E-Commerce Glossary
Key terms and definitions for e-commerce analytics and profitability
70 terms
3PL (Third-Party Logistics)
Outsourcing warehousing, fulfillment, and shipping to a specialized logistics provider.
AOV (Average Order Value)
The average amount spent per order. Increasing AOV is one of the fastest ways to boost revenue.
ARPU (Average Revenue Per User)
Total revenue divided by number of active users/customers over a period.
Accrual vs. Cash Accounting
Accrual records revenue when earned (not when paid). Cash accounting records when money actually changes hands.
Break-Even Point
The sales volume or revenue at which total costs equal total revenue — no profit, no loss.
Blended ROAS
Total revenue divided by total ad spend across all channels. Same concept as MER but focused on paid channels only.
Burn Rate
The rate at which a company spends cash reserves, typically measured monthly. Used to calculate runway.
Contribution Margin
Revenue minus all variable costs per unit, showing how much each sale contributes to covering fixed costs.
COGS (Cost of Goods Sold)
The direct costs of producing or purchasing the products you sell, including materials, manufacturing, and freight.
CAC (Customer Acquisition Cost)
The total cost of acquiring a new customer, including all marketing and sales expenses.
CPC (Cost Per Click)
The amount you pay each time someone clicks on your ad. Used in Google Ads, Facebook Ads, and other PPC platforms.
CPA (Cost Per Acquisition)
The cost of acquiring a single conversion (sale, lead, or signup) through a specific marketing channel.
Conversion Rate
The percentage of visitors who complete a desired action (purchase, signup). Average e-commerce rate: 2-3%.
CPM (Cost Per Mille)
The cost per 1,000 ad impressions. Used for brand awareness campaigns on display, social, and video platforms.
Churn Rate
The percentage of customers who stop purchasing over a given period. The opposite of retention rate.
Cohort Analysis
Grouping customers by shared characteristics (e.g. acquisition month) to compare behavior over time.
Customer Segmentation
Dividing customers into groups based on shared characteristics like behavior, demographics, or purchase history.
Cash Flow
The net movement of money in and out of your business. Positive cash flow means more money coming in than going out.
Chart of Accounts
A categorized list of all financial accounts used to organize transactions — assets, liabilities, equity, revenue, expenses.
Days Sales of Inventory (DSI)
The average number of days it takes to sell through your inventory. Lower is generally better.
Dropshipping
A fulfillment model where you sell products without holding inventory — the supplier ships directly to your customer.
Dead Stock
Inventory that hasn't sold and is unlikely to sell — tying up capital and incurring storage costs.
Discount Rate
The percentage of revenue lost to discounts, promotions, and coupon codes. Also: the average discount applied.
Dynamic Pricing
Automatically adjusting prices based on demand, competition, inventory levels, or time of day.
Fixed Costs
Costs that remain constant regardless of sales volume — rent, salaries, software subscriptions, insurance.
First-Touch Attribution
An attribution model that gives 100% credit to the first marketing touchpoint a customer interacts with.
Fulfillment Cost
The total cost of storing, packing, and shipping an order to the customer — warehouse, labor, materials, and postage.
Gross Margin
The percentage of revenue remaining after subtracting the cost of goods sold (COGS).
Gross Profit
The dollar amount remaining after subtracting COGS from revenue, before operating expenses.
GMV (Gross Merchandise Value)
The total value of goods sold through a marketplace or platform, before any fees or deductions.
Gross Revenue
Total sales income before any deductions for returns, discounts, or allowances.
Landed Cost
The total cost of a product delivered to your warehouse: purchase price + shipping + duties + insurance + handling.
Last-Touch Attribution
An attribution model that gives 100% credit to the last marketing touchpoint before conversion.
LTV (Customer Lifetime Value)
The total revenue or profit a customer generates over their entire relationship with your business.
LTV:CAC Ratio
The ratio of customer lifetime value to acquisition cost. A ratio of 3:1 or higher is considered healthy.
Loss Leader Pricing
Selling a product at a loss to attract customers, hoping they'll also buy higher-margin items.
Markup
The percentage added to COGS to determine the selling price. Often confused with margin.
Margin vs. Markup
Margin is based on selling price; markup is based on cost. They measure the same profit differently.
Marketing Attribution
The process of identifying which marketing channels and touchpoints are responsible for driving conversions.
MER (Marketing Efficiency Ratio)
Total revenue divided by total marketing spend across all channels. A holistic alternative to per-channel ROAS.
Multi-Touch Attribution
An attribution model that distributes credit across multiple touchpoints in the customer journey.
Net Margin
The percentage of revenue remaining after all expenses — COGS, marketing, shipping, fees, and overhead.
Net Profit
The total amount of money remaining after all business expenses have been subtracted from revenue.
Net Revenue
Total revenue minus returns, refunds, discounts, and allowances. The actual income you keep from sales.
Operating Margin
The percentage of revenue remaining after subtracting COGS and operating expenses, but before taxes and interest.
Order Defect Rate
The percentage of orders with issues — wrong item, damaged, late delivery. Critical for marketplace seller health.
Profit Margin
A general term for the percentage of revenue that becomes profit. Can refer to gross, operating, or net margin.
Purchase Frequency
The average number of times a customer buys from you within a given period (usually per year).
Price Elasticity
How much demand changes when you raise or lower prices. Elastic products see large demand shifts; inelastic products don't.
Product Bundling
Selling multiple products together at a combined price, typically at a discount vs. buying individually.
Profit & Loss Statement (P&L)
A financial report showing revenue, costs, and profit over a period. The core tool for understanding business health.
Payment Processing Fees
Fees charged by payment providers (Stripe, PayPal, Shopify Payments) per transaction — typically 2.4-2.9% + $0.30.
ROAS (Return on Ad Spend)
The revenue generated for every dollar spent on advertising. A ROAS of 4x means $4 revenue per $1 ad spend.
Repeat Purchase Rate
The percentage of customers who make more than one purchase. Higher rates indicate strong customer loyalty.
Retention Rate
The percentage of customers who continue purchasing over a given period. The inverse of churn rate.
RFM Analysis
Segmenting customers by Recency (last purchase), Frequency (how often), and Monetary value (how much they spend).
Return Rate
The percentage of sold items that are returned by customers. Average e-commerce return rate: 20-30%.
Revenue
The total income from sales before any deductions. Also called the top line or total sales.
Refund Rate
The percentage of orders that result in a full or partial refund. Distinct from return rate (not all refunds involve returns).
ROI (Return on Investment)
The percentage return on a specific investment, measuring profitability relative to cost.
Runway
How many months a company can operate before running out of cash, based on current burn rate.
Shipping Cost Ratio
Shipping costs as a percentage of revenue. Helps track whether shipping is eating into margins.
Stockout Rate
The frequency or percentage of time that products are out of stock, resulting in lost sales.
Take Rate
The percentage of GMV that a marketplace or platform keeps as revenue (commission/fees).
Transaction Fees
Fees charged per transaction by platforms (Shopify, Amazon), payment gateways, or banks. Distinct from payment processing fees.
Variable Costs
Costs that change proportionally with sales volume — COGS, shipping, payment processing fees, packaging.
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