chapter 9


We use a lot of terms you may not be familiar with in this guide, so here are some simple definitions to help you out. 

Address Verification System (AVS): Built to fight payment card fraud, the payment card Address Verification System compares the billing address a user submits during a card-not-present transaction with the billing address on record. AVS is one of several payment card fraud prevention systems.

Affiliate: A publisher or site owner that forwards qualified web traffic to an online merchant on a pay-for-performance basis is called an affiliate in the context of online marketing. 

Affiliate Links: A universal (uniform) resource locator (URL) that includes an affiliate's identification number and additional information that makes it easier for merchants to track affiliate activity is an affiliate link. 

Amazon: In the retail context, Amazon is a multi-national online retailer with a market capitalization in excess of $128 billion U.S. as of January 2013. Amazon also hosts a marketplace wherein other Internet purveyors may display and sell products, and offers several software-as-a-service and infrastructure-as-a-service solutions for business.

Application Programming Interface (API): An API is a protocol created to allow separate software solutions to communicate over a relatively simple interface. Developers will often use APIs to connect or integrate systems and services.

Authorization: A payment card transaction performed specifically to determine if the payment account has sufficient funds to complete a given transaction.

Authorized Distributor: A manufacturer-approved or -designated distributor able to sell products in quantity to commercial customers like Internet retailers.

Authorized Retailer: A manufacturer-approved or -designated retailer able to sell products directly to consumers. 

Better Business Bureau: A non-profit organization in Canada and the United States that is focused on trust in advertising. The organization responds to consumer inquiries about business reliability, and accredits businesses. Accredited online merchants may display a Better Business Bureau badge.

Bing: Microsoft’s search engine, Bing, displays results in response to a user’s search query. The site uses a complex and secret algorithm to select which sites to display in response to a particular search. Bing also offers a pay-per-click advertising platform, and allows merchants to offer a discount to shoppers.

Blog: A blog is an online journal or publication that includes relatively short, discrete articles, called posts, that are typically organized by date with the most recent posts first. Frequently, blogs allow readers to add comments to posts. The term blog is a combination of “web” and “log.” At first, blogs tended to be personal journals or opinion sites, but the term has come to include an array of different types of publications. In the ecommerce context, blogs are frequently used as a marketing tool, and may be included in a merchant's social media or content marketing campaigns. 

Bootstrapping: In business, bootstrapping is the concept of self-funding a new company, meaning that a business pays its operating expenses either with profits or from its founder's own investments, rather than accepting external capital.

Bounce Rate: An Internet marketing term used to describe the percentage of site visitors that arrive at a single page on a given website, and then leave (bounce) from that same page without visiting any other page on the site.

Brick & Click Store: A retail outlet or business with at least one physical location and at least one ecommerce enabled website.

Brick & Mortar Store: A retail outlet or business with at least one physical location.

Business Structure: A company's legal status or organization. Often refers to incorporation.

Call-to-Action: A phrase, button, link or other site element that specifically asks a visitor to take some action, including purchasing a product, registering, subscribing or similar.

Canonicalization: The practice of selecting preferred URLs for a specific set of content. Many modern sites allow content to be accessed from a number of URLs, including URLs that may contain session or query information. Canonicalization helps to manage which of those URLs search engines index and credit.

Canonical URL: The canonical meta tag that directs search engines to index the preferred URL for site content that is available from multiple URLs.

Capture: The process of securing payments from a payment process after an authorization.

Chargeback: When an issuing back forcibly reverses a transaction, taking funds from a merchant and returning those funds to a consumer. Nearly all chargebacks are the result of a consumer complaint, including claims that the transaction was not authorized, not fulfilled, or not as described. Chargebacks may also affect the rate that merchants pay to process card-not-present transactions. 

Comma Separated Values (CSV): A file type that stores data values. CSV files are often used to transfer product feeds.

Confirmed Shipping Address: The phrase confirmed shipping address may have two similar but distinct meanings in the ecommerce context. Confirmed Shipping Address may simply be an address that actually exists based on a review from a package carrier like FedEx or the United States Postal Service. The phrase may also refer to a shipping address that a particular consumer has either registered with a payment processor or used successfully in a prior transaction with a particular merchant. 

Content Management System (CMS): A software solution that makes it possible to create, edit, maintain, publish, and display content on the Internet from a single interface or administration tool. In the online retailing context, a CMS may be used to manage a stores product catalog.

