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Terms to Keep in Mind before Starting your Online Business (PART I)

There are all kinds of terms used in the online business industry that can make getting started seem overwhelming to those new to the field.

Knowing that, we’ve put together a glossary with the most common industry terms (including acronyms) that should help you get on your way to understanding the terms associated with online business.

This glossary can also be helpful for your customers (if you’re servicing businesses and helping them gain an online presence), since it can be impossible to communicate with your clients if they don’t know terms dealing with SEO and online advertising. So feel free to point them to this page.

Anchor Store

(Source: TheStranger)

An anchor store is the big department store at the mall. Depending on the overall size of the shopping center, there’s often more than one and at least two, with one at either end of the property.

Large advertising budgets and a wide range of desirable merchandise help anchor stores attract shoppers to the mall. Those shoppers often spend money at the anchors as well as at surrounding smaller retailers.

Anchor stores are usually large, well-known chain retailers such as Macy’s, Nordstrom, Von Maur, JCPenney, and Lord & Taylor.

Barrier to Entry

A barrier to entry is a high cost or other type of barrier that prevents a business startup from entering a market and competing with other businesses.

Barriers to entry can include government regulations, the need for licenses, and having to compete with a large corporation as a small business startup.

For example, large companíes are able to produce a large amount of products efficiently and more cost-effectively than companies with fewer resources. They have lower costs because they are able to purchase materials in bulk, and they have lower overhead because they are able to produce more under one roof.

The smaller company would simply have a hard time keeping up with that, which can result in them avoiding entering the market altogether.

Barriers to entry can have a negative effect on prices, since the playing field is not level and competition is restricted. It’s not really an ideal situation for anyone except the large company that holds the monopoly.

However, barriers to entry are not always completely prohibitive. In fact, many business startups encounter some sort of barrier to entry that they must overcome, whether that’s initial investments, acquiring licenses, or obtaining a patent – it’s just part of doing business.

Brand Equity

(Source: YourArticleLibrary)

Brand equity is a marketing term that describes a brand’s value. That value is determined by consumer perception of and experiences with the brand.

If people think highly of a brand, it has positive brand equity. When a brand consistently under-delivers and disappoints to the point where people recommend that others avoid it, it has negative brand equity.

Positive brand equity has value:

  • Companies can charge more for a product with a great deal of brand equity.
  • That equity can be transferred to line extensions – products related to the brand that include the brand name – so a business can make more money from the brand.
  • It can help boost a company’s stock price.


(Source: SearchEngineLab)

Branding is all of the ways you establish an image of your company in your customers’ eyes.

By building a website that describes what you offer, designing ads that promote your goods and services, selecting specific corporate colors that will be associated with your company, creating a logo and featuring it across all your social media accounts, etc.. you are branding your company.

That is, you are shaping how and what people’s perceptions of your business are.

And what your customers say about your brand is the reality (not what you’d like them to think). It’s the impression that pops into their minds when they hear your business’ name. It’s based on a feeling they have that is based on their experiences they’ve had with you, good or bad.

Business Operations

(Source: Medium)

Everything that happens within a company to keep it running and earning money is referred to collectively as business operations.

Business plans often include a section dedicated to operations, so that company founders understand the systems, equipment, people, and processes need to make the organization function.

Business Proposals

(Source: Bizfluent)

A business proposal is a document that’s designed to persuade an organization to buy a product or service.

A proposal is usually solicited or unsolicited – meaning that the purchasing company is either actively seeking proposals that meet a specific need or is reacting to an offer, often from a sales person, to consider a proposal.

For example, an unsolicited proposal might result from a dinner conversation at a trade show where the seller tells a prospect that he has a solution to the prospect’s problem, and says, “Would you like me to submit a proposal for that?”

Cash Flow Statement

(Source: AnalystPrep)

A cash flow statement is an account of the cash flowing into and out of a business over an accounting period, such as a month, quarter or year.

The statement tells how the business used the cash generated during the time that the report covers.

Competitive Analysis

(Source: SmashingMagazine)

A competitive analysis is the analysis of your competitors and how your business compares.

By evaluating the strengths and weaknesses of your competition, you can begin to formulate how to give your company an advantage.

Such an assessment is usually part of a company’s business or marketing plan, and provides context for growth plans.

Conversational Commerce

(Source: Yotpo)

Conversational commerce is a term coined by Uber’s Chris Messina in a 2015 piece published on Medium.

It refers to the intersection of messaging apps and shopping, meaning the trend toward interacting with businesses through messaging and chat apps like Facebook Messenger, WhatsApp, Talk, and WeChat, or through voice technology, like Amazon’s Echo product, which interfaces with companies through voice commands.

Consumers can chat with company representatives, get customer support, ask questions, get personalized recommendations, read reviews, and click to purchase all from within messaging apps.

With conversational commerce, the consumer engages in this interaction with a human representative, chatbot, or a mix of both.

On the business side, companies can use chatbots to automate customer service messages. It’s how companies are enabling consumers to buy from them without ever leaving the messaging app they are using.

Now companies can send order confirmations in Facebook Messenger, as well as shipping and delivery notifications.

