Dropshipping Glossary
40+ essential dropshipping terms every e-commerce seller should know — explained in plain English with practical examples.
AOV (Average Order Value)
The average dollar amount a customer spends per order. Calculated as Total Revenue / Number of Orders. The average e-commerce AOV is approximately $58. Higher AOV means you can afford a higher customer acquisition cost.
Attribution Window
The time period an ad platform uses to credit a sale to an ad. Facebook defaults to 7-day click + 1-day view. Google Search uses 30-day click. Attribution windows affect reported ROAS.
BEROAS (Break-Even ROAS)
The ROAS at which you make exactly $0 in profit. BEROAS = Selling Price / (Selling Price - Non-Ad Costs). Below BEROAS you lose money; above it you profit. The most important metric for ad scalability.
CAC (Customer Acquisition Cost)
The total cost of acquiring one new customer. CAC = Total Marketing Spend / New Customers Acquired. Compare to LTV — aim for a 3:1 LTV:CAC ratio.
CJ Dropshipping
A popular dropshipping supplier platform that offers 500K+ products, private line shipping (7-15 days), and native Shopify integration. Free to use.
CMP (Cost Per Mille)
The cost per 1,000 ad impressions. Facebook CPMs in 2026 average $15-$25. Lower CPMs mean your ads reach more people for the same budget.
CPA (Cost Per Acquisition)
The ad spend required to acquire one customer. CPA = Ad Spend / Conversions. Compare to your max affordable CPA (Selling Price - Non-Ad Costs) to determine profitability.
CPC (Cost Per Click)
The amount you pay each time someone clicks your ad. CPC = Ad Spend / Clicks. Facebook CPCs average $0.50-$3.00 depending on niche and audience.
CTR (Click-Through Rate)
The percentage of people who click your ad after seeing it. CTR = (Clicks / Impressions) x 100. A good Facebook ad CTR is 1%+. Below 1% usually indicates poor creative or targeting.
Chargeback
A forced reversal of a credit card transaction by the customer's bank. Chargebacks cost $15 per incident and high chargeback rates can get your payment processor account suspended.
Conversion Rate (CVR)
The percentage of website visitors who complete a purchase. CVR = (Orders / Visitors) x 100. The average e-commerce CVR is 1.58%. Mobile CVR is typically 50-70% of desktop CVR.
DSers
A Shopify app that integrates with AliExpress for automated dropshipping order fulfillment. Free to $19.90/month. The most popular AliExpress dropshipping tool.
Dropshipping
An e-commerce fulfillment model where you sell products without holding inventory. When a customer orders, you forward the order to a supplier who ships directly to the customer. You keep the difference between selling price and supplier cost.
E-E-A-T
Experience, Expertise, Authoritativeness, Trustworthiness. Google's framework for evaluating content quality. Demonstrating E-E-A-T is essential for SEO and AdSense approval.
Economic Nexus
A legal standard that requires businesses to collect sales tax in states where they have a certain level of sales activity, even without physical presence. Most US states set thresholds at $100K in sales or 200 transactions.
FX Margin
The markup a payment processor adds to the mid-market exchange rate when converting currencies. Typically 2-4%. PayPal has the highest FX margin (3-4%); Wise has the lowest (0.5-1%).
Gross Margin
The percentage of selling price that is profit after product cost and shipping. Gross Margin = (Selling Price - Product Cost - Shipping) / Selling Price x 100. A vanity metric — use net margin for profitability decisions.
Gross Profit
Selling Price minus Product Cost and Shipping. Does not include ad spend, fees, or other costs. Gross Profit = Selling Price - (Product Cost + Shipping).
IOSS (Import One Stop Shop)
An EU VAT scheme for goods valued under EUR 150. Sellers collect VAT at checkout and remit via IOSS. Improves CVR by avoiding surprise customs fees for customers.
Klaviyo
The leading email marketing platform for Shopify stores. Offers automated flows (welcome, abandoned cart, post-purchase), segmentation, and analytics. Free up to 250 contacts.
