The Ultimate Dropshipping Glossary

You're scrolling through dropshipping forums, and suddenly it feels like you're reading a foreign language. ROI, CPC, SKU – what's with all these acronyms? Don't sweat it! We've got your back with this ultimate guide to dropshipping terminology. From ops to marketing, and everything in between, we're serving up the essential terms you need to know.

Operations

1. Dropshipping

Come on, you know this one! It's the reason you're here, right? But just to recap: you sell, your supplier ships, and you nap in the sunbeam... I mean, count your profits. (Over simplified? Totally but that's the gist of it.)

2. E-commerce

This is just a fancy way of saying "selling stuff online." It's the whole world of buying and selling products on the internet.

3. Supplier

These are the folks who have the products you want to sell. They're like your secret weapon in dropshipping, providing the goods you list in your store.

4. Wholesaler

Think of them as the middlemen between manufacturers and retailers. They buy products in bulk and sell them to businesses like yours at lower prices.

5. Fulfillment

This is all about getting orders directly to your customers. In dropshipping, your supplier usually handles this part, packing and shipping products to your buyers.

6. Inventory management

Don't worry, as a dropshipper you won't have actual inventory (not in the beginning at least) ! This is about keeping track of what products are available from your suppliers and updating your store accordingly.

7. Product sourcing

It's the mission to find awesome products for your store. You'll be scouting supplier websites, checking out trending items on AliExpress, and maybe even using product research tools. It's all about finding products that are a good fit for your niche, have decent profit margins, and will make your customers excited to buy.

8. Order processing

This is what happens after a customer clicks "buy." It involves confirming the order, taking payment, and sending the order details to your supplier.

9. Shipping times

Shipping times refer to how long it takes for a product to travel from your supplier to your customer’s doorstep. Keeping your shipping times short and reliable is crucial because customers love getting their orders quickly. Always keep your customers informed about expected delivery times to manage their expectations.

10. Product research

Product research is all about finding the best products to sell in your store. This means looking for items that are in demand, have good profit margins, and aren’t overly saturated with competitors (e.g. sold in local stores). Good product research can make the difference between a successful store and one that struggles to get sales.

11. Winning products

Winning products are those items that sell like hotcakes. They’re popular, in-demand, and bring in steady sales and profits. Finding winning products involves a mix of market research, trend analysis, and sometimes a bit of luck. Once you identify these gems, they can significantly boost your business.

12. Dropshipping automation

It involves using special software that can do things like automatically update your product listings, sync inventory with suppliers, and even process orders without you lifting a finger. Some tools can even handle customer service tasks or update pricing based on your competitors. It's all about making your life easier and your business run smoother by automate processes.

13. Supplier vetting

This is where you put on your detective hat and do some serious digging on potential dropshipping suppliers. You'll want to check things like their product quality, shipping times, and customer service. This might involve ordering samples, reading reviews from other dropshippers, or even chatting with the supplier directly. You're looking for red flags like inconsistent communication or lots of negative feedback. Remember, your supplier is a key partner in your business, so it's worth taking the time to find a good one!

14. Fulfillment by Amazon (FBA)

FBA is a service where Amazon handles storage, packing, and shipping for you. You send your products to Amazon's warehouse, and they take care of the rest. It’s a great way to leverage Amazon's massive logistics network and reach more customers without the hassle of managing inventory yourself.

15. Minimum order quantity (MOQ)

MOQ is the smallest amount of a product that a supplier is willing to sell. For example, if a supplier has an MOQ of 100 units, you need to buy at least 100 of that product. Understanding MOQs is crucial in negotiating with suppliers and planning your inventory.

16. Bulk ordering

Bulk ordering means buying large quantities of a product at once. This often gets you a better price per unit, which can boost your profit margins. It’s a good strategy when you know a product will sell well and you have the space to store it.

17. POD (Print On Demand)

POD is a type of dropshipping where products are only printed and created after a customer orders them. It’s super popular for custom items like t-shirts, mugs, and posters. You don’t hold any inventory, and you can offer a wide range of unique, personalized products.

18. SKU (Stock Keeping Unit)

An SKU is like a unique code or number that stores use to keep track of their products. Think of it as a special ID for each item, making it easy to manage inventory and find exactly what you need quickly.

19. Dropshipping arbitrage

This is a smart way to make money by finding products at a low price on one platform and selling them at a higher price on another. It's all about buying low and selling high without ever touching the product yourself.

20. White labeling

White labeling means you take a product made by someone else and brand it as your own. Imagine you find a fantastic skincare product, and instead of selling it under its original name, you put your own brand on it. Your customers see it as your product, even though someone else made it.

21. Fulfillment center

A fulfillment center is like a giant warehouse where your products are stored, packed, and shipped out to your customers. These centers handle all the logistics, so you don’t have to worry about storing inventory or shipping orders yourself. They make sure everything gets to your customers quickly and efficiently.

