Dropshipping Lingo Explained: Essential Terms for Success
To succeed in dropshipping, it is crucial to understand its jargon and technical terms. The world of dropshipping and e-commerce is vast and constantly evolving, requiring a deep understanding of its specific environment. This article will help you master all the essential concepts to effectively navigate the field of e-commerce and dropshipping.
Basic definitions
Definition of dropshipping
Dropshipping is a sales method where the seller does not hold inventory. Products are delivered directly by the supplier to the customer.
Managing a site is essential in dropshipping to ensure good administration, visibility, and traffic. This allows entrepreneurs to start an online store without having to manage stock. It is a very appealing model for newcomers in the e-commerce field because it reduces financial and logistical risks.
E-commerce and e-commerce site
E-commerce refers to the buying and selling of products or services online. Websites play a crucial role in online commerce, facilitating the creation and management of sales platforms. An e-commerce site or online sales site is an online platform that allows users to purchase products or services. Thanks to the multiple platforms and SaaS available online, many entrepreneurs can now design and manage an e-commerce site, opening new business opportunities globally.
Back-office: Managing the online store
The back-office is the area reserved for e-merchants to manage and administer their website. It allows them to oversee the operational aspects of the online store (inventory management, orders, and customer service). Effective back-office management is crucial to ensure a smooth and pleasant customer experience.
Dropshipping lexicon
Mastering the dropshipping lexicon can improve operations and enhance communication with collaborators, suppliers, and customers. Understanding the specific expressions of dropshipping is essential to becoming an expert in this field. Each technical term is a crucial piece of the puzzle that helps understand and manage sales processes. Mastering the specific vocabulary also allows better navigation in the world of e-commerce and marketing.
Order process and checkout
The order process and checkout encompass all the steps to complete a sale, from adding to the cart to the order page. Understanding this process is crucial to improving user experience and reducing abandoned carts. The conversion rate can be significantly increased with a simplified and transparent checkout process. Additionally, analyzing the conversion rate is essential to evaluate the performance of the order process, considering the number of orders relative to the number of visitors and its impact on customer satisfaction.
Upsells and cross selling
Upsells and cross selling are sales techniques that involve offering complementary or additional products to the main product. This increases the average order value (AOV) ( Or cart).
A common upsell strategy example is offering an extended warranty when purchasing an electronic device.
Creative
A creative is a media, such as a video or an image, used to promote a product on advertising platforms like Facebook, TikTok, Pinterest, and Snapchat. Creatives play an essential role in engaging users and driving sales.
Abandoned Cart
An abandoned cart occurs when a customer adds products to their cart but does not complete the purchase. Implementing strategies to recover these lost sales, such as reminder emails or discount offers, is essential. Reducing abandoned carts can significantly impact the revenue of an online store.
Initiate Checkout (IC)
The Initiate Checkout phase is when the customer begins the payment process without necessarily completing the transaction. This indicates significant customer interest and may present an opportunity for retargeting actions. Understanding this behavior helps improve marketing strategies and increase the conversion rate.
Add to Cart (ATC)
The Add to Cart action is a crucial step in the purchase journey. It indicates the customer's purchase intent and presents an opportunity for additional marketing actions, such as upsells or abandoned cart reminders. Understanding ATC behaviors helps optimize the conversion rate and improve user experience.
Average Order Value (AOV)
The average amount spent per order over a given period is called the Average Order Value (AOV). It is a crucial indicator for evaluating profitability. AOV can be increased using strategies like upsells and cross selling.
Customer Acquisition Cost (CAC)
CAC refers to the total expenses incurred to acquire a new customer, including advertising and marketing costs. Reducing CAC is essential to improve profitability. Conducting a thorough analysis of marketing campaigns helps improve acquisition strategy efficiency and optimize expenses.