LTV (Customer Lifetime Value)
The total revenue a customer generates over their entire relationship with your store. LTV = AOV x Purchase Frequency x Customer Lifespan. Compare to CAC — aim for 3:1 LTV:CAC ratio.
Margin
The percentage of selling price that is profit. Margin = ((Selling Price - Cost) / Selling Price) x 100. A 67% margin means $0.67 of every dollar is profit.
Markup
The percentage you add to cost to get selling price. Markup = ((Selling Price - Cost) / Cost) x 100. A 3x markup (200% markup) gives a 67% margin. Often confused with margin.
Net Margin
The percentage of selling price that is profit after ALL costs (product, shipping, fees, ads, overhead). Net Margin = (Net Profit / Selling Price) x 100. The real profitability metric.
Net Profit
Selling Price minus ALL costs (product, shipping, fees, ads, overhead). The actual money you keep per order. Use our Profit Margin Calculator.
Niche
A specific market segment for your products. Examples: smart home lighting, pet tech, eco-friendly kitchen. Choosing the right niche is the highest-leverage decision in dropshipping.
OSS (One Stop Shop)
An EU VAT scheme that allows sellers to register in one EU member state and declare VAT for all EU sales. Simplifies cross-border EU selling.
POAS (Profit on Ad Spend)
A modern metric that measures actual profit per dollar of ad spend, not revenue. POAS = Net Profit / Ad Spend. A 1.5x POAS means $1.50 profit per $1 ad spend. More accurate than ROAS.
Print-on-Demand (POD)
An e-commerce model where products (t-shirts, mugs) are printed only when ordered. Lower margins than dropshipping but faster shipping and brand defensibility through original designs.
Private Label
A business model where you put your own brand on a supplier's product. Cuts supplier cost 30-50% and creates brand defensibility. The natural evolution from dropshipping for winning products.
ROAS (Return on Ad Spend)
Revenue from Ads divided by Ad Spend. ROAS = $400 revenue / $100 ad spend = 4x. A vanity metric unless you know your break-even ROAS.
ROI (Return on Investment)
Net Profit divided by Total Investment, expressed as a percentage. ROI = ((Revenue - Total Cost) / Total Cost) x 100. Includes all costs, not just ad spend.
SKU (Stock Keeping Unit)
A unique identifier for each product variant. A t-shirt in 3 sizes and 3 colors has 9 SKUs.
Shopify
The leading e-commerce platform for dropshipping stores. $39-$399/month. Includes hosting, SSL, payment processing, and integrations with every dropshipping app.
Shopify Payments
Shopify's built-in payment processor. Rates: 2.9% + $0.30 (Basic), 2.6% + $0.30 (Shopify), 2.4% + $0.30 (Advanced). Avoids the 0.5-2% third-party transaction fee.
Supplier
The company that manufactures or warehouses the products you dropship. Typically located in China. Your supplier determines product quality, shipping speed, and stock availability.
TikTok Shop
TikTok's integrated shopping platform. Allows users to buy products directly from TikTok videos. Generated $20B+ in GMV in 2025. A fast-growing sales channel for dropshippers.
Triple Whale
A popular analytics platform for e-commerce that calculates real-time POAS, LTV, and multi-platform attribution. $100+/month. Worth it at $50K+/month ad spend.
UGC (User-Generated Content)
Content created by your customers — reviews, photos, videos. UGC is the most authentic form of social proof and converts 2-3x better than brand-created content.
Wayfair Decision
A 2018 US Supreme Court ruling that allowed states to require online sellers to collect sales tax based on economic nexus, not just physical presence. Transformed dropshipping tax compliance.
WooCommerce
A WordPress plugin that turns a WordPress site into an e-commerce store. Free, but requires hosting ($10-$50/month) and technical knowledge. The main alternative to Shopify.
YunExpress
A shipping logistics company that offers private line shipping from China to US/EU (7-12 days). One of the best shipping options for dropshipping in 2026.
ePacket
A shipping option that was popular for dropshipping from China (12-25 day delivery). Largely obsolete post-2021. Use CJ Packet or YunExpress instead.