Dropshipping Glossary Full List for Beginners

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eCommerce can transform a simple website, which is dependent on advertising, into a digital shopfront and growing business.

This glossary contains all the terms, concepts, products and services that you need to be able to dropship.

Dropshipping: What does it mean?

Traditional eCommerce usually sees retailers keeping the inventory needed to fulfill customers’ orders. Dropshipping, a different approach to eCommerce. The inventory that retailers hold for their products or products is not actually kept by them. Dropship is a model where the retailer forwards incoming orders to a manufacturer, supplier or distributor who will fulfill the order and deliver it to the customer.

Although it may seem simple, there are many pieces to dropshipping. We’ve included a guideline that outlines all of the terms and concepts necessary to implement dropshipping in an eCommerce store.

Dropshipping 101

This section will cover the basics of dropshipping. These are the fundamental elements of dropshipping.

What does it mean to be an affiliate?

Affiliates site owners and publishers who recommend merchants or retailers to their audience. Affiliates are supposed to increase the revenue of the retailer by referring qualified leads and traffic. Affiliates get a share of every sale.

What is a Blog?

Blogs are websites which post short, narrative articles. They were originally created by individuals as digital journals. However, they have become increasingly useful tools for marketing. Many merchants and retailers hire bloggers to promote their products or services through content marketing.

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What does it mean to be a distributor?

Distributors are businesses that have inventories of products from several manufacturers and sell them to many different retailers. Distributors typically offer customers shorter shipping times than the manufacturers.

What is inventory?

Inventory refers to the quantity, value, and amount of products a retailer has at any given time. It doesn’t include products ordered from suppliers. Inventory only accounts for what is physically available and could be shipped at any time.

What does it mean to be a manufacturer?

Manufacturers are businesses or companies that make products for sale to consumers.

What is gross profit?

Gross Profit is the difference between the product’s sales and the costs of production or acquisition by the retailer (also called the cost of goods sold).

What is net profit?

Net Profit is the difference between sales and total retailer costs. This can include the cost of goods, payroll, operating expenses and marketing. The net profit is the revenue left after all expenses are paid.

What is outsourcing?

Outsourcing refers to when a company, individual, or business hires another party for a task or project or a specific type of work.

What does it mean to be a reseller?

Resellers are companies that buy products and services to resell rather than consume them. Affiliate marketers have become resellers with eCommerce becoming so common. This promotes rebranded products and services.

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What does it mean to be a retailer?

Retailers are businesses and companies that sell directly to end users or consumers.

What does it mean to be a supplier?

Suppliers companies, individuals, or businesses that provide the product or service required by the retailer. This could be a service, product, or another.

What is a tracking number?

Tracking numbers are alphanumeric identification codes that are assigned to items shipped via services such as USPS, FedEx and UPS. Tracking numbers are used to enable the sender or receiver to track the shipment’s progress and confirm delivery.

What does it mean to be a wholesaler?

Wholesalers are distributors and manufacturers that sell to retailers. Wholesalers often offer discounts to retailers who order larger quantities of products or services. This is why you hear terms like “bulk discount” and “buying wholesale.”

Intermediate Dropshipping

Let’s now move on to the intermediate terms and concepts of dropshipping. This section will help to explain the dropshipping model of retail. It includes chargebacks and listing fees.

What is an affiliate hyperlink?

Affiliate Links URLs that have a unique identification number at the end are URLs that can be used to measure an affiliate’s performance. Affiliates can share affiliate links from retailers to their blogs and social media. The URL’s identification number is linked to a specific affiliate so you can track how much traffic they are forwarding.

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What is an authorization?

Payments can only be processed if authorizations have been obtained. An authorization is required before a payment can be processed or an order submitted. It allows the system determine if the account has sufficient funds to process the order.

What does it mean to be an authorized distributor?

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

What does it mean to be an authorized retailer?

Authorized sellers are merchants who have been authorized or designated by the manufacturer to sell the product directly.

What is a chargeback?

Chargebacks are when the bank forcibly issues a refund to the customer, taking the transaction funds from the retailer and then returning them to him. This is usually when a customer files an official complaint. It can be for fraudulent purchases, false advertising or when the order was not fulfilled. The rate charged by retailers to process online orders could rise if chargebacks are frequent.

What is a delivery verification?

Shippers will be notified about delivery to confirm delivery confirmations. Many package carriers, such as FedEx and USPS, offer this service. Delivery confirmation doesn’t mean the recipient has signed for delivery.

What is fulfillment?

Fulfillment refers to the process of assembling an order so it is ready for shipment. This term can also be used to describe third-party companies that ship orders for retailers using their own inventory.

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What are the listing fees?

Listing fees are charges associated with listing products and services on third-party marketplaces. eBay is an example of such an online marketplace, and it usually charges a listing fee.

What is logistics?

Logistics is the management of products from their origination to their destination. Logistics is often used in eCommerce to refer to all phases of transportation that take place between a product’s manufacturing stage and its delivery to the customer. This includes transport from manufacturer to supplier, transport from retailer to retailer, and transport back to the customer.

