Tag Archives: insights and analysis

Out of Stock? Here are 5 Ways to Prevent Stockouts for Good

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Running out of stock is one of the leading reasons for loss of revenue.

Running out of stock is one of the leading reasons for loss of revenue.

In business, there’s one phrase you never want to say:

“We’re out of stock.”

But we’ve all said it.

And every time we say it, we tell ourselves we won’t say it again.

Until we do.

You shouldn’t beat yourself up about it, though. Small business owners like you aren’t the only ones who suffer from stockouts.

Walmart executives reported they were leaving almost $3 billion on the table as a result of going out of stock.

What you should be concerned with is the incredibly high cost of regular stockouts.

In 2015, it was estimated that out of stocks cost retail businesses $634.1 billion in lost sales – 39{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} higher than in 2012.

And those losses were estimated for just one industry.

Think of the billions lost across all industries due to stockouts…

To help you combat the cost of going out of stock, we’ll show you how stockouts happen and how to prevent them from happening to you.

But first, let’s briefly define “out of stock” and describe in more detail how it hurts your business.

What Does “Out of Stock” Mean?

Being “out of stock,” or OOS means that the inventory for a particular product is completely depleted.

Out of stocks typically occur when a business owner doesn’t order enough inventory to satisfy customer demand.

But not being able to sell when a customer wants to buy is only one major problem of stockouts. Read on to find out more.

What Are the Effects of a Stockout?

There are many negative effects of going out of stock. Here are a few:

  • Lost sales
  • Lost customers
  • Negative customer reviews
  • Damaged brand and reputation
  • Slow or declining business growth

Now, stockouts aren’t caused by mysterious forces. There are measurable reasons why you run out of inventory. We’ll tell you why you experience stockouts in the section below.

Causes of Stockout Situations

Stockouts have many causes, and understanding the causes will help you find better solutions.

Here are 3 reasons why you run out of stock:

Inaccurate Data

From sales numbers to stocktakes, inaccurate data will always lead to bad decision-making and poor business outcomes.

The numbers will help you predict the future and learn from the past. If they’re wrong, then you’re destined to fail.

Inefficient Product Ordering

Inaccurate data inevitably leads to inefficient product ordering.

If you don’t order enough product, you won’t keep up with customer demand – resulting in stockouts.

Manual Spreadsheets

If inefficient product ordering is caused by inaccurate data, then what causes inaccurate data?

Excel inventory management, or manual spreadsheets in general

In a study of errors in 25 sample spreadsheets, Stephen Powell from the Tuck Business School at Dartmouth College found that 15 workbooks contained a total of 117 errors.

While 40{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of those errors had little impact on the businesses studied, 7 errors caused massive losses of $4 million to $110 million, according to the researchers’ estimates.

One of our customers, Urban Couture, cited manual spreadsheets as the main problem in their business – causing stockouts and other issues.

You can read their story here.

5 Out of Stock Solutions

Knowing the causes of stockouts will point you in the right direction, but you’ll need actionable solutions if you hope to keep your warehouse well-stocked.

Here are 5 out of stock solutions to help you decrease and prevent stockouts:

Use RFID Tags

Radio Frequency Identification (RFID) tags allow you to easily track every product you store.

It makes your stocktaking process faster and more efficient. You can quickly search and find the products you need to retrieve. And RFID tags allow you to scan any item and find out in real-time how much of that item you still have in stock.

Researchers at the University of Arkansas found that RFID technology helped reduce stockouts by 16{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}. If you want to reduce stockouts too, then implement RFID tags.

Forecast Demand

We pointed out earlier that stockouts are caused by inaccurate forecasting.

So, to avoid going out of stock, you should follow demand forecasting best practices.

Some best practices include:

  • Determining what to measure and how often (i.e. competitors sales data, POS data, frequency of stockouts, etc.)
  • Integrating data from all of your sales channels, especially if you’re running an omnichannel ecommerce strategy
  • Creating a repeatable monthly process that analyzes previous forecasts and compares them to actual market results

Use a Reliable Order Point Formula

A reorder point formula tells you approximately when you should order more stock – when you’ve reached the lowest amount of inventory you can sustain before you need more.

You can stop being a victim to market spikes and slumps by using a proven, mathematical equation to help you consistently order the right amount of stock each month.

