Ecommerce Glossary: Key Terms to Know for Your Online Store
This ecommerce glossary collects the terms you run into when you start and run your own online store: payments, shipping, marketing and the metrics you track, plus US rules every seller meets, such as sales tax nexus, seller's permits, Form 1099-K and the FTC Mail Order Rule. Each definition is a few sentences long, and terms based on a law or official rule link to the source.
3
- 3D Secure
- An extra authentication step for online card payments in which the card issuer confirms the cardholder's identity, for example with a one-time code or a prompt in the banking app. It runs on the payment provider's or issuer's secure page during checkout.
- 3PL (third-party logistics)
- A company that stores your inventory and picks, packs and ships orders for you for a fee. Using a 3PL means outsourcing fulfillment; you still own the products and the customer relationship.
A
- Abandoned cart email
- An automated email sent to a shopper who added items to the cart but left without buying, reminding them to finish the order. It usually goes out within hours and may be followed by one or two more messages.
- Average order value (AOV)
- The average amount a customer spends per order: total revenue for a period divided by the number of orders. Free shipping thresholds, bundles and cross-selling are common ways to raise it.
B
- Billable weight
- The weight a carrier actually charges for: the greater of a package's actual weight and its dimensional weight. Light, bulky boxes are billed on size; small, heavy ones on weight.
- Buy now, pay later (BNPL)
- A checkout payment option that splits a purchase into installments, often four payments over a few weeks. The BNPL provider pays the merchant upfront, minus a fee, and collects the installments from the shopper.
C
- CAN-SPAM Act
- The US law that sets the rules for commercial email. Messages must not use misleading headers or subject lines, must identify themselves as ads, include a valid physical postal address and a working opt-out, and opt-out requests must be honored within 10 business days. Source: FTC, CAN-SPAM Act: A Compliance Guide for Business
- Cart abandonment rate
- The share of shopping carts that are created but not turned into orders: 1 minus completed orders divided by carts created. Unexpected costs at checkout, forced account creation and long forms are common causes. how to reduce cart abandonment
- Chargeback
- A reversal of a card payment that starts when the cardholder disputes the charge with their card issuer, for example because goods were not delivered or not as described. Under the Fair Credit Billing Act, a consumer can dispute a billing error in writing within 60 days after the first statement showing it; the merchant can respond with delivery and order records. Source: FTC Consumer Advice, Using Credit Cards and Disputing Charges
- Checkout
- The steps between the cart and a confirmed order: shipping address, delivery option, payment and order review. Fewer steps, guest checkout and showing all costs early tend to mean fewer abandoned carts.
- Conversion rate
- The percentage of visits (or visitors) that end in an order: orders divided by sessions, times 100. Read alongside traffic numbers, it shows whether new visitors from ads, search or social are actually buying. how to drive traffic to your online store
- Cost per click (CPC)
- The average amount you pay for each click on an ad: ad spend divided by clicks. Combined with your conversion rate, it tells you what one order costs in advertising.
- Customer acquisition cost (CAC)
- The average marketing and advertising spend needed to win one new customer: spend for a period divided by new customers in that period. It is compared with the profit a customer brings over time.
- Customer lifetime value (CLV or LTV)
- The total revenue or profit you expect from a customer over the whole relationship with your store. It shows whether a customer who isn't profitable on the first order becomes profitable through repeat purchases.
D
- DDP and DAP
- Incoterms that decide who pays import duties and taxes on international orders. With DDP (Delivered Duty Paid) the seller pays them, so the buyer gets no bill at the door; with DAP (Delivered at Place) the buyer pays them on delivery. how to sell online internationally
- Dimensional weight (DIM weight)
- A weight that carriers assign to a package based on its size: length × width × height divided by a divisor. US parcel carriers use 139 for inches and pounds, and they bill the greater of dimensional and actual weight. dimensional weight calculator
- Direct-to-consumer (DTC or D2C)
- A brand selling its products straight to shoppers, usually through its own online store, instead of through wholesalers, retailers or marketplaces. The brand keeps the margin, the pricing and the customer data, and pays for its own traffic.
- Dropshipping
- A model in which you sell products you don't stock: when an order comes in, you pass it to a supplier that ships directly to the customer. You avoid inventory costs, but delivery times, product quality and returns depend largely on the supplier, while you remain the seller to the customer. how to find products to sell online
E
- Ecommerce platform
- The software that runs an online store: product pages, cart, checkout, orders and inventory. A hosted platform handles servers, security and updates for a monthly fee; self-hosted or custom software leaves those to you. how to start an online store
- Economic nexus (sales tax nexus)
- A connection to a state, based on sales volume rather than a physical presence, that obliges a remote seller to register and collect that state's sales or use tax. States have set these rules since the Supreme Court's 2018 South Dakota v. Wayfair decision; Texas, for example, sets the threshold at $500,000 in Texas revenue over the preceding twelve months. sales tax for online store Source: Texas Comptroller, Remote Sellers
F
- Form 1099-K
- An IRS information return that reports payments you received for goods or services through payment cards, payment apps and online marketplaces. Card payments are reported regardless of amount; payment apps and online marketplaces report when payments exceed $20,000 in more than 200 transactions, though you may receive a form below that. Source: IRS, Understanding Your Form 1099-K
- Free shipping threshold
- The order value above which shipping is free, for example "free shipping on orders over $50". It is used to raise average order value, and it should be set so the margin on qualifying orders still covers the shipping cost. how much to charge for shipping
- FTC Mail Order Rule (30-day rule)
- The FTC's Mail, Internet, or Telephone Order Merchandise Rule. You must have a reasonable basis to ship within the time you state, or within 30 days if you state none; if you can't, you must tell the customer and offer the choice to agree to the delay or cancel for a full refund. Source: FTC, Business Guide to the FTC's Mail, Internet, or Telephone Order Merchandise Rule
- Fulfillment (order fulfillment)
- Everything between an order and the customer's doorstep: storing inventory, picking, packing, labeling and handing the parcel to the carrier. You can do it yourself or outsource it to a 3PL.
