An astounding 75% of online shopping carts are abandoned by shoppers, leaving a vast number of potential sales just lingering at the final stage. Imagine the potential revenue spike if organizations could correct the issues causing shoppers to walk away right before making a purchase. To do so, it’s important to understand the primary drivers of shopping cart abandonment.
Why customers abandon their shopping carts
There are a variety of reasons why a customer might fill up their cart and then ditch it at the last moment. Among the most popular: they’re doing research. When they’re shopping, consumers do a lot of research on cost-related factors as they seek the best available deals.
According to ChannelAdvisor, 81% of shoppers conduct online research before making big purchases, with Amazon (55%) and Google (28%) the most frequent starting points. Seventy-nine percent of shoppers look for free return shipping and 71% of shoppers use online carts to evaluate shipping fees and return policies.
The Baymard Institute found shoppers abandoned their carts because extra costs were too high, including shipping, taxes and fees (60%) and they “couldn’t see/calculate total order costs up front (23%).
Of course, there is a host of other reasons shoppers abandon their carts, like forcing customers to register to make a purchase, unnecessary coupon forms, checkout errors, overly-complicated checkout processes, stock availability issues, waning brand loyalty and the demand for price-match guarantees. But with the majority of shoppers abandoning carts over concerns with shipping costs and options, a smart approach is to leverage smart shipping technology to help close more sales.
Preventing shopping cart abandonment with flexible shipping options
“Free shipping” is often the top reason why shoppers choose certain e-commerce stores, but is it the only reason? Not according to Fulfillment Service which reports free shipping is important, but not as important as low prices. Fifty-eight percent of those surveyed want free and discounted shipping, while 28% want a choice of shipping options. A good portion of shoppers are willing to accept longer delivery windows for free shipping and it’s still important to provide expedited shipping as an option.
Essentially, both fast and free shipping options create incredible incentives for customers and can dramatically increase sales. The question is, do they increase sales enough to be worth it? Shipping costs typically account for 5% or more of the total cost, which can eat into profits.
Jerry Storch, CEO of Hudson’s Bay Company, a brick-and-mortar retailer that includes Canada’s The Bay department store, Lord & Taylor, and Saks Fifth Avenue, claims it’s more expensive for retailers to deliver products to a customer’s home than to have them shop in the store. “The economics are clear,” Storch stated at a Shoptalk e-commerce conference. “Direct-to-home has a supply chain cost three times higher than a store-based model.”1
Still, over 46.5% of small to mid-sized businesses say that offering free shipping increases their profits. The key to correctly utilizing this kind of promotion is to find the sweet spot between costs and increased sales. How? Many companies are embracing free or expedited shipping to gain a competitive advantage but getting creative to address those situations where either option is simply too cost-prohibitive. For example, they:
- Offer free shipping on standard delivery, but charge a premium for premier services such as expedited or time-specific deliveries
- Charge for shipping on low-value products or orders and offer free shipping on high-value purchases
- Provide free shipping options if certain carriers are used
- Consider using lower-cost regional carriers, as well as the postal service
Leveraging technology to handle the added shipping burden
Offering plentiful and creative shipping options may satisfy customers’ needs and close more sales, but it can also increase the burden on an organization. To meet customer shipping preferences, a seller must be committed to handling a wider mix of shipping speeds and carriers, which impacts profitability.
The best way to create more profitable free or expedited shipping offers is to increase the profit per item shipped, and the simplest way to do this is by reducing shipping costs. Cue: technology.
Regardless of company size or industry, there are numerous solutions available to automate every phase of the shipping process within any warehouse or fulfillment system to achieve savings. Options range from multi-carrier shipping workstations that streamline carrier selection and optimize employee workflows to fully automated transportation execution systems that that minimize employee involvement in the shipping process.
At their core, these shipping solutions enable companies to quickly and automatically determine the most efficient shipping option for each parcel they ship, considering delivery deadlines, carrier rates, performance and other factors. In addition, the data intelligence companies derive from these solutions provide them with significant negotiating power.
With multi-carrier shipping software, for example, the fulfillment staff can process domestic and international shipments in seconds by:
- Managing local, regional, national and international shipping carriers on a single shipping system
- Letting the system rather than the staff to compare rates/services for small parcel, postal, LTL and other carriers to identify lower-cost delivery services
- Choosing a system with a user-configurable business rule engine to apply customer-specific shipping rules
- Auto-generating carrier-compliant shipping labels, export shipping documents and more
Eliminate cart abandonment with best-of-breed shipping solutions
While retailers consider the impact of free or expedited shipping offers on their bottom line, it’s also critical to remember the financial loss that results when potential sales walk out the virtual door – carts full but abandoned – as shoppers seek another vendor who will provide the same products with the shipping options they desire. Retailers who recognize the high cost of a lost customer are investing time and resources into providing a variety of shipping options to keep these shoppers on their site. The best way to achieve this is to choose a multi-carrier shipping software platform that is scalable and flexible and makes it easy to respond quickly to rapid changes in shopping behaviors.
Paula Heikell is Vice President of Product Marketing at Logistyx