Using chatbots, businesses can resolve slow customer service issues, provide recommendations, create wishlists, and interact with buyers in real-time.

Direct Marketing

(Source: B2BMarketing)

Direct marketing is a promotional method that involves presenting information about your company, product, or service to your target customer without the use of an advertising middleman.

It is a targeted form of marketing that presents information of potential interest to a consumer that has been determined to be a likely buyer.

For example:

  • Subscribers to footwear magazines might be presented with Facebook ads for protection sprays which, based on their interest, they are likely to need.
  • Members of the Consoles & Gaming Gears Facebook group might all receive an email promotion offering special pricing on video games related products.
  • Current residents of Cau Giay District, Hanoi might receive a flyer announcing the arrival of Phuc Long tea store to their area. Conversely, people in Hochiminh City would not.

Distribution Channel

(Source: NazarKaTeeka)

Distribution channel refers to the network used to get a product from the manufacturer or creator to the end user.

When a distribution channel is “direct”, the manufacturer is selling directly to the end user without a middleman.

When the distribution channel is “indirect”, the product changes hands several times before reaching the ultimate consumer.

Intermediaries between the manufacturer and the consumer in an indirect distribution channel might include:

  • Wholesaler/distributor
  • Dealer
  • Retaile
  • Consultant
  • Manufacturer’s representative
  • Catalog

There might be just one intermediary; there might also be many.

Doing Business As (DBA)

(Source: FreshBooks)

When a business operates using a name that is different from the owner’s name or from the legal name of the partnership, LLC, or corporation, it is said to be “doing business as,” or “DBA,” another name.

A DBA is a pseudonym, though some states in the USA refer to the paperwork required as a “fictitious name filing.”

To operate under a different name, companies need to submit an application indicating the name to be used and verify that another business is not already using the name.

In North America, the common designation for doing business as is “DBA” or “d/b/a.” In other countries, “trading as” is more common, with “t/a” the abbreviation.

Not all companies require DBA filings, however.

Enterprise Resource Planning (ERP)

(Source: xtuple)

Enterprise resource planning, or ERP for short, is a comprehensive software platform used to help a business run more efficiently and effectively, by automating core processes.

An ERP system can take orders from customers, manage financial records, update inventory after each sale, and anticipate labor needs based on the level of orders received.

In addition to managing processes, ERP systems also gather, store, and analyze data from internal functions, such as marketing, manufacturing, accounting, facilities, and research and development.

FOB Shipping Point

(Source: BansarChina)

FOB is a shipping term that stands for “free on board”.

If a shipment is designated FOB (the seller’s location), then as soon as the shipment of goods leaves the seller’s warehouse, the seller records the sale as complete. The buyer owns the products en route to its warehouse and must pay any delivery charges.

That also means that if a pallet of jewelry is lost or damaged in shipment, the buyer must file any claims for reimbursement – not the seller – since the shipment became the buyer’s responsibility immediately.

Green Marketing

(Source: cmp.smu)

Green marketing is the marketing of environmentally friendly products and services.

It is becoming more popular as more people become concerned with environmental issues and decide that they want to spend their money in a way that is kinder to the planet.

Green marketing can involve a number of different things, such as creating an eco-friendly product, using eco-friendly packaging, adopting sustainable business practices, or focusing marketing efforts on messages that communicate a product’s green benefits.

This type of marketing can be more expensive, but it can also be profitable due to the increasing demand.

For example, products made locally in, say, Singapore tend to be more expensive than those made overseas using cheap labor, but they have a much smaller carbon footprint because they don’t have to fly across the ocean to get here. For some consumers and business owners, the environmental benefit outweighs the price difference.

Gross Profit

The gross profit of a company is the total sales of the firm minus the total cost of the goods sold.

The total sales are all the goods sold by the company. The total cost of the goods sold is the sum of all the variable costs involved in sales.

Human Resource (HR)

(Source: Lynda)

Human resources (HR) is the department within a business that is responsible for all things worker-related. That includes recruiting, vetting, selecting, hiring, onboarding, training, promoting, paying, and firing employees and independent contractors.

HR is also the department that stays on top of new legislation guiding how workers need to be treated during the hiring, working, and firing process.

HR is considered by many business strategists to be the most important of all company resources. That’s because employees can gain new skills, thereby increasing the size of a company’s competitive advantage over time. Other resources simply don’t have that capacity.

Inventory Turnover

Inventory turnover is an indication of how frequently a company sells its physical products.

The turnover rate tells the business if its products sell quickly or slowly. That information, in turn, helps the company make business decisions.

Inventory turnover can help a company understand a number of specifics, including whether:

  • Product pricing should be adjusted
  • Purchasing schedules should change
  • Manufacturing volumes should change
  • Promotions are needed to sell excess inventory

The inventory turnover rate is particularly important with perishable products such as fashion, which is ever-changing. Too many “jeggings” today could mean unsold inventory (also known as dead stock) and a financial loss tomorrow.

In addition, storing inventory costs money that the inventory isn’t generating when it sits in a warehouse or elsewhere. Unsold inventory can eventually be obsolete and unsellable, making it a potential financial liability for a company.


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