Here’s the reorder point formula you can use today:

(Average Daily Unit Sales x Average Lead Time in Days) + Safety Stock = Reorder Point

Order Safety Stock Inventory

Safety stock inventory is a small, surplus amount of inventory you keep on hand to guard against variability in market demand and lead times.

It will help you protect against unexpected spikes in demand, compensate for inaccurate market forecasts, add a buffer for longer-than-expected lead times, and ultimately, prevent stockouts.

To help you calculate safety stock, here’s the formula we recommend using if you’re just starting out:

(Max Daily Sales x Max Lead Time in Days) – (Average Daily Sales x Average Lead Time in Days) = Safety Stock Inventory

Use a Cloud-Based Inventory System

A cloud-based inventory management system lets you track your inventory in real-time from anywhere in the world. You’ll know up-to-the-minute when stock is low or sales are high.

With that kind of insight, you’ll be able to send out purchase orders right when you need them.

But if you don’t want to manually send out those orders, you don’t have to. Cloud-based inventory management allows you to set an automated reorder point. Since the software automatically tracks your inventory, it’ll know when to automatically send out a purchase order for you, too.

Plus, it integrates with top business apps like Xero so you don’t need to operate multiple apps on multiple screens – you can do everything on one platform.

What kind of cloud-based inventory management system do we recommend?

DEAR Inventory, of course.

How to Prevent Stockouts for Good

Preventing stockouts isn’t easy and it won’t happen overnight.

The tips we gave you in this post will help you in big ways if you implement them correctly.

Beyond that, you’ll have to continue to test solutions and pay attention to your market.

To do that, you’ll need a tool that can collect and analyze all the data you want to be measured for accurate forecasts.

DEAR Inventory can do that for you. And you can test drive the software for 14-days free. Just click the button below to learn more.

Cloud-Based Inventory Management That Helps You Finally Stay “In Stock”

From real-time inventory tracking to automated sales reports to accurate demand forecasts, DEAR Inventory is the tool you need to effectively manage your supply chain, stock your warehouse, and satisfy your customers.

Start your free 14-day trial of DEAR Inventory today!

Try DEAR for Free

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5 Demand Forecasting Best Practices for Smarter Predictions and Better Results

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Better understand what’s coming with these demand forecasting best practices.

Better understand what’s coming with these demand forecasting best practices.

Demand forecasting is a tough job with a lot of errors.

The people who attempt to tell the future of your customers’ buying decisions are usually wrong.

But sometimes they’re right.

And in those instances, they’ve saved you from buying too much or buying too little  – leading to obsolete stock, and from buying too little – leading to stockouts.

Their job is necessary but very difficult.

To help you do the job of forecasting demand better, we’ll go over a few demand forecasting best practices so you can increase your chances of forecasting demand correctly – increasing profit margins and decreasing costs of inventory.

Before we do that, let’s define demand forecasting.

What is Demand Forecasting?

Demand forecasting is a process of predicting what your customers will buy, how much they’ll buy, and when they’ll buy it.

You can use informal methods (i.e. guessing) or quantitative methods, such as analyzing past sales data.

From production planning to inventory management to entering a new market, demand forecasting will help you make better decisions for managing and growing your business.

But to make demand forecasting as accurate as possible, you’ll need to follow demand forecasting best practices.

Read on to discover these best practices.

Demand Forecasting Best Practices

Demand forecasting is an imprecise science, but that doesn’t mean you can’t improve the process.

Here are a few tips to help you forecast demand effectively:

Create a Repeatable Monthly Process

An increase in demand forecasting accuracy requires a consistent, monthly process that systematically analyzes previous forecasts and compares them to actual market results.

Through this process, you’ll have data on when your predictions were right or wrong, and what market demand has been.

Then, you can sort those “deviations” (when you were right or wrong) from highest to lowest and evaluate the top 20{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} to determine why you were wrong and how to be right next time.

By following a monthly process and evaluating your past successes and failures, you can minimize future errors.

Determine What to Measure and How Often

You can measure virtually anything in your business, but to accurately forecast demand, you should focus on the most relevant data points.