Conversion: A marketing term that describes when a user or visitor completes some action or achieves some marketing goal. More specifically, conversion is often used to describe when a site visitor converts to a customer, making a purchase.

Cookie: A very small file saved on a user’s computer or mobile device for the purpose of storing information related to the user’s interaction with a particular site.

Corporation: A distinct legal entity and business structure, wherein the business is separate from its shareholders.

Customer Relationship Management (CRM): A software solution specifically devoted to organizing, synchronizing, and automating a business' customer relationships.  

CSS: A stylesheet language used to describe the “look and feel” of a site written in HTML. CSS allows a page's presentation to be separated from its structure, making updates and maintenance easier. CSS stands for Cascading Style Sheet.

Delivery Confirmation (DC): A service offered by many package carriers, like the United States Postal Service and FedEx, that provides the shipper with information about when a package was delivered. This is not the same as when a customer signs for a package.

Directories: Sites that list and link to other sites, including online stores, are referred to as directories.

Discount Code: A series of numbers and/or letters that an online shopper may enter at checkout to get a discount or other special offer. Discount codes may also be called coupon codes.

Distributor: A distribution business that inventories products from a number of manufacturers and sells to many retailers. Often distributors are able to offer shorter lead times than manufacturers and may sell in smaller quantities. It is common for distributors to charge a premium over a manufacturer-direct price for the service and convenience provided.

Domain: The root address for a web page.

Dropshipping / Drop Shipping: A fulfillment strategy wherein the retailer does not actually inventory the drop shipped product, but instead passes the shipping address to either the manufacturer, or a distributor that actually ships the purchased items directly to the customer. 

Dutch Auction: Depending on context, the term Dutch Auction may have more than one specific meaning. At its simplest, a Dutch Auction is an auction that starts with a high price that is lowered incrementally until a bid is placed or a reserve (minimum) price is met. Also, the term may describe an auction wherein more than one of an item is for sale, each item may sell for a separate price, so that one buyer may take two of an item for $1, while the next buyer takes three items at 90 cents each. Finally, a Dutch Auction can refer to an auction wherein many items or lots are for sale, but all will sell for the same value. All bids are considered and a common low bid price is determined for the sale of all items.

eBay: A online auction and shopping website, best known for its consumer-to-consumer sales. Many online merchants also use eBay as a sales channel.

Ecommerce: Buying and selling products over electronic networks, including the Internet or mobile applications. The term may apply specifically to electronic transactions or more generally to the online retailing and online business.

EIN: The United States Internal Revenue Service may issue a business an Employer Identification Number (EIN), which is also known as a Federal Tax Identification Number. The EIN is used for tax collection and certain types of tax or sales reporting. 

Expedited Shipping: A shipping option that features reduced handling or transit times. Customers frequently pay a premium in order to ensure that an ordered item arrives more quickly.

Exporting: The practice of selling items to wholesale or retail customers in another country. 

Fraud: Intentional deception for the purpose of gain. 

Fulfillment: In ecommerce, fulfillment is the process of completing an order. The term may also be applied to third-party companies that inventory products and ship orders on behalf of an online store. 

Google: The leading search engine provider, Google displays search results using a complex and secret algorithm that considers many factors. The company seeks to show its users the best possible results. Google also provides other services, including a pay-per-click advertising network, payment processing solutions, product discovery tools, and an excellent analytics platform. 

Google Keyword Tool: A free keyword suggestion tool included in the Google AdWords Platform. The tool uses data from the many searches conducted on the Google search engine to suggest keywords for a given URL and category.

Google Trends: A search engine tool that shows how often a particular term or keyword is searched for on Google. Results are shown in a relative scale, making the tool well suited for comparing keywords or phrases. Trends will also show where searches came from and how search volume for a particular keyword has changed over time.

HTML (Hyper Text Markup Language): A markup language specifically created for displaying web pages and applications in web browsers. Like other markup languages, HTML annotates a document, describing its layout and syntax. 

Inventory: The value or quantity of a retailer’s current stock of products. 

JavaScript: A scripting language – ECMAscript – used to make web pages interactive and dynamic.

Landing Pages: In the online marketing context, a landing page is a single web page that is displayed in response to a particular call to action. Landing pages are often shown in response to a link in a pay-per-click ad, a link in an email, or a specific URL shown in offline advertising. Landing pages include content meant to meet the expectation set with the link a visitor clicked.