G
- Gross margin
- Revenue minus the cost of the goods sold, shown as a percentage of revenue. For a store, the more useful figure is often the margin per order after shipping, payment fees, ad spend and returns are also deducted.
- GTIN (UPC)
- The globally unique number that identifies a product, shown in the US as the 12-digit UPC under the barcode. Unlike your SKU it belongs to the product, and shopping channels such as Google match products by it.
L
- Landed cost
- The total cost of getting a product to the buyer's door across a border: product price, shipping, insurance, import duties, taxes and any brokerage fees. Showing it at checkout avoids surprise charges on delivery.
M
- Marketplace
- A platform where many sellers list products side by side and the platform operator handles traffic and checkout in return for fees. Compared with your own store, you get built-in shoppers but give up control of pricing rules, branding and customer data.
- Merchant account
- A bank account that lets a business accept card payments and holds the funds before they are paid out to the business's regular bank account. Many payment providers bundle it, so you don't open one separately.
- Multichannel selling (inventory sync)
- Selling the same products on your own store and on one or more marketplaces at once. Stock has to be managed in one place and synced, or an item sold on one channel can still be bought on another. how to manage an online store
P
- Payment gateway
- The service that securely takes card details at checkout and passes the transaction for authorization. It is often sold together with payment processing, so one provider handles the whole card payment for your store. how to accept payments on your website
- Payment processor
- The company that moves a card transaction between your business, the card networks and the banks, and settles the money to you. It charges a fee per transaction, usually a percentage plus a fixed amount.
- PCI DSS
- The Payment Card Industry Data Security Standard, a set of technical and operational requirements to protect payment card data. It applies to any business that stores, processes or transmits cardholder data, including merchants; taking payments on a provider's hosted page keeps most card data off your own systems. Source: PCI Security Standards Council, PCI DSS
- Product feed
- A data file that sends your product details (title, price, availability, images, GTIN) to channels such as Google Merchant Center. Shopping ads and free product listings run on this data, so prices and stock must match your store.
R
- Return rate
- The share of delivered orders or items that customers send back in a period. Returns cost shipping both ways and often the item itself, so return rate is tracked as part of real margin.
- ROAS (return on ad spend)
- Revenue from ads divided by what you spent on them. It measures revenue, not profit, so a store needs a break-even ROAS based on its margin to know whether ads pay for themselves.
S
- Sales tax
- A state and local tax on retail sales that the seller collects from the buyer and pays to the state. Rules, rates and taxable goods vary by state, and an online seller collects in each state where it has nexus.
- Seller's permit
- State registration that lets you collect and pay sales tax, also called a sales tax permit or license. In California, for example, you need one if you intend to sell or lease tangible goods that would ordinarily be subject to sales tax. do i need a business license to sell online Source: California Department of Tax and Fee Administration, Seller's Permit FAQ
- SEO (search engine optimization)
- Work on your site's technical setup, content and links so its pages rank higher in unpaid search results. For a store, that means category and product pages built around what people search for, fast pages and unique product descriptions.
- SKU (stock keeping unit)
- A code you create for each product and each variant (size, color) you stock, so you can track inventory and orders. Unlike a UPC or GTIN, a SKU is internal and means nothing outside your business.
- SSL certificate
- A certificate that encrypts the connection between a visitor's browser and your site, shown by https in the address bar. Every store that takes payments or logins needs one, and browsers flag sites without it.
T
- Transaction fee
- A charge per sale, usually a percentage of the order and sometimes a fixed amount. Payment providers charge one on every card payment; some ecommerce platforms add their own on top, which raises your cost per order. how much does it cost to run an online store
U
- Upsell and cross-sell
- An upsell offers a better or larger version of the product the shopper is looking at; a cross-sell offers a related item that goes with it, such as a case with a phone. Both raise average order value.
How to use and cite this glossary
Terms are listed alphabetically; use the letters at the top to jump to a section. Every term has its own link: click the term to get a URL you can share or cite that points straight to that definition.
Definitions of legal and tax terms are short summaries, not legal or tax advice; check the official source linked under the term for the exact rule. We review the glossary once a year and when the rules change. To cite it, use "Favenda, Ecommerce Glossary" and the link to the term.
Put these terms to work in your own store
In Favenda you set shipping rates by weight or by size, add a free shipping threshold, and give each sales region its own currency, payment methods and shipping rates. Card payments run on the payment provider's secure 3D Secure page. Each order shows real profit after shipping and payment costs, and there are no transaction fees on your sales.
FAQ
What does SKU stand for?
SKU stands for stock keeping unit: a code a business creates for each product and variant it stocks, so it can track inventory and orders. It differs from a UPC or GTIN, which identifies the product everywhere it is sold.
What is a chargeback?
A chargeback is a reversal of a card payment after the cardholder disputes the charge with their card issuer, for example because the order never arrived. The money is taken back from the merchant, who can contest the dispute with delivery tracking and order records.
What is economic nexus?
Economic nexus is a connection to a state based on how much you sell there, not on having an office or warehouse there. Once you pass a state's threshold, you register and collect that state's sales tax; Texas, for example, sets it at $500,000 in Texas revenue over the preceding twelve months.
What is the difference between dropshipping and fulfillment?
With dropshipping you never hold the stock: the supplier ships each order to your customer. With fulfillment you (or a 3PL you pay) store your own inventory and pick, pack and ship each order. Dropshipping lowers upfront costs; holding stock gives you more control over delivery and packaging.