Here are a few data points you should consider measuring:

  • Competitors sales data
  • POS data
  • Amount of obsolete stock
  • Frequency of stockouts
  • Shipments
  • Orders

Feel free to add any more relevant data points to that list. Then, depending on your industry and rate of inventory turnover, choose whether to measure those data points on a weekly or monthly basis.

Integrate Data From All of Your Sales Channels

If you have multiple sales channels – like an omnichannel ecommerce strategy – then you should aggregate all the data from every sales channel for each individual product into a single data set.

Once you’ve done this for all of your SKUs, you’ll be able to see which channels offer the highest ROI for each product, and what your shipping and order requirements will be – helping you make smarter decisions.

Measure Forecast Accuracy at the SKU, Location, and Customer Planning Level

According to Gartner, only 17{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of respondents to their study indicated that they forecast demand at the SKU, location, and customer planning level.

This is unfortunate because a primary driver of demand volatility is increased customer requirements.

Mr. Steutermann, the research vice president at Gartner said, “Customer or sales forecast accuracy should be measured for continuous improvement and accountability. The appropriate place to measure for continuous improvement is in the sales and operations planning (S&OP) review process.”

If you measure demand error down to the customer level, you’ll be able to better understand the source of the error – allowing you to improve your process.

Maintain Real-Time, Up-To-Date Data

You can’t accurately forecast demand if you don’t have accurate data.

Demand forecasting best practices revolve around up-to-date inventory data, sales data, raw materials data, finished goods data, etc.

To make smart forecasts, you’re going to need that data as close to real-time as possible so you don’t calculate demand with any missing data points, and so you can continually forecast demand on a weekly or monthly basis with fresh information.

So how can you track your POS, financial, and inventory data all at once within the same platform?

By using a cloud-based inventory management tool that integrates with all of your business apps.

In other words, DEAR Inventory.

Better Demand Forecasting Requires Better Inventory Management

Through real-time insight into your sales orders, stock levels, and past customer demand, DEAR Inventory allows you to track trends and forecast demand using accurate and up-to-date data from all areas of your business. Without this tool, you’ll struggle with spreadsheets and un-integrated apps – leaving you disorganized and without precise metrics. WIth DEAR Inventory, your apps will be integrated into a single platform and all of your data will be automatically calculated and charted for you. That’s why 7,503 small businesses and startups use us to grow their businesses.

Start your free 14-day trial of DEAR Inventory today!

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6 Ecommerce KPIs You Need to Start Measuring Today

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These Ecommerce KPIs are crucial to understanding and managing your business.

These Ecommerce KPIs are crucial to understanding and managing your business.

“If you can’t measure it, you can’t manage it.”

We don’t know who said it first, but we do know this quote rings true in the world of ecommerce.

If you don’t have specific objectives or clear goals, how do you know if you’ve reached a desirable outcome or milestone?

You don’t.

A lack of clear targets is especially harmful in your ecommerce business where tactics and strategies change fast, and if you’re not keeping up with trends or data, you’ll quickly lose to your competition.

That’s where ecommerce KPIs come in.

They help you make sense of the data you’re (hopefully) collecting, and give you insights into changes you need to make, strategies you need to implement, or tools you need to use.

But ecommerce KPIs are not created equally.

There are a few essential KPIs you absolutely should measure, and there’s a whole lot of KPIs that would be a waste of your time to measure.

We’ll give you a thorough list of the ecommerce KPIs every business should consider measuring, what to do before you start measuring KPIs, and how to make the most out of the data.

But first, let’s define ecommerce KPIs and metrics.

What are Ecommerce KPIs and Metrics?

A metric is any data you want to measure.

A key performance indicator (KPI) is a metric that measures data relative to a goal.

You can measure whatever you want, but if it isn’t tied to a goal, and if it doesn’t move you closer to that goal, it’s not a KPI.

Which means ecommerce KPIs are metrics that visibly influence your conversions, sales, and growth online.

With that in mind, there’s one question you’re probably asking yourself:

How Should You Construct and Measure Your Ecommerce KPIs?

You create ecommerce KPIs by first creating ecommerce business goals.