Lifetime Value (LTV)
The total revenue generated by a customer for the company during their relationship is called Lifetime Value (LTV). A high LTV indicates high customer loyalty. Understanding and increasing LTV is crucial to ensure a company's sustainability and growth.
Advertising campaigns, ABO and CBO
Advertising campaigns are sets of ads created to achieve a specific marketing objective. A campaign can include multiple ad sets, each containing several individual ads.
Adset Budget Optimization (ABO)
Adset Budget Optimization involves setting a specific budget for each ad set. This approach allows precise monitoring of expenses for each targeted group.
Campaign Budget Optimization (CBO)
Campaign Budget Optimization involves setting a global budget for the entire campaign, allowing the advertising platform’s algorithm to optimally distribute the budget across various ads. This can help optimize results by reallocating resources to the most effective areas.
Broad
The term "broad" refers to zero targeting. In advertising, a broad campaign includes no specific targeting, allowing the platform's algorithm (like Facebook or TikTok) to determine the best audience. This can be useful for identifying new market segments.
Testing
Testing aims to evaluate a product’s performance and profitability before moving to the growth phase. This step is essential to avoid unnecessary investments in unprofitable products.
Scaling
Scaling involves increasing the performance of a product that has already demonstrated its profitability and effectiveness. This requires increasing advertising spend and expanding the sales channels used to optimize profits.
Retargeting
Retargeting is a marketing strategy that involves targeting site visitors who did not make a purchase during your campaigns. This technique helps increase conversions by reminding potential customers of the products they viewed, often through personalized ads.
Product management
It is essential to ensure effective product management to guarantee availability, quality, and customer satisfaction. Familiarizing yourself with terms and techniques related to inventory management and logistics improves the performance of your online store.
Product database and inventory management
A product database includes all product listings that make up an online store's catalog. It contains detailed information about each product, such as descriptions, images, prices, and stock levels.
Inventory management is crucial to avoid stockouts and minimize storage costs. Using an inventory management system helps track available quantities, forecast replenishments, and manage product returns efficiently.
Tools and technologies
Modern tools and technologies play a crucial role in automating and improving dropshipping processes. Utilizing appropriate software solutions can save time and optimize efficiency.
Software Solution (SaaS) for marketplace presence
A SaaS allows an online store to offer its products on a marketplace. These solutions simplify product setup, order management, and stock synchronization. Presence on multiple marketplaces can increase visibility and sales.
Software Connector for ERP and E-commerce Site Integration
A software connector is a tool that enables the integration of an ERP (Enterprise Resource Planning) solution with an e-commerce site. This centralizes data management and business processes, improving operational efficiency and information accuracy.
Pixel
The pixel is a code or artificial intelligence connected to an online store and an advertising software (like Facebook Pixel linked to Facebook Ads or TikTok Pixel linked to TikTok Ads). The pixel tracks everything that happens on the store: traffic, ad clicks, user actions.
This data is used for retargeting, allowing you to target visitors who have shown interest or interacted with your business. The pixel also helps train the algorithm to improve the conversion rate by identifying common characteristics of buyers.
Niche Finder
The Niche Finder is a tool using artificial intelligence to analyze market trends and consumer behavior. It helps e-merchants identify high-growth potential niches. Using a Niche Finder allows you to discover new opportunities and strategically position yourself in the market.
Fulfillment
Fulfillment encompasses the entire order management process, including storage, packaging, and shipping of products.
In the dropshipping model, these tasks are often outsourced to the supplier, simplifying management for the merchant. Effective fulfillment management is crucial to ensure fast delivery and high customer satisfaction.
Marketing and sales
Marketing and sales play a crucial role in any online sales strategy. Keywords are essential in digital marketing and dropshipping as they help optimize ads and online stores. To attract and retain customers, it's vital to understand and apply digital marketing techniques such as upsells to increase revenue.
