What You Need to Know Before Diving into eCommerce
eCommerce might seem overwhelming at first, especially with all the new terms and jargon. But don’t worry! If you’re a Jamaican looking to start selling online, understanding these basic terms will help you navigate the eCommerce world with confidence. Whether you’re planning to run a dropshipping business, start selling on Amazon, or create your own online store, knowing the right language will set you up for success.
Let’s break down some of the most common eCommerce terms and concepts to make sure you’re fully prepared to start your online journey.
1. eCommerce Platform
An eCommerce platform is the software that allows you to build and manage your online store. It’s like your virtual storefront where customers can browse products, add items to their cart, and check out. Popular eCommerce platforms include Shopify, WooCommerce, and BigCommerce. Each platform offers different features, so it’s important to choose one that fits your needs. For example, Shopify is known for its ease of use and extensive app ecosystem, while WooCommerce offers more flexibility for those using WordPress.
2. Dropshipping
Dropshipping is a retail fulfillment method where you don’t keep any products in stock. Instead, when you sell a product, you purchase it from a third party, usually a wholesaler or manufacturer, and they ship it directly to the customer. This model is great for beginners because it has low startup costs and doesn’t require you to manage inventory. However, be aware of potential drawbacks, like lower profit margins and less control over product quality and shipping times.
3. Fulfillment by Amazon (FBA)
Fulfillment by Amazon (FBA) is a service that allows you to store your products in Amazon’s fulfillment centers. Amazon then picks, packs, and ships your orders for you, handles returns, and provides customer service. FBA is popular because it gives you access to Amazon’s vast customer base and makes your products eligible for Prime shipping. However, it comes with fees, so it’s important to factor those into your pricing strategy.
4. SKU (Stock Keeping Unit)
An SKU, or Stock Keeping Unit, is a unique identifier for each product or item in your inventory. It helps you keep track of stock levels, manage inventory, and process orders efficiently. Think of SKUs as a way to quickly identify different products based on size, color, model, or any other characteristic. For example, a red t-shirt in size medium might have an SKU of “TSH-RED-M,” while a blue one in size large could be “TSH-BLU-L.”
5. Conversion Rate
Your conversion rate is the percentage of visitors to your site who complete a desired action, such as making a purchase. A high conversion rate means that more people who visit your site are buying something, which is great for business! You can improve your conversion rate by optimizing your website’s design, making sure it loads quickly, writing compelling product descriptions, and offering excellent customer service.
6. Shopping Cart Abandonment
Shopping cart abandonment occurs when a customer adds items to their cart but doesn’t complete the purchase. This is a common issue in eCommerce, with studies showing that nearly 70% of shopping carts are abandoned. To reduce cart abandonment, you can offer incentives like discounts or free shipping, simplify the checkout process, or send follow-up emails reminding customers to complete their purchase.
7. Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is a metric that estimates the total revenue a business can expect from a single customer over the course of their relationship. Understanding CLV helps you determine how much you can spend on acquiring new customers and how to retain existing ones. For example, if the average customer spends $100 every time they purchase and buys from you twice a year for three years, their CLV would be $600.
8. Return on Investment (ROI)
ROI measures the profitability of an investment and is calculated by dividing the net profit by the cost of the investment. In eCommerce, you’ll want to calculate the ROI of your marketing campaigns, product sourcing, or any other business expense to ensure you’re getting a good return. For instance, if you spend $100 on Facebook ads and generate $500 in sales, your ROI would be 400%.
9. Payment Gateway
A payment gateway is a service that processes credit card payments for eCommerce transactions. It securely captures the payment information from your customer, checks for sufficient funds, and then transfers the money to your account. Popular payment gateways include PayPal, Stripe, and Square. Choosing the right payment gateway is crucial for providing a smooth checkout experience and keeping your customers’ information secure.
10. A/B Testing
A/B testing is a method of comparing two versions of a webpage or app against each other to see which one performs better. In eCommerce, A/B testing can help you optimize everything from product pages and checkout processes to email campaigns and ads. For example, you might test two different headlines for a product page to see which one results in more sales.
Why Understanding These Terms is Crucial
Knowing these basic eCommerce terms will give you the foundation needed to make informed decisions as you start and grow your online business. By understanding the language of eCommerce, you’ll be better equipped to communicate with suppliers, set up your online store, and optimize your marketing strategies for better results. Remember, the more you know, the better you can strategize and avoid common pitfalls that new sellers often face.
Ready to dive deeper? Stay tuned for the next article where we explore how to choose the right eCommerce model for you.
