Dropshipping Glossary

Glossary & Terminology Used in Dropshipping

Here are definitions of and terminology mostly used by dropshippers worldwide.

What is Dropshipping?

Traditional eCommerce typically sees retailers maintaining the inventories used to fulfill their customers’ orders. Dropshipping is a different strategy for eCommerce. Retailers don’t actually maintain inventory for the product or products that they’re selling. Instead, the dropship model means the retailer passes incoming orders to either a manufacturer, supplier, or distributor to fulfill the order and ship it directly to the customer.

Address Verification System (AVS)

Address verification systems originated as a way to combat payment fraud. With an address verification system in place, the billing address provided during order checkout is compared to the address the creditor has on file for the card; if the addresses don’t match, it indicates a fraudulent purchase and prevents the transaction from being processed. Retailers use address verification systems as a deterrent for payment fraud to minimize the frequency of chargebacks.

Affiliate

A person aka marketer, publisher or website owner that promotes other people’s products through his website or blog in exchange for commissions.  The idea is for the affiliate to help increase revenue for the retailer by forwarding qualified leads and traffic. The affiliate, in turn, gets a percentage of revenue for every sale.

See “How to Make Money from Home as Affiliate” for Beginners.

Affiliate links

A useful URL that consists of an associate’s identity quantity and extra statistics that makes it easier for merchants to track associate pastime is an associate hyperlink.

Alibaba

Alibaba is the largest online marketplace in China and by some accounts, the entire world. It consists of hundreds of millions of users who buy from millions of retailers and merchants across three websites. Alibaba processes more transactions for online purchases than any other eCommerce site, so a growing number of retailers are listing their products on Alibaba in an effort to target Asian consumers.

Alidropship

AliDropship is a platform that lets you create a dropshipping business by selling AliExpress products. It lets you start your Dropshipping Business right away without spending money upfront for product inventory and warehousing.

Aliexpress

AliExpress is a popular online marketplace owned by Alibaba that is more international in focus. In fact, AliExpress has at one time or another, been the most visited website in Brazil and Russia which is an indication of its international appeal. Compared to Alibaba, AliExpress has become an ideal marketplace for small businesses to list their products for global audiences.

Aliexpress Dropshipping

AliExpress Dropshipping is one of the most popular marketplaces for ecommerce entrepreneurs using the dropshipping business model. AliExpress makes it easy to find products to sell in your online store or ecommerce store without having to worry about inventory or shipping. No minimum order requirements. Unlike other dropshipping suppliers that have MOQ, Aliexpress allows dropshippers to purchase 1 item and have it shipped. AliExpress dropshipping is a perfect model for first-time entrepreneurs. Dropshipping with AliExpress is easy and much profitable. 

Amazon

Amazon is a U.S. online marketplace and mega-retailer with a growing international presence that has allowed it to become the largest online retailer in the world in terms of revenue and market capitalization. Today, around half of Amazon’s sales are driven by third-party retailers that list their products on the Amazon Marketplace. Amazon is also growing rapidly in the software-as-a-service and infrastructure-as-a-service industries.  

Analytics  

Analytics refers to reviewing data to infer patterns of significance, especially when it comes to user behavior. Typically, analytics are used to determine consumers’ purchasing habits and how they engage with a retailer’s website. With analytic data, you can implement changes that might lead to increased sales and revenue.

Application Programming Interface (API)

An API is a protocol created to permit separate software program solutions to work over a exceedingly easy interface. APIs are used to attach or integrate structures and services.

Authorization

A transaction to determine the ownership of a service, platform, account or any other item on which one user has rights over. Authorizations are one of the steps for processing payments. Before a payment is processed and the order is submitted, an authorization allows the system to determine whether the account has the funds available to complete the order.

Authorized Distributors

Authorized distributors are companies and businesses that have been designated or approved by the product manufacturer to sell the product in quantity to commercial retailers.

Authorized Retailer

Authorized retailers are merchants that have been designated or authorized by the product manufacturer to sell the product directly to consumers.

Blog

Blogs are websites or part of websites that post primarily short, narrative articles called ‘blog posts.’ They originated as the digital journals of individuals — in fact, the word blog is a portmanteau of “web” and “log” — but have increasingly become tools for marketing. Merchants and retailers frequently hire bloggers to promote their products and services via content marketing. See: How to Create Blog in 10 Minutes.

Bounce Rate

An internet term used to show the percentage of users that leave one website or page after visiting it. Bounce also means leave.

Call-to-Action

A word, button or any other website element that calls the user to action. It may be BUY, REGISTER or any other action we want the user to take in our webiste.