Here’s an example of clear ecommerce goals paired with specific KPIs from Shopify:

  • GOAL 1 — Boost sales 10{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} in the next quarter. KPIs include daily sales, conversion rate, and site traffic.
  • GOAL 2 — Increase conversion rate 2{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} in the next year. KPIs include conversion rate, shopping cart abandonment rate, associated shipping rate trends, and competitive price trends.
  • GOAL 3 — Grow site traffic 20 percent in the next year. KPIs include site traffic, traffic sources, promotional click-through rates, social shares, and bounce rates.
  • GOAL 4 — Reduce customer service calls by half in the next 6 months. KPIs include service call classification, identify which pages were visited immediately before the call, and identify what event lead to the call.

Once you have clear goals in mind, you can begin measuring the appropriate KPIs.

Since the KPIs you’ll measure will be specific to your business goals, we’ll give you a few ecommerce KPIs that every business should measure to get you started on the right foot.

Essential Ecommerce KPIs to Measure

If you’re just starting out, consider measuring only 4-10 KPIs to avoid overwhelm and to be as efficient as possible.

Here’s a list of 7 high-value ecommerce KPIs that will give you plenty of meaningful data you can use to reach your desired outcomes.

Brand Name Search

If your goal is to increase your brand awareness, your audience engagement, or your site traffic, then tracking how often people search for your brand name is essential.

If people are increasingly aware of your brand name, they’re more likely to seek out and discover the products and services you offer and are more likely to buy from you.

When your prospect considers buying a solution to their problem, they’ll immediately search their own minds in an attempt to recall a seller that they know of who can provide the solution they’re looking for.

If you’ve successfully implanted your brand name into their mind, they’re likely to go to your website and revisit your offer before looking at your competition.

Here are a few tools for monitoring your brand online.

Bounce Rate

If you want to increase your conversion rate, then you should focus on decreasing your bounce rate – the percentage of people who visit and immediately leave your site.

According to the Wolfgang 2017 E-commerce KPI Benchmarks Study, by increasing time spent on a site by 16{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}, conversion rates went up by a full 10{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}.

In the world of online conversions, 10{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} is a huge increase.

So, how do you decrease bounce rate and keep people on your website?

Here are a few suggestions:

Applying these tips will help you quickly achieve your ecommerce KPI of a low bounce rate.

Conversion Rate

Conversion rate is one of the most important ecommerce KPIs to measure across every part of your site.

A conversion rate is simply the rate at which visitors to your site perform the action you want them to (opt-in to your email list, share your post, buy your product, etc.).

Here’s the basic calculation:

(Number of conversions) / (number of site visitors) = conversion rate

If 1,000 people visit your ecommerce store, but only 50 people buy, your conversion rate is 50 divided by 1,000 which equals a 5{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} conversion rate.

You can increase your conversion rate by:

By testing the methods above, you’ll be able to measure incremental improvements in this particular ecommerce KPI, and over time, you’ll reach a higher and higher conversion rate.

Cart Abandonment

Shopping cart abandonment is unfortunately widespread.

Baymard Institute studied buyer behavior on ecommerce sites and found that 69{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of all ecommerce visitors abandon their carts.

There could be several reasons why online shoppers abandon their carts:

  • Shipping fees were too high
  • The site asked them to create an account in order to checkout
  • Too many form fields to fill out to complete the checkout process
  • Website errors
  • Not enough payment methods
  • Etc.

It’s frustrating knowing there are so many factors that contribute to such a high rate of shopping cart abandonment.

Where should you begin if you want to influence your customers to complete their checkout?

You can start with these 5 proven tips to stop shopping cart abandonment:

  1. Include images of the shopping cart items throughout the checkout process
  2. Use trust badges on your checkout page
  3. Reduce checkout form elements
  4. Ask users to register for an account AFTER the sale, not before
  5. Reduce or eliminate shipping costs

If you implement these 5 tips, you’ll see a measurable reduction in your shopping cart abandonment KPI.

Average Order Value

Your average order value (AOV) is a fundamental ecommerce KPI metric to track if you’re struggling to make a profit.

AOV is simply the average amount that people buy in your store.

The higher, the better.

To increase your AOV, try these tactics:

  • Product bundling
  • Free shipping for customers who spend a lot of money (over $100, for example)
  • Limited time offers and coupons
  • Upsells to higher-priced items than the ones in their cart
  • Cross-sells to items related to the ones they already have in their cart (like a laptop bag to accompany their new laptop)
  • Points for purchases that customers can use to buy other items from you in the future

Customer Retention

Repeat customers are the holy grail of good business, online or offline.

