E-commerce, or electronic commerce, is the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions. It is a critical aspect of many businesses today, particularly small businesses looking to expand their reach and customer base. This glossary will delve into key terms and concepts related to e-commerce in the context of small business operations.
Understanding these terms is crucial for small business owners and operators who are looking to leverage e-commerce as part of their business strategy. It will help them navigate the online marketplace, make informed decisions, and ultimately, drive their business towards success. Let's dive into these terms and explore their meanings and implications.
Online Marketplace
An online marketplace is a type of e-commerce site where product or service information is provided by multiple third parties. Online marketplaces are the primary type of multichannel ecommerce and can be described as a "simple and convenient portal" to streamline the production process. In an online marketplace, consumer transactions are processed by the marketplace operator and then delivered and fulfilled by the participating retailers or wholesalers.
Examples of online marketplaces include Amazon, eBay, and Etsy. For small businesses, selling through an online marketplace can be a way to expand reach to more customers without the need for a large marketing budget. However, it's important to understand the fees and policies of each marketplace, as they can vary significantly.
Third-Party Sellers
Third-party sellers are independent individuals or companies that sell products or services on an online marketplace. These sellers are responsible for setting their prices, managing their inventory, and ensuring the quality of their products or services. They typically pay a fee to the marketplace operator for the ability to sell on their platform.
For small businesses, becoming a third-party seller on a popular online marketplace can be a way to reach a larger audience and increase sales. However, it also comes with challenges, such as increased competition and the need to adhere to the marketplace's rules and standards.
Dropshipping
Dropshipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer. As a result, the seller doesn't have to handle the product directly.
For small businesses, dropshipping can be a cost-effective way to offer a wide range of products without the need to invest in inventory or warehousing. However, it also comes with risks, such as reliance on third-party suppliers for product quality and delivery.
E-commerce Platforms
E-commerce platforms are software applications that allow online businesses to manage their website, sales, and operations. These platforms provide the necessary tools to run an e-commerce business, including website building, inventory management, payment processing, and customer service.
Examples of e-commerce platforms include Shopify, WooCommerce, and BigCommerce. For small businesses, choosing the right e-commerce platform is a critical decision that can impact the ease of managing online sales, the customer experience, and the scalability of the business.
Payment Gateways
A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. The payment gateway facilitates the transfer of information between a payment portal (such as a website, mobile phone, or interactive voice response service) and the Front End Processor or acquiring bank.
For small businesses, selecting a reliable and secure payment gateway is crucial to ensure smooth transactions and build trust with customers. Factors to consider when choosing a payment gateway include transaction fees, card types accepted, and security measures.
Shopping Cart Software
Shopping cart software is a piece of e-commerce software on a web server that allows visitors to an Internet site to select items for eventual purchase. The software allows online shopping customers to accumulate a list of items for purchase, described metaphorically as “placing items in the shopping cart” or “add to cart”.
For small businesses, choosing the right shopping cart software is important to provide a seamless shopping experience for customers and manage sales effectively. Factors to consider when choosing shopping cart software include ease of use, customization options, and integration with other systems.
Search Engine Optimization (SEO)
Search Engine Optimization, or SEO, is the process of improving the visibility of a website or a web page to users of a web search engine. SEO refers to the improvement of unpaid results (known as "natural" or "organic" results) and excludes direct traffic and the purchase of paid placement.
For small businesses, effective SEO can help attract more traffic to their online store, improve customer experience, and increase sales. Key aspects of SEO include keyword research, on-page optimization, and link building.
Keyword Research
Keyword research is the process of finding and analyzing actual search terms that people enter into search engines. The insight you can get into these actual search terms can help inform content strategy, and marketing strategy more broadly.
For small businesses, effective keyword research can help identify what potential customers are searching for and tailor the online store's content and products to meet those needs. Tools such as Google Keyword Planner can be useful for conducting keyword research.
On-Page Optimization
On-page optimization refers to all measures that can be taken directly within the website in order to improve its position in the search rankings. Examples of this include measures to optimize the content or improve the meta description and title tags.
For small businesses, effective on-page optimization can improve the visibility of their online store in search engine results, leading to more traffic and potential sales. Key aspects of on-page optimization include creating high-quality, relevant content, optimizing title tags and meta descriptions, and ensuring the website is mobile-friendly.
Customer Relationship Management (CRM)
Customer Relationship Management (CRM) is a strategy for managing an organization's relationships and interactions with customers and potential customers. A CRM system helps companies stay connected to customers, streamline processes, and improve profitability.
For small businesses, a CRM system can help manage customer data, track sales, and improve customer service. Examples of CRM systems include Salesforce, HubSpot, and Zoho CRM.
Email Marketing
Email marketing is the act of sending a commercial message, typically to a group of people, using email. In its broadest sense, every email sent to a potential or current customer could be considered email marketing. It involves using email to send advertisements, request business, or solicit sales or donations.
For small businesses, email marketing can be a cost-effective way to reach customers, build relationships, and drive sales. Key aspects of email marketing include building an email list, creating engaging content, and tracking performance.
Social Media Marketing
Social media marketing is the use of social media platforms and websites to promote a product or service. Although the terms e-marketing and digital marketing are still dominant in academia, social media marketing is becoming more popular for both practitioners and researchers.
For small businesses, social media marketing can help increase brand awareness, engage with customers, and drive traffic to the online store. Key aspects of social media marketing include choosing the right platforms, creating engaging content, and interacting with followers.
Analytics
Analytics is the systematic computational analysis of data or statistics. It is used for the discovery, interpretation, and communication of meaningful patterns in data. It also entails applying data patterns towards effective decision making.
For small businesses, analytics can provide valuable insights into customer behavior, website performance, and marketing effectiveness. Tools such as Google Analytics can be used to track and analyze data.
Conversion Rate
Conversion rate is the percentage of visitors to your website that complete a desired goal (a conversion) out of the total number of visitors. A high conversion rate is indicative of successful marketing and web design: It means people want what you're offering, and they're easily able to get it!
For small businesses, monitoring and improving the conversion rate can help increase sales and profitability. Strategies to improve conversion rate include improving website design, offering clear and compelling calls to action, and providing excellent customer service.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the cost associated in convincing a customer to buy a product/service. This cost is incurred by the organization while convincing a potential customer. This cost is inclusive of the product cost as well as the cost involved in research, marketing, and accessibility costs.
For small businesses, understanding and managing CAC is crucial for profitability. Strategies to reduce CAC include improving marketing efficiency, increasing customer retention, and optimizing the sales process.
Security
Security in e-commerce is the protection of e-commerce assets from unauthorized access, use, alteration, or destruction. 6 dimensions of e-commerce security are Integrity, Nonrepudiation, Authenticity, Confidentiality, Privacy, Availability.
For small businesses, ensuring the security of their online store is crucial to protect customer data and build trust. Key aspects of e-commerce security include secure payment processing, data encryption, and compliance with data protection regulations.
Secure Sockets Layer (SSL)
Secure Sockets Layer (SSL) is a standard security technology for establishing an encrypted link between a server and a client—typically a web server (website) and a browser, or a mail server and a mail client (e.g., Outlook).
For small businesses, implementing SSL on their online store is crucial to ensure secure transactions and protect customer data. An SSL certificate can also help improve the website's ranking in search engine results.
Data Protection Regulations
Data protection regulations are legal frameworks designed to protect the personal data of individuals. These regulations set out the responsibilities of businesses that collect and process personal data, and provide rights to individuals over their personal data.
For small businesses, compliance with data protection regulations is crucial to avoid penalties and build trust with customers. Examples of data protection regulations include the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) in the United States.