Chargeback

This happens when one of our customers reverses a transaction and decides to ask for his fundings back. These procedures usually happen after client complaints. Chargebacks occur when a refund is forcibly issued by the customer’s bank, taking transaction funds from the retailer and returning them to the customer. This tends to occur when a customer files a complaint, such as in cases of fraudulent purchases, false advertising, or when the order wasn’t fulfilled. If chargebacks occur at a high frequency, the rate a retailer pays to process payments for customers’ online purchases could increase.

Comma Separated Values (CSV)

A file type used to store values and data. CSV are used to transfer feeds of products.

Content Management System (CMS)

A software solution made to facilitate the creation, edition and maintainance of websites and online publications. I.E. WordPress.

Conversion

A marketing term used to specified when a customer or clients fulfills an action we want him to do. Conversion rate refers to the percentage of users that have completed our desired action.

Cookie

Small record saved automatically in every users device to study his or her behavious when surfing the net.

Delivery Confirmation

Delivery confirmations occur when shippers are notified of delivery. This is a service offered by many package carriers like FedEx and USPS. However, delivery confirmation isn’t the same as when a recipient signs for delivery.

Distributor

Distributors are businesses that maintain inventories of products from a number of manufacturers and sell those products to a number of different retailers. Typically, distributors offer shorter windows for shipping orders to customers than the manufacturers of those products. A distribution business that inventories merchandise from some of producers and sells to many stores. Distributor may not be the manufacturers and therefore their distribution time is usually shorter than the suppliers’.

Domain

The name or URL of any website self-hosted Website, Blog or Online Store (e.g. www.yourwebsitename.com)

Dropshipping / Drop Shipping

A business model where the retailer does not need to stock up products, and buys them from a distributor instead, who will also be in charge of delivering the products to the final customer. ( Click to view how to start dropshipping)

eBay

eBay is a popular online marketplace that facilitates consumer-to-consumer and business-to-consumer purchases. Though traditionally associated with online auctions, eBay allows items to be listed with set prices which gives retailers the chance to extend their reach by creating eBay listings for the products they offer. This has become a popular practice for both small businesses and larger companies. One of the best online selling platforms there is. It is maybe the most famous C2C (Consumer to Consumer) channel in western countries.

Ecommerce

Business and shopping made online. Ecommerce refers to online commerce and retailing. It can be done both from computers or mobile phones, as long as it is done on the internet.

Expedited Shipping

It refers to the fastest possible shipment method a platform can offer to its customers. It is usually more expensive than lower methods.

Fulfillment / Services

Fulfillment is the process of putting an order together so that it’s ready for shipment. The term also refers to when third-party companies with their own inventories ship orders on behalf of a retailer. Example of Popular Fulfillment Services: Deliverr, Fulfillman, Spocket, Shipwire

Gross Profit

Gross profit refers to the difference between the amount of money generated through sales of a product and the retailer’s costs of producing or acquiring that product (also known as the cost of goods sold).

Inventory

Inventory is a term used to refer to the amount, quantity, or value of products that a retailer currently has available. It does not account for products that have been ordered from suppliers; inventory accounts only for what is physically on hand and could be shipped at any given time.

Liquidation

Sales meant to get rid of products or to cleanse the stock to replenish new supplies.

Listing Fees

Listing fees are costs associated with listing products or services on third-party online marketplaces. An example of such an online marketplace is eBay, which usually charges a fee for listing.

Logistics

Logistics refers to the management of products as they progress from origination to destination. In the world of eCommerce, logistics often encompasses the different phases of transport that occur between a product’s manufacturing and its delivery to the customer, including transport from the manufacturer to the supplier, transport from the supplier to the retailer, and transport from the retailer to the consumer. The control of channels and means of distribution and stocking. In e-commerce, logistics may refer to delivering and inventory controls.

Long Tail

Long tail may refer to keywords or to markets. These both share the same description: this refers to very small and strong markets where competence is small.

Manufacturers

Manufacturers are the businesses or companies that produce products for the purposes of selling to consumers.

Margins

Margins refer to the difference between what a retailer pays for a product and the amount the consumer pays when purchasing the product. Retailers’ profits are dependent on the margins they have on their products. Margins represent how much of what consumers pay is actually profit for the retailer. Retailers can increase their margins by either negotiating a lower rate from suppliers or increasing the purchase price for consumers. The difference between what you pay and the price you end up selling the product. This may also include further costs, like distribution, stock, etcetera. In dropshipping businesses, the margin only refers to the price paid to the distributor.

Multi-channel eCommerce

Multi-channel eCommerce, also called multi-channel selling or multi-channel retail, is an increasingly common model of retail where the retail lists products on multiple online marketplaces, such as on eBay, Amazon, and AliExpress. The idea is to reach a larger audience of potential customers. 

Multi-Channel Retailing

Retailing products through multiple channel wherein channels like Amazon, eBay, Shopify or others.