Limited Liability Company (LLC): A business structure that blends some of the best elements of a partnership and a corporation.

Linking Root Domains: In search engine optimization, when site A links to site B one or more times, site A is said to be a linking root domain. Linking root domains — in the plural — are the total number of unique sites that link one or more times to a given website. 

Liquidation: A sale intended to dispose of all of a given product line’s inventory with the intention of not replenishing supplies.  

Liquidator: A company that purchases closeout products for the purpose of resale. 

Listing Fees: Marketplaces and online auction sites, like eBay, may charge a nominal listing fee for posting products.

Logistics: The management of products or other resources as they travel between a point of origin and a destination. In ecommerce, logistics might describe the process of transporting inventory to a merchant or the act of shipping orders to customers. 

Long Tail: Posited in the October 2004 issue of Wired Magazine, the Long Tail is Chris Anderson’s idea that markets and marketplaces, especially online, are moving away from mainstream, broad-appeal products toward niche products. In ecommerce, new retailers may find it easier and more cost effective to focus on niche products.

Long-Tail Variations: In search engine optimization and pay-per-click advertising, Long-Tail variations are keywords similar in meaning or root to other high-volume keywords, but less competitive. Long-Tail variations are often employed when a business is just starting out and cannot gain traction or afford to bid on top performing keywords. 

Long-Tail Traffic: Website traffic derived from Long-Tail variation keywords or from niche searches and keywords in general.

Manufacturer: A company that makes goods for the purpose of sale.

Manufacturer’s Suggested Retail Price (MSRP): The price at which a manufacturer recommends that retailers sell a given product.

MAP Pricing: Manufacturers may require retailers to sell or advertise a given product at a minimum price. This price floor is known as a minimum advertised price or a minimum acceptable price. Manufacturers vary in their MAP enforcement, with some cancelling retail dealer agreements, if sellers offer products below MAP.

Margins: The difference between what a retailer pays for a product and what the retailer’s customer pays for the product. Margin calculations may consider only the cost of the goods sold or may take into account overhead and other variable costs.

Meta Tags: HTML tags that provide information about a web page, but do not necessarily impact how a page is displayed. Meta tag information is useful in search engine optimization and for use with some social media application programming interfaces.

Minimum Order Size: Manufacturers or distributors may require retailers to place orders that meet a minimum value or unit count. This requirement would be the minimum order size. 

Multi-Channel Retailing: Retailing products through more than one channel where channels include online stores, online marketplaces like Amazon, physical stores, physical catalogs, and similar.

Multivariate Testing: In online marketing, a testing model that has marketers simultaneously test many variables in order to discover which variation in web page or ad content or design produces the best possible result. Simply put, prospects might see one of several variations of a page or online ad, while marketers measure which variation did the best job of achieving some stated goal, like making a sale.

Net Profit: The difference between a business’ revenue and its costs – all of its costs. Net profit may be thought of as the money left over after every bill is paid.

Net Terms: Credit term that a supplier extends to a retailer, allowing the retailer to pay for purchased items some number of days after those items have been shipped. Often net terms are described as “net 30,” “net 120,” or similar where net 30 means that a retailer has 30 days to pay for an order after that order has shipped. Frequently, net terms will also include a discount so that 5/10 net 30 would mean that a retailer would receive a 5-percent discount if the bill was paid in 10 days or less, otherwise the bill is due in 30 days. 

Niche: A distinct market segment.

Open Site Explorer: A SEOmoz link analysis tool created to help measure several aspects of a site search optimization and link quality.

Order Fulfillment: In ecommerce, order fulfillment is the process of completing an order, shipping a product or products to the customer. The term may also be applied to logistics companies that inventory products and ship orders on behalf of an online store.

Organic: In the context of search engine optimization and search engine marketing, organic results are those listings search engines show because of their relevance to a query, not because a site owner paid for an ad or paid to be featured.

Outsource: The process of contracting work to external, third-party organizations. 

Overhead: The ongoing expenses associated with operating a business.

PageRank: Google’s proprietary page ranking system that places emphasis on inbound links as a means of determining how important a given page is. PageRank can be measured on either a ten-point or 100-point scale.

Patent: Protection for some forms of intellectual property, granting the inventory exclusive right to manufacture, use, or sell an invention for a certain number of years. 

PayPal: Founded in 1998, PayPal is a leading, worldwide payment processing company. The service can process payments for merchants. 