22. Dropshipping agent

A dropshipping agent is like your right-hand helper in the world of online selling. They take care of finding and storing products, packing them up, and shipping them out directly to the customers (your customers). This means you don’t have to worry about keeping stock or dealing with shipping hassles. Instead, you can focus on what you do best: promoting your store and making sales. They help keep everything running smoothly behind the scenes, making sure your customers get their orders on time and in good condition.

23. High-Ticket Dropshipping

High-ticket dropshipping involves selling expensive, high-quality items that usually have a higher profit margin per sale. Instead of selling lots of low-cost items, you focus on a few premium products, which can mean bigger profits with fewer sales.

24. Fulfillment by Merchant (FBM)

FBM is when you, the seller, handle all the storage, packing, and shipping of products yourself, instead of using a third-party service like Amazon. This gives you more control over your inventory and shipping process but also means more work on your end.

25. Backorders

Backorders occur when a product is sold out but customers can still place orders for it. These orders will be fulfilled once the product is back in stock. It's a way to keep sales going even when you're temporarily out of inventory, but you need to manage customer expectations about the wait time.

26. Omni-Channel

Omni-channel refers to selling products across multiple platforms and channels, both online and offline. This could include your own website, marketplaces like Amazon and eBay, social media, and even physical stores. The goal is to create a seamless shopping experience for customers, no matter where they shop.

27. Fulfillment

Fulfillment is the complete process of receiving, processing, and delivering orders to customers. It includes everything from managing inventory, packing products, shipping orders, and handling returns. Good fulfillment practices ensure customers get their orders quickly and accurately.

28. Shipping Times

Shipping times are how long it takes for an order to get from your warehouse or supplier to your customer. Fast and reliable shipping times are crucial for customer satisfaction. Always provide accurate shipping estimates to keep your customers happy and informed.

29. Fulfillment Center

A fulfillment center is a warehouse where products are stored, packed, and shipped out to customers. These centers handle all the logistics of getting products to your customers, freeing you up to focus on other aspects of your business.

Marketing

1. Niche Selection

Picking a niche means choosing a specific area or category to focus your store on. Instead of selling a little bit of everything, you specialize in something you’re passionate about or that has a big demand. This helps you stand out and attract the right customers who are interested in what you’re selling.

2. Conversion Rate Optimization (CRO)

CRO is all about making your website better at turning visitors into buyers. This involves tweaking things like your website design, product descriptions, and checkout process to make it easier and more appealing for people to make a purchase. A higher conversion rate means more sales from the same amount of visitors.

3. Abandoned Cart

An abandoned cart happens when someone adds items to their online shopping cart but leaves the website without completing the purchase. This is a common issue, but you can reduce abandoned carts by sending reminder emails, offering discounts, or making the checkout process simpler.

4. Upselling

Upselling is when you encourage customers to buy a more expensive version of the product they’re looking at. For example, if someone is buying a phone, you might suggest a model with more features. It’s a way to increase the value of each sale and give customers options to upgrade their purchase.

5. Cross-Selling

Cross-selling is when you suggest related products to go along with what the customer is already buying. For instance, if someone is purchasing a laptop, you might recommend a laptop bag or a mouse. It helps increase your sales by offering customers more items they might need or want.

6. Search engine optimization (SEO)

SEO is the practice of improving your website so that it ranks higher in search engine results. This involves using the right keywords, creating quality content, and optimizing your site’s structure. Better SEO means more people will find your store when they search for products you sell.

7. Pay-per-click (PPC) advertising

PPC is a type of online advertising where you pay each time someone clicks on your ad. It’s a way to drive traffic to your website quickly. You create ads that appear on search engines or social media, and you set a budget for how much you’re willing to pay for each click.

8. Branding

Branding is all about creating a unique identity for your store. This includes your logo, colors, website design, and the overall vibe of your business. Good branding helps you stand out and makes your store memorable to customers, building trust and loyalty over time.

9. Private labeling

Private labeling is when you take a product made by another company and sell it under your own brand name. You get to design the packaging and create your own label, making it look like it’s exclusively yours. This allows you to offer unique products without having to manufacture them yourself.

10. Competitor analysis

Competitor analysis is all about checking out what other businesses in your niche are doing. You look at their products, pricing, marketing strategies, and customer reviews. This helps you understand what’s working for them and find ways to make your store even better.

11. Product bundling

Product bundling is when you sell multiple products together as a package deal. For example, you might bundle a toothbrush with toothpaste and floss. It’s a great way to increase sales by offering customers more value and encouraging them to buy more items at once.

12. Seasonal trends

Seasonal trends refer to changes in what people buy based on the time of year. For instance, swimsuits are popular in the summer, and holiday decorations are a hit in the winter. Keeping an eye on these trends helps you stock the right products at the right time, boosting your sales.