Net Profit

Net profit refers to the difference between the amount of money generated through sales and the retailer’s total costs, which can include not only the cost of goods sold, but things like payroll, operating expenses, and marketing. Net profit reflects the amount of revenue that’s left over after all the necessary expenses have been paid.

Net Terms

Net terms refer to an agreement between supplier and retailer. It allows the retailer to pay the supplier for the products a predetermined amount of time after those products have been shipped to consumers. An example of net terms is “net 30,” which indicates the retailer has until 30 days after shipping to a consumer to remit payment for the product to the supplier. There can be discounts involved, too. For instance, “10/5 net 30” means the retailer would receive a discount of ten percent if payment is made in the first five days, but the discount would be forfeited is payment is made between day six and day 30.

Niche

A small and powerful market segment.

Organic

Not human-produced. This means to growth based on natural reasons. In online marketing, organic means growth due to quality content. Organic growth is free, slow, stable and very profitable.

Outsourcing

Outsourcing is when a business, company, or individual hires a third party for a task, project, or specific type of work.

Overhead

Overhead is a catch-all term for expenses associated with operating a business that doesn’t include things like labor, direct materials, and direct expenses. Expenses that are part of the overhead can be things like advertising costs, interest accrued on loans, rent, utilities, repairs, maintenance, insurance, taxes, and legal fees.

Payoneer

The world we live in today is a borderless digital world, and Payoneer allows millions of businesses and professionals from over 200 countries worldwide, to grow globally by facilitating fast cross-border payments. Many big businesses rely on and also make use of Payoneer to send out payments to their beneficiaries worldwide. Businesses and professionals can now pay and get paid globally With Payoneer’s fast, flexible, secure and low-cost solutions, just as you do locally.  

PayPal

PayPal is an online payment system that facilitates online purchases as well as money transfers. Though originally associated with eBay, PayPal has become ubiquitous and as such, is supported by many digital storefronts.

Pay Per Click (PPC)

An online marketing term that refers to the cost that every click a user makes. Google Adwords works upon this standards. Every time one user clicks on your ad, you will pay a fixed rate (or variable, depending on the campaing).

Preferred Supplier

Preferred suppliers are businesses and companies from whom a retailer prefers to source products. A preferred supplier arrangement usually occurs when special rates have been negotiated — which, in turn, means better margins for the retailer — or when there’s a long-term partnership between the supplier and retailer. As such, preferred suppliers are advantageous to both the retailer and the supplier.

Resellers

Resellers are individuals or businesses that purchase products or services for the purpose of resale rather than for consumption. With eCommerce now ubiquitous, affiliate marketers are becoming resellers sometimes, too, as this promotes rebranded products or services.

Restocking Fee

Restocking fees are either a flat fee or a percentage of the purchase price that is charged to customers when they return the products they’ve purchased. This is particularly common with products where the value is lower after they’ve been opened because it affects whether the items can be resold. It’s common practice for restocking fees to be deducted from the customer’s refund.  

Retailers

Retailers are companies and businesses that sell directly to the end user or consumer.

Search Engine Marketing (SEM)

Marketing strategies and campaigns to increase one website’s visibility by spending money on ads or inclusions on other websites.

Search Engine Optimization (SEO)

Marketing strategies and campaigns aimed to increase the visibility of one website. These optimizations and changes are human made and free of charge.

Search Engine Results Page (SERP)

The list of responses after any particular search query or keyword search.

Stripe

Stripe is an online payments system similar to PayPal. PayPal is more consumer-facing, whereas Stripe is geared toward businesses and professionals as a means of allowing them to accept payments for their products and services.

Suppliers

Suppliers are companies, businesses, or individuals that supply something the retailer needs. This could be a product, service, or something else.

Supply Chain

Supply chains refer to a network of businesses or companies involved in moving a product from its point of origin to the consumer. For eCommerce, this usually equates to the manufacturer and distributor of a product.

Tracking Number

An alphanumeric code that includes information about the shipment of any order. It can be updated and this is of vital information to the final user. Tracking numbers are alphanumeric identification numbers assigned to items that are shipped through services like USPS, FedEx, and UPS. The purpose of tracking numbers is to allow the sender and receiver to track the progress of the shipment as well as to confirm its delivery.

Wholesale

Refers to buying products at a discount in large quantities. These businesses and companies — referred to as wholesalers — sell products in quantity to retailers that, in turn, sell those products individually to consumers.

Wholesaler

An individual person, a business or company that has the capacity of buying quantities in bulk. Wholesalers are manufacturers and distributors that sell to retailers. Oftentimes, wholesalers offer discounts when the retailer orders larger quantities of the products and services, which is the origin of expressions like “buying wholesale” and “bulk discount.”

 

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