It’s also an essential ecommerce KPI if you value long-term business growth.

A 5{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} increase in customer retention rate will result in a 25{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} to 95{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} increase in profits according to Bain & Company.

Here are 3 metrics you should focus on:

  1. Rate of repeat purchases
  2. Frequency of purchases
  3. Order gap analysis

So, how can you increase customer retention? By following these tips:

  • Deliver products in customer packages that make your customers say “wow”
  • Offer fast delivery options
  • Under-promise and over-deliver (e.g., your policy says you ship within 5 business days, but you usually ship overnight)
  • Make it easy to repeat purchases
  • Make it fast and easy to create an account
  • Offer free and easy returns

How to Make the Most out of Ecommerce KPIs

We have to stress the importance of the old idiom “less is more.”

The first thing you’ll be doing when first measuring ecommerce KPIs is establishing a baseline for all of your KPIs and then testing strategies to improve those KPIs.

This is a long process, so be patient and never stop testing new strategies and tactics.

In that same vein, you should always be testing new technologies that make it easier for you to track, measure, and understand specific ecommerce KPIs.

One such technology is a cloud-based inventory management system that allows you to track all of your sales, offline and online, in one central hub.

This system would give you the advantage of knowing exactly how much inventory you have in stock in real-time, without needing to take a physical inventory.

You can also update all of your ecommerce stores when you start carrying new seasonal items or when you stop selling unprofitable items.

You’ll even be able to automate reorders and backorders so you’ll never have to run out of stock.

This system will help you reach many of your ecommerce KPIs such as your average order rate, shopping cart abandonment rate, and customer retention rate, among many others.

Where can you get this system?

Right here.

Achieve Your Ecommerce KPIs With A Cloud-Based Inventory Management System

From integration with your ecommerce stores and apps to seamless inventory tracking through your POS, DEAR Inventory will track, measure, and generate reports that make it possible for you to grow your business using sound, accurate data.

Start your free 14-day trial of DEAR Inventory today!

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The Power of Safety Stock Inventory and How to Calculate It

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Calculating safety stock inventory is easier (and more beneficial) than you think

Calculating safety stock inventory is easier (and more beneficial) than you think

What would happen if there was a sudden spike in market demand for your products?

Would you have enough inventory to satisfy your customers?

Or would you have to hang up the dreaded “out of stock” sign?

If you’re unsure, then you probably need to invest in safety stock inventory.

Even if you think you could handle that type of situation, your business is still vulnerable to uncertain shifts in the market and supply chain.

One of the best ways to safeguard your business and satisfy your customers is to have safety stock inventory.

We’re going to go over some of the benefits of safety stock and show you how to use one simple formula to calculate it.

But first, let’s define safety stock inventory.

What is Safety Stock Inventory?

As the name implies, safety stock inventory is a small, surplus amount of inventory you keep on hand to guard against variability in market demand and lead times.

If you’re trying to implement just-in-time (JIT) inventory, then you probably won’t want to invest in safety stock.

But, if you’re like the majority of retailers and wholesalers who use a just-in-case (JIC) inventory strategy, safety stock is critical to your business operations and offers many benefits to your bottom line.

What are the Benefits of Safety Stock Inventory?

Safety stock plays an integral role in the smooth operations of your supply chain in various ways.

Here are just a few:

  • Protection against unexpected spikes in demand
  • Prevention of stockouts
  • Compensation for inaccurate market forecasts
  • And a buffer for longer-than-expected lead times

You probably noticed that the benefits of safety stock are all tied to mitigating problems that could seriously harm your business.

That’s because without safety stock inventory you could experience:

  • Loss of revenue
  • Lost customers
  • And a loss in market share

With safety stock, you can safely avoid most of these problems.

Of course, despite its benefits, too much safety stock can incur substantial carrying costs, in which case you’ll need to reduce inventory or increase your rate of inventory turnover.

This is why it’s crucial to know how to order just the right amount to safeguard against variability in the market and supply chain, while not ordering too much and risk losing capital over the long-term.

To get it just right, let’s look at how to calculate safety stock inventory using a proven formula.

How Do You Use a Safety Stock Formula for Accurate Calculation?

