by Aurangzeb Agha
In this post we’re going to cover the impact cart abandonment has to your top-line revenue. We’ll look at the variables you need to figure out your cart abandonment rate, how to calculate it, and how a reduction in your cart abandonment rate can increase your revenue—often substantially.
First, let’s get on the same page about what cart abandonment is: Once shoppers come to your (e-commerce) site and add an item or more to their cart, the biggest risk is that they’ll abandon their purchase (i.e. leave your site before they complete their purchase). This is called cart abandonment. For a more in-depth description of cart abandonment, see our first blog post. According to the Baymard institute, almost 70% of shoppers abandon a purchase after they’ve already placed products in their cart. This represents a big chunk of potential revenue your store is losing every day.
Regardless of the approach you take to reduce cart abandonment for your site, it’s important to first understand how big of a problem it is and how much it impacts your revenue. To understand the impact your cart abandonment rate has on your revenue, you’ll need know the following:
- Average number of daily sales
- Your Average Sales Price (ASP)
- Your cart conversion rate
Before we start, if you want to follow along, we’ve created this handy little spreadsheet for you to download or—if you like—plug in your own company’s numbers numbers:
Let’s start with an example of a fictional online retailer, Cables Plus. Let’s say that every day, Cables Plus makes about 100 sales and their average sales price is $15:
From these numbers, we can easily calculate our monthly revenue (here, we’re assuming 30 days in a month):
We also know that Cables Plus has a cart conversion rate of 10%. Meaning that one out of every 10 customers that add an item or more to their cart completes their purchase:
Knowing the cart conversion rate is one of the easiest ways to calculate your cart abandonment rate (CAR). It’s simply:
100% – (Your conversion rate) = Cart Abandonment Rate
Note: You may not always know your cart conversion rate (see more, below). If you do, use the “I Know My Cart Conversion Rate” worksheet:
If you don’t know your Cart Conversion Rate, but know your Cart Abandonment Rate, use the “I Know My Cart Abandonment Rate” worksheet:
If you don’t know either and want some help figuring out, reach out to us for some free help!
For the purposes of this example, we’ll assume you know your Cart Conversion Rate.
In Cable Plus’ case, we can calculate the cart abandonment rate and the number of daily carts abandoned:
And from these numbers and the ASP from above ($15), we can calculate how much is being lost to cart abandonment every month:
That is a lot of money that’s being lost due to cart abandonment! With a cart conversion rate of 10%—and therefore a cart abandonment rate of 90%—Cables Plus is potentially missing out on $405K in revenue every month!
The reality is that capturing all the revenue lost to cart abandonment is impossible. But what if we could make a little dent and reduce cart abandonment by just 4%?
By just a tiny cart abandonment reduction, we see our daily carts abandoned drop from 900 to 860. That means that every day we’re able to recover 40 more carts:
Think about that for a moment: We were averaging 100 sales/carts a day, but because of our 90% cart abandonment rate, just a small 4% improvement in cart abandonment nets us 40 new carts every day, a 40% improvement!
Assuming the same ASP as before ($15), that means more revenue every month:
Holy moly! Remember how our monthly revenue was $45K? By reducing our 90% cart abandonment rate by just 4%, we net an additional $18k a month! That’s a huge bump! How big exactly?
That additional $18k a month is a 40% increase in revenue! Can you imagine increasing your revenue so dramatically?
In future posts, we’ll talk about methods you can use to reduce your cart abandonment rate. There’s a lot of things you could do—and should be doing—to capture revenue that’s being left in carts that aren’t converting.
If you want to learn more about how we help companies to calculate their cart abandonment rate, where in the purchase funnel shoppers are dropping off, and how much revenue is being lost—and want to see cool dashboards like the one below—drop us a note!