Applied marketing science on the internet domain
Digital marketing, also known as e-marketing or web marketing, involves applying marketing principles to the internet. Becoming an expert in digital marketing is essential for mastering the techniques and strategies necessary for online success. It encompasses various methods such as SEO, online ads, and content marketing. Grasping these methods is crucial for attracting and converting visitors into customers.
Sales technique and upsells
Sales techniques include strategies like upsells and cross-sells. Offering complementary or higher-quality products during the purchase process can increase the Average Order Value (AOV).
For example, offering compatible accessories (a fast charger) when purchasing a main product (a smartphone) can encourage customers to spend more.
Product page
The product page is a web page that provides detailed information about a given product. It should include accurate descriptions, high-quality images, customer reviews, and technical specifications. A well-designed product page can enhance the user experience and increase conversions.
Break Even (BE)
The break-even point is where revenues cover costs, with no profit or loss. Reaching break-even is a crucial step for a business's financial viability. It helps determine if a strategy or campaign is profitable.
ROI (Return on Investment)
ROI is a measure of an investment's profitability. It is calculated by dividing the net gain by the total investment cost. A high ROI indicates good investment performance. In digital marketing, ROI is used to assess the effectiveness of advertising campaigns.
Bundle
A bundle is an offer that combines several products at a reduced price. This strategy encourages customers to buy more, increasing the Average Order Value. Bundles are particularly effective for clearing stock or promoting new products.
Security and payments
Secure and dematerialized payment service
A secure and dematerialized payment service allows customers to make online purchases safely. These services include options like PayPal, secure credit cards, and other online payment platforms. They ensure transactions are protected against fraud and data breaches.
Internet payment authentication and security protocols
Authentication and security protocols for internet payments, such as SSL (Secure Sockets Layer), protect sensitive information during online transactions. They ensure data transmitted between the customer and the server is encrypted and secure, reducing the risk of fraud.
Chargeback
A chargeback occurs when a customer requests a refund through their bank for a completed transaction. Chargebacks can be costly for merchants as they result in lost sales and additional fees.
Analysis and optimization
Number of orders compared to total site visits
The conversion rate is the ratio between the number of orders and the number of unique visitors over a specific period. A high conversion rate indicates the website's effectiveness in turning visitors into customers. Improving this rate is essential for increasing revenue.
Unique visitor and site audience
A unique visitor is a user who visits an online sales site during a specific period. Understanding user behavior on the site allows marketing strategies to be adapted to the audience.
Optimization of Visibility in Search Engine Results
SEO encompasses all methods and best practices aimed at improving a website's visibility in search engine results. An effective SEO strategy increases site visibility and attracts more organic traffic.
Performance Indicators (KPIs)
Key Performance Indicators (KPIs) provide tangible measures of your marketing efforts' performance. Tracking indicators like CPM, CTR, and ROAS allows for adjusting strategies and optimizing campaigns for optimal results.
CPC and Online Advertising
Cost per Click (CPC) is a pricing model for online advertisements. Each click on an ad incurs a cost for the advertiser, making this metric essential for evaluating the effectiveness of advertising campaigns.
CPC is particularly useful for optimizing ad spending and maximizing return on investment.
CPM (Cost per Thousand Impressions)
Cost per Mille (CPM) refers to the price of an advertisement for one thousand impressions. It is a crucial measure for evaluating the performance of advertising campaigns. A low CPM indicates that the advertiser is reaching a broad audience at an affordable price.
CTR (Click-Through Rate)
Click-Through Rate (CTR) is the ratio of clicks on an ad to the number of impressions. A high CTR indicates that the ad is relevant and capturing users' attention.
ROAS (Return on Advertising Spend)
Return on Advertising Spend (ROAS) measures the effectiveness of an advertising campaign by comparing revenue generated to advertising expenses. A high ROAS indicates that the campaign is profitable.
Understanding dropshipping jargon and technical terms is essential for success in e-commerce. By mastering concepts like CPC, AOV, and pixel, you can optimize your online store, increase conversions, and improve your marketing.