Defining Shopping Cart Abandonment
Shopping cart abandonment refers to when a customer adds items to their online shopping cart but leaves the website without completing the purchase. It’s a major issue facing ecommerce retailers, with studies showing extremely high abandonment rates.
According to Baymard Institute, the average shopping cart abandonment rate across online stores is a whopping 69.57%. This means that for every 100 customers who add items to their cart, nearly 70 will abandon the cart without buying. Just 30 customers out of 100 will complete the purchase.
With abandonment rates this high, it’s clear that retailers need to understand the implications abandoned carts can have on their business and inventory management strategies. Leaving so many carts full of merchandise untransacted leads to tied up capital, excess stock, and forecasting difficulties.
Excess Inventory from Abandonment
When online shoppers abandon items in their carts, those items remain a part of the retailer’s inventory. This results in excess stock that is taking up physical warehouse space and tying up the company’s capital. Retailers have invested in purchasing or manufacturing those goods, but are unable to realize the return on that investment because the items are not converting to sales.
Having an oversupply of inventory that is not moving leads to unnecessary carrying costs for storage and management. Warehouses become crowded with unsold merchandise that requires space, equipment, labor, insurance and other costs to handle. All of this results in significant additional overhead expenses for retailers.
The capital spent to acquire abandoned items could have been better utilized elsewhere in the business. By freeing up this tied-up capital, companies can improve cash flow and invest in other areas like marketing, expansion or product development. Just a small reduction in abandonment rates can unlock significant working capital.
Forecasting and Planning Challenges
High shopping cart abandonment rates make it extremely difficult for retailers to accurately predict demand and plan inventory levels. When a large percentage of customers put items in their cart but fail to complete the purchase, it skews the data used to forecast sales and inventory needs.
Retailers face significant risks from inflating purchase orders and overstocking inventory in an attempt to account for abandoned carts. The excess inventory takes up costly warehouse space and ties up working capital. Companies can easily overspend on inventory that goes unsold due to unreliable demand signals from all the abandoned carts.
Forecasting future sales becomes very challenging without a clear understanding of true buyer intent. The abandoned items reflect interest but not real purchases. Relying too heavily on inflated cart data leads retailers to order excess stock that they are unable to sell.
Strategies to Reduce Abandonment
Abandoned shopping carts tie up capital and lead to excess inventory, but there are strategies retailers can use to win back customers and lower abandonment rates. Two of the most effective methods are sending cart reminder emails and offering discounts or promotions.
Cart Reminder Emails
Setting up a cart reminder email campaign targets shoppers who have added items to their cart but not yet completed checkout. The email gently reminds the customer of the items left in their cart and prompts them to come back and complete their purchase. Studies show cart reminder emails can recover over 20% of abandoned carts. Make sure to send the initial email soon after abandonment while the customer is still engaged. Followup emails can be sent over the next several days. Personalize each message with the specific products they left behind.
Discounts and Promotions
Another way to incentivize completing abandoned purchases is by offering discounts or promotions. This could be a sitewide promo code sent in reminder emails or a special discount on the items left in their cart. Providing an extra nudge with a monetary incentive increases conversion rates. Consider triggering the discount email when someone has an almost complete cart, missing just 1 or 2 items. Make sure to test different discount amounts and promo codes to optimize recovery.
Simplifying and streamlining checkout is also key, but focusing on reminders and discounts provides an actionable starting point for most retailers. Pay close attention to cart abandonment metrics and test methods to bring customers back. Recovering even a portion of abandoned carts translates into recouped sales and improved inventory management.
Adjusting Inventory Management
With high abandonment rates, retailers need to account for the excess inventory and find ways to improve turnover. Here are some strategies:
- Account for abandonment rates in stock orders– When placing orders with suppliers, add a buffer to account for the percentage of abandonment historical data shows. For example, if you need 100 units of a product but have a 30% abandonment rate, order 130 units. This prevents shortages if more customers complete checkout.
- Implement safety stock levels– Safety stock acts as a buffer for unexpected fluctuations in demand. Set safety stock levels higher to prevent stockouts from abandoned carts. Monitor and tweak as needed.
- Increase inventory turnover – Improve how often inventory moves through the chain to customers. Faster turnover frees up capital and reduces storage needs. Discount older stock, enhance replenishment procedures, and streamline processing.
With some adjustments to inventory management, retailers can mitigate the effects of cart abandonment. Planning for losses enables sufficient availability to meet real demand. Improved turnover keeps stock fresh and space freed up.
FAQs on Shopping Cart Abandonment
What is Shopping Cart Abandonment?
Shopping cart abandonment occurs when a customer adds items to their online shopping cart but leaves the website without completing the purchase. It is a prevalent issue in ecommerce, with an average abandonment rate of 69.57%.
Why is Shopping Cart Abandonment a problem for retailers?
Abandonment leads to lost sales, tied-up capital, and excess stock, complicating inventory management and forecasting. It also results in additional overhead expenses due to the storage and management of unsold merchandise.
How does Shopping Cart Abandonment affect inventory management?
Abandoned carts result in excess inventory that consumes warehouse space and capital. This makes forecasting demand and planning inventory levels challenging, as the data from abandoned carts may inflate expected sales figures.
What strategies can reduce Shopping Cart Abandonment?
Effective strategies include sending cart reminder emails, offering discounts or promotions, and simplifying the checkout process. These methods can incentivize customers to complete their purchases and reduce abandonment rates.
How can reminder emails help recover abandoned carts?
Cart reminder emails target shoppers who have left items in their cart, prompting them to complete their purchase. Sending a timely initial email followed by follow-ups can recover over 20% of abandoned carts.
Can offering discounts and promotions recover abandoned carts?
Yes, offering discounts or promotions for the items left in the cart can provide an incentive for customers to complete their purchases. Testing different discounts and promo codes can help optimize recovery rates.
What inventory management adjustments can help with high abandonment rates?
Retailers can adjust their inventory management by accounting for abandonment rates in stock orders, implementing safety stock levels, and increasing inventory turnover. These strategies help manage excess inventory and improve capital and space usage.