What is a margin?

Margin is the difference between the price a retailer charges for a product, and what the consumer pays to purchase the product. The margins on products are a key factor in retailers’ profit. The margins are the percentage of what consumers pay that is actually profit for retailers. Retailers have two options to increase their margins: negotiating lower rates from suppliers or raising the price consumers pay.

What are net terms?

A contract between a supplier and retailer is called net terms. This agreement allows retailers to pay the supplier for products within a set time frame after they have been shipped to consumers.

Net terms can be described as “net 30”, which means that the retailer has 30 days from the day the product was shipped to the consumer to pay the supplier. You may also be eligible for discounts. If payment is made within the first five days, the retailer will receive a 10% discount. However, if payment is made between day 6 and day 30, the discount would be lost.

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What is overhead?

Overhead refers to all expenses that are associated with running a business. It does not include direct costs such as labor and materials. Overhead expenses can include advertising costs, interest on loans, rents, utilities, repairs and maintenance, insurance, taxes and legal fees.

What is a preferred supplier?

A retailer’s preferred supplier is a business or company from which it prefers to source products. A preferred supplier arrangement is when special rates are negotiated, which in turn means higher margins for the retailer, or when there is a long-term partnership between supplier and retailer. Both the supplier and the retailer benefit from preferred suppliers.

What is a supply-chain?

A supply chain is a group of companies or businesses that move a product from its origin to the end consumer. This usually refers to the distributor and manufacturer of a product for eCommerce.

What is wholesale?

Wholesale refers to the purchase of products at a large discount. These wholesalers are businesses or companies that sell products in large quantities to retailers who then sell the products to consumers.

Advanced Shipment

After having covered the basics of dropshipping, we can now turn our attention towards advanced dropshipping. We’ll cover the details of dropshipping in this last section. This includes multi-channel eCommerce, restocking fees and specific services and players such as Stripe, Alibaba, and PayPal.

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What is an address verification (AVS)?

As a way of preventing payment fraud, address verification systems were created. An address verification system allows the billing address to be compared with the creditor’s file for the card during order checkout. If the addresses do not match, it is considered fraudulent purchase and the transaction cannot be processed. To reduce chargebacks, retailers use address verification systems to deter payment fraud.

What is Alibaba?

Alibaba has the largest online marketplace for China and, according to some accounts, the world. It has hundreds of millions of users, who shop from thousands of merchants and retailers across three websites. Alibaba processes more online transactions than any other eCommerce site. This is why increasing numbers of merchants are listing their products on Alibaba to reach Asian consumers.

What is AliExpress?

AliExpress, a popular online marketplace that is more international than its Chinese counterparts, is owned by Alibaba. AliExpress is the most popular website in Russia and Brazil, which shows its international appeal. AliExpress is a great marketplace for small businesses looking to sell their products to global customers.

What is Amazon?

Amazon, a U.S.-based online marketplace and megaretailer, has grown to be the largest global online retailer in terms of market capitalization and revenue. Amazon Marketplace is home to around half of its sales. Amazon is also growing rapidly in the software-as-a-service and infrastructure-as-a-service industries.

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What is analytics?

Analytics is the process of reviewing data in order to identify patterns of significance, particularly when it comes down to user behavior. Analytics are typically used to identify consumers’ buying habits and how they interact with retailers’ websites. You can make changes to increase sales and revenue with analytic data.

What is eBay?

eBay, a popular online marketplace, facilitates both consumer-to-consumer as well as business-toconsumer transactions. Although eBay is often associated with online auctions and listing items at fixed prices, it allows retailers to expand their reach by creating eBay listings. This is a common practice for both small and large businesses.

What is the suggested retail price of a manufacturer?

The manufacturer’s suggested retail price (or MSRP) is the price that a manufacturer recommends to sell a product to consumers. To increase their margin , retailers can decide whether to sell the product at the suggested price or at a higher rate.

What is the minimum price advertised?

eCommerce retailers must agree to a minimum price advertised (MAP) for a product. They agree not to market the product at a lower price than that MAP. As a condition for selling their products, manufacturers may require that the minimum advertised price be adhered to.

What is multi-channel eCommerce?

Multi-channel eCommerce (also known as multi-channel selling, or multi-channel retailer) is a growing model of retail that allows the seller to list products on multiple online marketplaces such as AliExpress, Amazon, and eBay. This is a way to reach more potential customers.

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What is PayPal?

PayPal allows you to make online payments and money transfers. Although PayPal was initially associated with eBay, it has since become ubiquitous and is supported by many digital storesfronts.

What is a Restocking Fee?

Customers are charged a restocking fee when they return products that they have purchased. This can be either a flat fee, or a percentage. This is especially true for products with lower value after they have been opened as it can affect whether or not the item can be resold. Restocking fees are often deducted from the customer’s refund.

What is Stripe?

Stripe , an online payment system similar to PayPal, is . PayPal is more for consumers, while Stripe is designed for businesses and professionals to allow them to accept payment for their products or services.

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