E-commerce glossary

SKU

Stock-keeping unit — a unique code for a product item.

Cost of goods sold (COGS)

Direct product costs: purchase + shipping + duty + packaging.

Margin / markup

Margin = profit/sale price; markup = profit/cost. Don't confuse — 50% markup = 33% margin.

Conversion rate (CR)

Share of visitors who bought: orders/visitors × 100%.

Average order value

Average check: revenue/order count.

Customer lifetime value

Revenue from a customer over the whole relationship — basis for allowable acquisition cost.

Customer acquisition cost

Marketing spend / new customers. Should be < LTV/3.

Return on ad spend

Ad revenue / ad spend.

Acquiring

Accepting card payments; 1.5–2.5% fee online.

Fulfillment

Outsourced warehousing: storage, picking, packing, shipping orders.

Dropshipping

Selling without stock — supplier ships directly to the customer.

Break-even point

Sales volume covering all costs.

Economic order quantity

Optimal purchase-batch size — balances ordering and storage costs.

Safety stock

Buffer stock against supply delays or demand spikes.

USP

Unique selling proposition — why buy from you.

RMA

Return merchandise authorization — the product-return process.