13. Impulse buying

Impulse buying happens when customers make unplanned purchases on the spur of the moment for example, scrolling on Facebook. You can encourage this by displaying tempting products at checkout, offering limited-time deals, or highlighting bestsellers. Making it easy and exciting for customers to add extra items to their cart can increase your sales.

14. CPC (Cost Per Click)

CPC is the amount you pay each time someone clicks on your online ad. It’s a common way to measure the cost of advertising, especially in Pay-Per-Click (PPC) campaigns. Knowing your CPC helps you understand how much you’re spending to attract each potential customer.

15. CTR (Click-Through Rate)

CTR is the percentage of people who click on your ad or link compared to the number who see it. If 100 people see your ad and 5 click on it, your CTR is 5%. A higher CTR means your ad is effective at grabbing attention and encouraging clicks.

16. Split testing

Split testing, or A/B testing, is a way to compare two versions of something to see which one performs better. For example, you might test two different headlines for an ad to see which gets more clicks. It helps you make data-driven decisions to improve your marketing efforts.

17. User-generated content (UGC)

UGC is content created by your customers, like reviews, photos, videos, and social media posts about your products. It’s powerful because it’s authentic and can build trust with potential customers. Encouraging UGC can help promote your store and create a community around your brand.

Financial

1. Profit margin

Profit margin is the amount of money you make from selling a product after subtracting all the costs. It's usually shown as a percentage. For example, if you sell a product for $50 and it costs you $30 to make and sell it, your profit margin is 40%. Higher profit margins mean more money in your pocket.

2. Customer acquisition cost (CAC)

CAC is how much you spend to get a new customer. This includes marketing, advertising, and any other costs involved in attracting people to your store. Knowing your CAC helps you understand if your marketing efforts are cost-effective and if you're spending wisely to grow your business.

3. Average order value (AOV)

AOV is the average amount of money customers spend each time they place an order on your site. If your total sales for a month are $10,000 and you had 100 orders, your AOV is $100. Increasing your AOV can boost your revenue without needing more customers.

4. Return on investment (ROI)

ROI measures how much profit you make from an investment relative to its cost. It’s usually shown as a percentage. If you spend $100 on an ad campaign and make $200 in sales from it, your ROI is 100%. A higher ROI means you’re getting more bang for your buck.

5. Customer lifetime value (CLV)

CLV is the total amount of money a customer is expected to spend in your store over the entire time they shop with you. It helps you understand how valuable each customer is to your business. A higher CLV means that customers keep coming back and buying more, which is great for your long-term success.

6. Payment gateways

Payment gateways are the online services that process payments for your store. They handle transactions when customers pay with credit cards, PayPal, or other methods. Popular payment gateways include PayPal, Stripe, and Square. They make sure transactions are secure and money gets to your account.

7. Chargeback

A chargeback happens when a customer disputes a charge on their credit card and asks the bank to reverse it. This can happen if they didn’t receive the product, were charged incorrectly, or didn’t recognize the charge. Chargebacks can be costly for your business, so it's important to provide good customer service and clear communication.

8. ROAS (Return On Ad Spend)

ROAS measures how much revenue you earn for every dollar spent on advertising. If you spend $100 on ads and generate $500 in sales, your ROAS is 5:1. A higher ROAS means your ads are effective and bringing in more money than you’re spending.

9. LTV (Lifetime Value)

LTV is another term for Customer Lifetime Value (CLV). It’s the total revenue a business expects from a customer throughout their relationship with the company. Knowing your LTV helps you understand how much you can spend to acquire and retain customers profitably.

10. AOV (Average Order Value)

AOV is the average amount of money each customer spends per order on your site. If your total sales for a month are $5,000 and you had 50 orders, your AOV is $100. Boosting your AOV can increase your overall revenue without needing more customers.

11. COGS (Cost of Goods Sold)

COGS is the total cost to produce and sell your products. This includes the price of materials, labor, and any other expenses directly related to making the product. Knowing your COGS helps you determine your profit margin and set the right prices for your products.

12. VAT (Value Added Tax)

VAT is a type of sales tax that’s added to the price of goods and services in many countries. It’s usually a percentage of the sale price. Businesses collect VAT from customers and then pay it to the government. If you’re selling internationally, you might need to account for VAT in different countries.

Dropshipping Glossary

We hope this dropshipping glossary has helped clear up some of the key terms and concepts you’ll encounter in your dropshipping business. Understanding these can make a big difference in how you run your online store and connect with your customers. Whether you're refining your unique selling proposition or figuring out the best way to sell the product, having a solid grasp of these terms is crucial. Keep this glossary handy as a quick reference, and don’t hesitate to dive deeper into any of these topics as you grow your business.

Happy dropshipping!