A safety stock formula is relatively straightforward and requires only a few inputs for calculation.

Here’s the formula we recommend using if you’re just starting out:

(Max Daily Sales x Max Lead Time in Days) – (Average Daily Sales x Average Lead Time in Days) = Safety Stock Inventory

To take this out of the abstract and show you how it works, here’s an example to demonstrate this formula:

Suppose there’s a store in the USA called Harry’s Honey Shop. Harry sells honey that’s imported from Brazil.

On average, he sells about 5 bottles of honey every weekday. On the weekends, he operates a stand at his local farmers market and sells about 10 bottles of honey.

His average lead time to get a fresh shipment of Brazilian honey is 40 days. Although, because of the limited availability of flowers and other environmental factors, it can take up to 50 days to receive a shipment (maximum lead time).

If Harry wants to make sure he always has enough honey in stock to satisfy customer demand, he can use this formula to figure it out:

(10 x 50) – (5 x 40) = 300

If Harry sells about 45 bottles a week (5 every weekday, 10 on the weekends) equaling 180 bottles a month, then with these calculations he would have enough stock to last him about a month and a half.

If Harry orders honey every month, he would have plenty of safety stock. Maybe even too much.

Now that Harry knows how much honey he needs to have, and how much extra he would probably have left over, he can slightly reduce the amount of honey he orders to guarantee a nice buffer in case there’s a spike in demand or longer lead times.

Now, this is a pretty basic safety stock formula that will get you up and running quickly. But, you should never solely rely on basic formulas like these to calculate safety stock.

Use them as a baseline, test them, and expand your calculations with more nuanced formulas to deal with large volumes of inventory, different types of stock, and volatile market demands.

If you want to dive deeper into safety stock formulas, you should check out this excellent article that will help you handle more complex variances, deviations, and variables in your calculations.

How Do You Make Calculating Safety Stock Easier?

A safety stock formula is only useful if you have accurate inventory metrics.

If you don’t have an effective SCM software, a successful stocktaking process, or a proven perpetual inventory system, then you run the risk of having inaccurate forecasts, inefficient stock counts, and error-ridden data.

Before you can optimize your inventory ordering process and factor in safety stock, you should upgrade your inventory management system.

Accurately Calculate Your Safety Stock Using Proven Inventory Management Software

Our cloud-based inventory management software will track all your sales, generate real-time reports on buyer behavior, forecast spikes and slumps in demand, and monitor every piece of inventory the moment it arrives and the moment it’s used or sold. If you want to reap the rewards of safety stock inventory, then you should invest in a powerful inventory management system.

Start your free 14-day trial of DEAR Inventory today!

Try DEAR for Free

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5 Proven Ways to Stop Shopping Cart Abandonment

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Another casualty of shopping cart abandonment...

Another casualty of shopping cart abandonment…

Did you know 69{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of online shoppers completely abandon their shopping carts before making a purchase?

That’s what the research says according to usability firm Baymard Institute.

Think about it like this:

Say 10 people walk into a grocery store, shop around for things on their list (and maybe a few things that aren’t – the bakery section is always calling!).

When all’s said and done in their shopping experience, 3 of them take their full carts to the checkout, smile as the cashier rings up their items, and pay the bill before heading home.

But for 7 of them, something happens between entering the grocery, starting to fill their carts, and the actual purchase.

Four of them were just taking a look around, they had some time to kill and thought they might like a snack; maybe they grabbed a couple things to think about them a bit, but ultimately they decided they weren’t that hungry and they needed to get a move on.

One of them put one or two items in their cart before checking Facebook, seeing their friends are meeting for drinks nearby right now, and deciding they don’t really need their items now – so they’ll come back later.

Another got all the way to the checkout line, but after waiting for 10 minutes in the crowded store with only 3 items to buy, they decide they’d rather just leave and come back later too.

And the last got all the way to checking out, but because the cashier gave them an unsavory look, they decided they didn’t quite trust handing over their money to them and just walked out.

Top Reasons for Shopping Cart Abandonment

In their study,  Baymard makes it clear that 58.6{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of US online shoppers abandoned their carts within the last 3 months because they were “just browsing” or “not ready to buy”.

