📜 E-commerce Glossary
These words come up when talking to merchants, writing your App Store description, and explaining which metric your app improves. For the developer: these are the merchant's KPIs. If you can't tie your app to a metric, it's hard to sell.
Rule: every term = what it means + formula + example number. A term without a formula is rote memorisation.
1. Money and sales metrics
| Abbreviation | Stands for | What it means | Formula |
|---|---|---|---|
| GMV | Gross Merchandise Value | Total sales volume (revenue before refunds are deducted) | Σ order value |
| AOV | Average Order Value | Average cart value | Revenue ÷ Number of orders |
| LTV / CLV | (Customer) Lifetime Value | Total profit a customer leaves over their lifetime | AOV × Orders per year × Customer lifetime (years) × Gross margin |
| COGS | Cost of Goods Sold | Cost of the goods sold | Product + packaging + shipping |
| Gross Margin | Gross margin | What's left of the sale after subtracting product cost | (Revenue − COGS) ÷ Revenue |
| MRR | Monthly Recurring Revenue | Monthly recurring revenue (in subscription businesses) | Σ active subscription fees |
| ARR | Annual Recurring Revenue | Annual recurring revenue | MRR × 12 |
| ARPU | Average Revenue Per User | Average revenue per user | Revenue ÷ Number of users |
Example: Cart is €60, the customer buys 3 times a year, stays 2 years, gross margin 40%.
LTV = 60 × 3 × 2 × 0.40 = €144. You must spend less than €144 to acquire this customer.
2. Advertising and customer acquisition
| Abbreviation | Stands for | What it means | Formula |
|---|---|---|---|
| CAC | Customer Acquisition Cost | The cost of acquiring one customer | Marketing spend ÷ Customers acquired |
| CPA | Cost Per Acquisition | Cost of one target action (purchase/sign-up) | Spend ÷ Conversions |
| CPC | Cost Per Click | Cost per click | Spend ÷ Clicks |
| CPM | Cost Per Mille | Cost of 1,000 impressions | (Spend ÷ Impressions) × 1000 |
| CTR | Click-Through Rate | Click rate | Clicks ÷ Impressions |
| ROAS | Return On Ad Spend | How many times its cost the ad brought back in revenue | Revenue from ads ÷ Ad spend |
| ROI | Return On Investment | Profit return on the investment | (Gain − Cost) ÷ Cost |
| LTV:CAC | — | The health indicator of the business | LTV ÷ CAC |
Healthy thresholds (generally accepted, varies by industry):
LTV:CAC ≥ 3→ healthy.< 1→ you're losing money on every customer.ROAS 4→ €4 revenue per €1 of ads. If margin is 25% you're breaking even; ROAS alone doesn't mean profit.- CAC payback → how many months it takes to recover CAC. Longer than 12 months and cash gets tight.
Example: €1,000 of Meta ads → 25 customers. CAC = €40. If LTV is €144, LTV:CAC = 3.6 → healthy.
3. Funnel and conversion
| Term | What it means |
|---|---|
| Traffic / Sessions | Number of visits (sessions). If the same person comes twice, that's 2 sessions. |
| CR / CVR (Conversion Rate) | The rate at which visits turn into sales = Orders ÷ Sessions. Typical in e-commerce: 1–3%. |
| Bounce rate | The share of visitors who view one page and leave. |
| Add-to-cart rate | The share of visitors who add to cart. |
| Checkout abandonment | The share who enter the checkout step and don't finish. Typical 60–80% — a massive opportunity area. |
| Cart abandonment | Those who add to cart and don't buy. |
| Upsell | Selling the more expensive/higher-tier model. |
| Cross-sell | Selling a complementary product alongside ("buy this too"). |
| Bundle | Selling products together as a discounted package. |
| Order bump | A small add-on product offered during checkout. |
Why this matters to us: apps sell precisely at these steps. The sentence "I cut checkout abandonment by 5%" sells many times better than "I offer a nice interface".
Example: 10,000 sessions, CR 2% → 200 orders, AOV €60 → €12,000 revenue. An app that lifts CR from 2% → 2.4% brings in +€2,400 a month. A €49/mo price is easy to defend.
4. Retention
| Term | What it means | Formula |
|---|---|---|
| Retention rate | The share of customers who stay | Remaining at end of period ÷ At start of period |
| Churn rate | The share of customers/subscribers lost | Departed ÷ At start of period |
| Repeat purchase rate | The share of customers who buy again | Customers with ≥2 orders ÷ Total customers |
| Cohort | A group of customers acquired in the same period; used to track behaviour over time | |
| RFM | Recency-Frequency-Monetary — the classic of customer segmentation | |
| Subscription | Regular recurring orders (coffee, vitamins) |
Critical for the app developer: churn is high in Shopify apps. 5% monthly churn =
average customer lifetime of 1 ÷ 0.05 = 20 months. 10% monthly churn = 10 months. This number directly cuts your LTV in half.
5. Operations and logistics
| Term | What it means |
|---|---|
| SKU | Stock Keeping Unit — the unique code of each product variant (Red-M is a separate SKU) |
| Variant | A product's combination of options like size/colour (a first-class concept in Shopify) |
| Inventory | Stock |
| Fulfillment | Picking, packing and shipping the order |
| 3PL | Third-Party Logistics — outsourcing warehousing/shipping |
| Dropshipping | Shipping directly from the supplier to the customer without holding stock |
| POD | Print on Demand — products printed when the order comes in (t-shirts, posters) |
| RMA / Returns | The returns process |
| Chargeback | The customer recalling the payment through their bank |
| COD | Cash on Delivery — pay at the door (very common in Turkey) |
6. Channels and marketing
| Term | What it means |
|---|---|
| SEO | Traffic from organic search |
| SEM / PPC | Paid search advertising |
| Paid social | Meta/TikTok ads |
| Organic | Traffic that arrives without paying |
| Email/SMS marketing | The owned channel — the one with the highest ROI |
| Abandoned cart flow | An automatic reminder series for those who abandon the cart |
| Affiliate | A partner working on commission per sale |
| Influencer / UGC | Selling through creator content (User Generated Content) |
| Attribution | Attributing which channel a sale came from — where everyone lies |
| Retargeting | Showing ads again to those who browsed the site and didn't buy |
| A/B test | Comparing two variants; the result is only meaningful with a sufficient sample |
| Social proof | Trust elements like reviews, ratings, "12 people are viewing this" |
7. The SaaS side (our business)
| Term | What it means |
|---|---|
| Trial | Free trial period (7–14 days is standard in Shopify apps) |
| Freemium | Free tier + paid upper tier |
| Activation | The moment the user first sees value ("aha moment") |
| TTV (Time to Value) | Time from install to first value — the shorter it gets, the lower churn goes |
| Onboarding | The first experience after install |
| Expansion revenue | Extra revenue from existing customers (upgrading to a higher tier) |
| NRR | Net Revenue Retention — churn + expansion together; if >100% the business grows by itself |
| Uninstall rate | The share who uninstall the app — the most painful metric of Shopify apps |
Keep these in your pocket: 3 formulas
LTV = AOV × Orders per year × Years × Gross margin
LTV:CAC should be ≥ 3
App value = (New CR − Old CR) × Sessions × AOV → monthly return in €
The last formula is the most honest way to defend your app's price: if you can tell the merchant what you earn them per month in €, the price discussion is over.
When you hear a new term, add it here — with its formula and an example number. No additions without a formula.