer places an order you send that order to the supplier, and the supplier ships the product directly to your customer. In dropshipping, you don’t have to store or hold any product yourself.
ESTIMATED DELIVERY DATE:
There are two ways to show when your customer’s package is going to arrive. You can tell them how long it will take (6-8 business days, for example), or when it will arrive (an actual date, like September 10th). Data shows that clients prefer to know the actual estimated delivery date, which makes sense. Wouldn’t you?
A fulfillment center is a building where you can store your goods. There, a third-party logistics provider (fulfillment provider) will do everything necessary to get your products to your customers. The process of getting your product to your customers is called fulfillment.
If you’re taking a more hands-on approach to your ecommerce business, fulfillment centers can be a huge advantage. If your suppliers are in a different country to the customers in your primary market, then fulfillment centers can help to shorten shipping times from multiple weeks to several days. For customers who are looking to get something soon, that alone can be the reason why they buy your product instead of someone else’s.
There’s a lot that goes into choosing a fulfillment center, but the most important aspects that I look at are storage costs, shipping costs, and success rates with fulfillment.
IN AND OUT:
This is when you price an item at a discount in order to encourage customers to buy more items. You lose money on that first item, but then you make more overall when they come out with more than they planned on buying originally because of their perceived savings on that first item.
For example, you might be walking on a shopping street and see that there’s a sale on garlic bread, so you decide to buy some garlic bread… as well as some pizza to go with it.
The danger in this is similar to the danger in discount pricing. If you price things too cheaply then customers may come to expect things from your store to always be cheap, and won’t buy items at the price you’d like to be selling for.
MANUFACTURER’S SUGGESTED RETAIL PRICE (MSRP)
For example, if you’re selling a shirt, and you bought the shirt for $8 from the manufacturer, and then stored it for $3, and then finally you sold it for $20, then the margin would be $9.
If we go back to the shirt example, and you bought the shirt for $8 from the manufacturer, and then stored it for $3, and then finally you sold it for $20, the markup would be $12.
MINIMUM ORDER QUANTITY (MOQ):
MINIMUM PURCHASE AMOUNTS
This is essentially the store telling you I’m not giving you any of my product unless you spend $200 with me, for example.
MULTIPLE PRICING / PRODUCT BUNDLE PRICING:
For example, you may go to a store and buy socks. Rarely are you buying just one sock. In fact, you’re usually buying several pairs at once, but all for one singular price. This is when you buy ten pairs of socks (20 socks total) in a package for $10.
NET PAYMENT TERMS:
Net payment terms are when your business gets a little bit of extra time to pay for something. The idea behind this is that in that extra time your own customers will have paid you, so then you’ll have that money to pay your suppliers.
It’s usually a strategy used by businesses that are strapped for cash. It can be a good way to get the time and money you need without having to take out credit or a loan.
OPEN-TO-BUY (OTB) PLAN:
The pick list is an important document for your suppliers. It has the list of things that you want them to send you. The things that customers have picked is on a list. Once your suppliers get the pick list, then they can send out the picked items to your customers.
POINT OF SALE (POS):
This is how Starbucks sells coffee at twice the price of gas station coffee.
PRIVATE LABEL / WHITE LABEL:
Private labels are, in my opinion, one of the best ways for an ecommerce brand to succeed. This is where a manufacturer will develop the actual product, but you will tell the manufacturer what that product will actually be. You’ll give them the dimensions, the details, everything that they need to know so that you can make your product just a little bit better (or a lot better!) than the competition’s.
From there, you’ll develop your own custom packaging for the product. This is important, because I’ve literally gotten a 1-star review before because my packaging was too plain.
The review was for a dog bowl.
I’m still in a bit of shock about it, if I’m being honest, but it showed me how important the branding and unboxing experience was for a customer.
Anyhow, in a private label, once you’ve set up the packaging, you will then take care of the storage and fulfillment of a product.
Now, when I say that you take care of the fulfillment, do not start picturing that you’re sitting there with mountains of dog bowl boxes piling up in your garage. No. Instead, it means that you hire a fulfillment center to hold the items for you and send them out when you tell them a customer has ordered something.
One of the popular fulfillment centers is Amazon (Amazon’s Fulfilled by Amazon program, or FBA), and this can sometimes be profitable with the right product, but generally I don’t use them because they’re quite a bit more expensive than other fulfillment centers.
While price list does mean the list of your items with their respective prices, it is also a way for you to offer different customers different prices. A price list extension can help you to tag different customers by their group, and then show them different prices based on whatever group they’re a part of.
PURCHASE ORDER (PO):
A purchase order is the document that you give your supplier with a list of items, the number of items, the price of the item that you’ve agreed on with the supplier, their SKU, tracking number, and any other more specific details that the supplier may need.
RECOMMENDED RETAIL PRICE (RRP):
In ecommerce, the idea of a product sample isn’t that different from when you get to try a dumpling at Costco as a way to convince you to buy a whole box of dumplings.
Most suppliers will let you take a look at the product you’re purchasing from them before you make an order.
When you do so, this helps you to make sure that the product you’re buying matches your brand and is up to the quality standards that you’ve set.
STOCK-KEEPING UNIT (SKU):
Unboxing is literally taking things out of a box.
Whatever the reasoning behind it, the result is that a lot of customers are really passionate about packaging.
Take this bread lamé. It has mostly five-star reviews, but of the few four and three-star reviews, one of the reasons they cite for a low review is ugly packaging. It’s not the only problem they talk about, but it’s certainly one that matters to people.
This awareness of how much the experience of taking an exciting new item out of a beautiful box matters to customers is important when creating your own branded unboxing experiences.
UNIVERSAL PRODUCT CODE (UPC) LABELLING:
You’ve seen a UPC before. There’s a UPC on every product in the grocery store, every clothing item in a major chain, every box at IKEA. It’s what your cashier scans at the checkout counter with their laser machine. BEEP. On to the next item.
An Anglicization of the French word ‘vendeur,’ which means seller, a vendor is exactly that. They are the ones who sell something. In e-commerce, they’re the wholesale supplier; the original and first seller.
You, the ecommerce store owner, meanwhile, are the retailer; the second seller.
When you, the ecommerce retailer, set up a relationship with your wholesale supplier (a vendor), then together you will establish some concrete rules to discuss and ensure that they are shipping the right products to your customers on time, quickly, and to the right location.
Because having to fix problems involving which things were shipped where, how long that took and how fast it took those items to get there is time-consuming for a retailer, some vendor contracts include things like buybacks if there are issues with this on the vendor’s side.
YEAR TO DATE (YTD):
Your year-to-date refers to the amount of time between the current date and the start of the fiscal year on January 1st. Usually, in particular it’s referring to the amount of money made in that time period.
No doubt you’ve heard of wholesale. Usually it’s being described to you by an excited salesperson or in an advert as they tell you that whatever it is that you’re buying is on sale at wholesale price.
To understand what wholesale is, you also need to know that in most distribution systems there are basically four parts. There is the manufacturer (the one who makes it), then there’s the distributor, who buys things from the manufacturer, and sells them to the wholesaler, who buys and stores huge quantities of items. Then the retailer buys a smaller quantity of things, which are then, finally, sold to customers.
Global supply chains can get crazy complex, but this is one common model.
Part of why ecommerce can be such a profitable model is that you have the opportunity to alter this model based on what makes sense to your business.