Pay Per Click (PPC): An online advertising model wherein advertisers pay only when a prospect clicks on an advertisement and is directed to the advertiser’s website. Google’s AdWords platform is an example of pay-per-click promotion.

Per-Order Fee: When a manufacturer or distributor drop ships an order directly to a customer on a retailers behalf, that manufacturer or distributor may charge a per-order fee for processing.

Preferred Supplier: Some businesses will specify preferred suppliers, encouraging employees with purchase privileges to order specific categories of products from preferred suppliers. In the retail context, being a preferred supplier for a large organization may lead to additional sales. 

Profit Margin: The difference between what a retailer pays for a product and what the retailer’s customer pays for the product. Margin calculations may consider only the cost of the goods sold or may take into account overhead and other variable costs.

Quantitative Metrics: In online marketing, quantitative metrics are those measures that may be represented as numbers. Click-through rates, visitor counts, and time-on-site are all examples of quantitative metrics.

Qualitative Metrics: In online marketing, qualitative metrics seek to measure the quality of a customer interaction, and may be subjective in nature. A retailer, as an example, may implement a new product review campaign, compare reviews written before and after the campaign, awarding each review a qualitative score, and then use the relative scored to decide if the campaign was successful.

Reseller: A company that purchases goods or services for the purpose of resale not consumption. In web economics, a reseller may also be a form of affiliate marketer, promoting a rebranded service.

Restocking Fees: A fee charged to customers who are returning products. Often the restocking fee is subtracted from the customer’s refund. 

Retailer: A company that sells directly to the end consumer. 

Search Engine Marketing (SEM): Online marketing aimed at increasing a given website’s visibility on a search engine results page (SERP) by both optimizing the website for indexing and purchasing ads or paid inclusions.

Search Engine Optimization (SEO): The process of making a website easier for search engine bots to index and categorize. 

Search Engine Results Page (SERP): A search engine web page displaying the list of responses to a particular search query.

Shipping: The process of physically moving merchandise form a point of origin, like a retailer’s warehouse, to a destination, like a customer’s home.

Social Media: Internet-based tools or websites that facilitate sharing of content, opinions, links, images, or videos between people.

Social Media Marketing: A branch of Internet marketing aimed at promoting products or service via social media. It may be thought of as web-based word-of-mouth marketing.

Sole Proprietorship: A business structure wherein a single individual both owns and runs the company. For the most part, there is not legal distinction between the owner and the business.

Split Testing: In online marketing, a testing model that has marketers simultaneously test two variables (often labeled A and B) in order to discover which variation in web page or ad content or design produces the best possible result. 

Supply Chain: A network or system of businesses involved in moving a product from its manufacturing point to the customer. In online retailing, the supply chain usually represents the distributor and manufacturer of a product.

Tracking Number: An alphanumeric identification that shipping services like FedEx or the United States Postal Service assign to a specific package to facilitate monitoring and delivery confirmation. 

Trademark: Government protection for words, symbols, or designs meant to represent a product or brand. 

Trade Show: An exhibition created so that manufacturers and distributors may show or demonstrate new products or services.

Traffic: In Internet marketing, traffic represents the number of visitors a particular page or site receives. 

Usability: The relative ease of navigating, reading, or otherwise interacting with a website or web application.

Value Added Tax (VAT): A tax added at each stage of a production process. Effectively, the tax applies each time “value” is added to the product. 

Vertical: An industry segment made up of similar business and customers. 

VoIP: Voice over Internet Protocol (VoIP) describes a set of technologies capable of enabling voice communications over an Internet connection rather than traditional telephone lines.

Wholesale Price: The price manufacturers, distributors, or other wholesalers charge retailers for products. 

Wholesaler: A manufacturer, distributor, or similar that sells to retailers.

XML: The Extensible Markup Language or XML is a World Wide Web Consortium standard used to encode and annotate text documents. XML is frequently used in product feeds.


Free Webinar: How to Quickly Start a Profitable Dropshipping Business

shopify webinarEvery week, Shopify hosts a free workshop that walks you through how to setup your online store, step-by-step, using dropshipping to fulfill orders. You’ll learn how to find awesome products you can quickly import into your store and begin selling immediately. Can’t make it? Register to get the recording after the event goes live.

Register for Webinar or Find Products Now


Next chapter

10. Infographic

1 min

Start your free 14-day trial today!