But these aren’t the shoppers you should be worried about – “browsing” is a millennia old part of the process, rooted all the way back in the hunter/gatherer days.

What you really need to know is why people who were ready to buy suddenly changed their minds.

Once you account for the “just browsing” segment, that last 10.4{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of abandoned carts is where you can actually make a difference in your sales.

And with research from BI Intelligence revealing approximately $4 trillion worth of merchandise is abandoned on a yearly basis – there’s a huge opportunity, as they also found that smart companies could recover 63{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of that lost revenue by streamlining their checkout process.

 

Top Reasons for Shopping Cart Abandonment or How to Grow Your Profits!

Top Reasons for Shopping Cart Abandonment or How to Grow Your Profits!

Based on testing of checkout processes from leading e-commerce sites – such as Walmart, Amazon, and Wayfair – Baymard found that 35{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of site owners can fight shopping cart abandonment by simply redesigning their checkout page.

Though you might not realize it, there are certain things you’re doing that might be scaring off potential buyers, and certain things you’re NOT doing that are psychologically proven to make buyers feel more comfortable with and confident about their purchases.

So, if you want to make more sales and keep more customers, then read on to discover our top 5 ways to reduce shopping cart abandonment in order of least to most effective!

5. Include Images of Products Throughout Checkout Process

This is a powerful way to keep the value of your products front and center in your customer’s mind (so powerful we added it to our list even though it wasn’t covered in Baymard’s research – free bonus!).

Think about the process of buying physical goods from a bricks and mortar store.

Throughout the entire shopping process, you’re subconsciously reassuring yourself every item in your physical shopping cart is a worthwhile by literally looking at it throughout your entire shopping journey.

Even if you don’t do it consciously (or that juicy pack of steaks is buried under all the other stuff you’re going to buy), you’re carrying each and every item with you the entire time, a subtle reminder that you’ve already committed to buying it.

And when you finally get to the checkout counter, you have to physically take all of your items out of your cart and watch them get scanned.

So how do you apply the psychology of these subtle commitments and reminders online?

The moment a customer clicks “add to cart,” you should reassure them it was successfully added in one of a few ways:

  • By displaying a number of total items in their cart (+ however many they just added)
  • By taking them to a “successfully added” page (like Amazon).
  • Or maybe even a small popup that confirms their item has been added and what else is already in their cart (like Amazon would do if changing its website didn’t cost billions of dollars).

Then, once they get to the checkout page, you should display a thumbnail version of the product picture.

Even if you have multiple checkout pages, keep the thumbnails of all their in-cart items listed on one side of the screen to act as a visual reminder of what they’ll get when they complete their purchase – so they’ll be less likely to allow a distraction keep them from getting the products they want from you!

4. Use Trust Badges on Your Checkout Page

18{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of shopping cart abandonment occurs because users don’t trust the website their shopping on with their credit card information.

Baymard found that many people believed certain pages were more or less secure than other pages; even if this isn’t technically true – for example, if your entire site is secured with HTTPS – most people don’t have the technical insight to understand exactly how your website security works.

So especially when it comes time to enter their credit card info, people will look for any signs that your checkout page is tightly secured with a recognizable trust badge.

As we just mentioned, a common way to signal a secure checkout is with HTTPs, an SSL certificate, and some sort of badge that signals your website is secured this way.

But while it’s most common, HTTPS/SSL isn’t the only way to tell your visitors you care about their security and privacy.

You can also install other security software such as Symantec, Comodo, or TRUSTe.

These go a long way in protecting your customer’s data and making your business look (and actually become) more legitimate.

While security should be a top concern for ecommerce companies, there are other forms of trust badge.

Visual Website Optimizer ran a test for one of their clients and found that by adding a simple trust badge that read “100{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} money back guarantee” they increased their conversion by 32.57{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}.

While not website security related, money back guarantees still offer the peace of mind that comes with knowing if for any reason they don’t like the products they’ve bought, they can return them at little to no cost.

Ultimately buyers need their fears dispelled in order to feel comfortable enough to make buying decisions. So help them realize they’re making a good choice by using trust badges on your checkout page!

3. Reduce Checkout Form Elements

Baymard also found that 27{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of shopping cart abandonment occurs for a relatively simple reason:

The Checkout process is “too long/complicated.”

Their usability tests showed that the ideal checkout flow should be restricted to 12-14 form elements, yet the average amount of form elements used by US ecommerce sites was 23.

That means that by cutting their form elements in half, most site owners can see significant reductions shopping cart abandonment.

And, if you can, stop using multi-page checkouts; just like too many form elements can be overwhelming, so too is trudging through page after page just to get to the “order now” button.

Instead, try to condense your entire checkout process to just one or two pages, and if you must have multiple pages for checkout, use a progress bar that displays how far along your shopper is in their checkout journey.

Recent research from Statistic Brain suggests that humans now have lower attention spans than a goldfish – so each and every task you ask someone to complete is another second they’re losing interest and becoming more distracted.

Fewer fields to complete and “you’re almost there” progress bars can help keep them engaged while gently guiding them closer to the sale. And remember: by making your checkout process shorter, you’re making 27{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of online shoppers more likely to actually buy from you.

2. Ask Users to Register for an Account After the Sale, Not Before

35{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of shopping cart abandonment occurs because ecommerce sites make customers create an account in order to make a purchase.

Requiring a customer to create an account on your site before being able to make a purchase is sort of like a tax on their time – you’re making it more difficult for them to make a purchase without really adding value to their order (sure, next time it might be easier to purchase by logging in, but there won’t be a next time if there’s not a this time!).

Why lawmakers raise taxes on tobacco products (besides revenue)? To deter people from buying them.

Do you really want to deter potential customers from buying through from you?

We’d guess not.

So instead, offer a “guest account” option that streamlines the checkout process and makes it easy for the customer to buy first. Then, on the “thank you” screen, offer to create an account for them in order to make checkout even faster next time.

This is a win-win for 2 reasons:

  1. You’ve made it easy to purchase from you at all.
  2. You’re offering to make the checkout process even easier to purchase from you next time.

In a time and attention strapped world, easy sells.

And as an added bonus, by creating accounts and capturing emails from actual customers, you’ll be able to build an email list that you can turn into a valuable resource going forward.

1. Reduce Your Shipping Cost (aka Make It Free)

Well, you’ve finally made it to the last thing any business wants to do, even if they know it will increase customer conversion – lower their prices.

It’s a hard fact to swallow, but the biggest reason for cart abandonment is high hidden costs like shipping fees and taxes. 61{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of potential buyers will abandon their cart if you try to slyly tack on additional costs at checkout.

But as a smart,web-savvy business, you’re not going to do that (at least, not anymore).

The most important step to take here is to be completely honest about extra costs.

The moment your customer adds something to their cart, you should calculate tax and display it with their total. Being transparent beats being sneaky in the long run because you build trust before the sale – which makes that sale more likely – instead of breaking what trust you’ve built up right before someone is ready to buy, which results in losing both the sale and a customer.

The second step is to try and offer free shipping (even if it costs you).

The big ecommerce retailers have been doing it for so long it’s no wonder most consumers expect everyone, including small businesses, to follow suit; a 2011 Comscore study suggested that 61{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of consumers are likely to cancel their entire purchase if free shipping is not offered.

If you absolutely can’t afford free shipping for each and every one of your items, then create different bundles of products or have “free shipping on orders over $x” to make enough money to cover shipping on all products while still making a profit.

At the very least, offer free shipping for special holidays.

Either a 1-day or 1-week free shipping offer can easily spike sales during peak buying months.

Now as an added bonus, we have 1 more step you can take to reduce shopping cart abandonment:

Always have enough stock to meet customer demand.

Make Sure Shoppers can Fill Their Carts… Even if They’re Going to Abandon Them

One of the quickest ways to damage your reputation and bottom line is greeting would-be customers with the dreaded “out of stock” sign.

Are you able to easily and automatically track your products from raw good to sale in order to always have just the right amount of stock?

If not, you need a better way to manage your inventory: one that offers better metrics on your customer’s buying decisions while helping you keep a close eye on your inventory levels across your warehouses and sales channels.

Automate tracking, integrate product info with major ecommerce platforms, and keep track of your sales throughout the year with cloud-based inventory management software.

 

Ready To Take Back Control of Your Inventory?

Experience the automation and real-time reporting benefits modern cloud-based inventory management software offers by starting your free 14-day trial of DEAR Inventory today!

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