Dropshipping has become one of the most popular online business models these days.
But why is this the case?
Thanks to COVID-19, online shopping has increased exponentially in the last few years—turning the ecommerce field into a goldmine for new and hungry entrepreneurs. And dropshipping is the entryway for new business owners to start making money online.
That’s because the dropshipping business model doesn’t require in-depth financial knowledge—it gives the flexibility to work whenever and wherever. It allows new entrepreneurs to test product ideas without having to pay for inventory upfront—and once a product is sold, the dropshipping supplier handles order fulfillment and shipping.
However, dropshipping isn’t all rainbows and sunshine. In fact, 90% of dropshippers fail at the beginning, and the remaining lose a lot of money in yearly sales revenue—potentially without even realizing it. Read on to learn more.
Why Do Dropshippers Lose Sales?
Shockingly, eCommerce stores lose $18 billion in sales revenue yearly due to cart abandonment. And that’s not all, the damages go beyond merely losing sales. Just like an onion, cart abandonment has many layers to unpeel.
Starting small, abandoned carts can negatively impact customers’ lifetime value. It makes it easier to understand the financial effect of your marketing efforts and balances the interests of both your short and long-term customers.
So, how do abandoned carts negatively impact customers’ lifetime value?
Think about the potential customer who starts the purchase process and then abandons their cart. Not only have you lost a sale, but you’ve also lost a repeat customer and other customers they may refer to you.
And that’s not all—we’ve only scratched the surface; shopping cart abandonment can lower your advertising click-through rates. When someone adds an item to their cart, it creates a transaction record that can be used to target future ads.
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The ad platform will show ads to more people who look like those users. Because of this, your click-through rate and return on ad spend can decrease as you unwittingly target users who are not in the market to convert.
Another effect of cart abandonment is the loftier cost of customer acquisition, as it costs less to keep a current customer than to onboard a new one. Therefore, it’s in your best interest to prevent cart abandonment by turning browsers into customers. Also, just because an ad campaign or piece of content drives clicks doesn’t mean it is driving sales.
Now to the juicy stuff, abandoned carts are more than just lost sales—they can also cost money.
Here’s a situation: Let’s say that your eCommerce store receives 1000 visitors on average per day, and 500 of those visitors attempt to make a purchase, but they abandon their cart. As a way to recover potential customers, you’ve decided to use retargeting ads as your marketing strategy—these campaigns can cost up to $1.23 per click—which is often less costly than other PPC and CPC ads.
However, when comparing the cost of clicks between standard paid ads and retargeting ads, it’s important to consider that businesses spend thousands of dollars to get visitors to their sites the first time—and then a few more dollars per click to bring them back.
Average Cart Abandonment Rates
Baymard Institute reports that the average cart abandonment rate worldwide has remained at 69.8% for the last 12 years. Another research also shows that shoppers use different devices to shop online, and the number of people who abandon their carts varies depending on which device they use.
And, of course, your customers’ location also influences how likely they are to abandon their online shopping carts. For example, Italy’s online shopping cart abandonment rate for smartphones is nearly 90%, which means that almost all of the online baskets placed through mobile devices do not result in completed orders. Desktop users were somehow more eager to place their orders; their cart abandonment rate amounted to 80%.
In Scandinavian countries, 86% of mobile orders were not completed during three months, while roughly eight in ten carts created on both computers and tablets were left abandoned during the same time frame.
Meanwhile, Japanese shoppers created the greatest number of abandoned shopping baskets among shoppers accessing platforms with mobile devices as of the second quarter of 2022. While 83% of online shopping baskets created on mobile devices did not result in completed orders, the proportion of shoppers who made purchases on a computer was slightly lower than those who used other devices.
And during the second quarter of 2022, 85% of baskets created on computers in the United States did not result in a completed order. This was most common among shoppers using mobile devices.
There is also a variation in abandonment rates, depending on what kinds of products you sell. According to a recent study, consumers are likelier to abandon clothing, tech, and home products than fitness, food, and jewelry items due to the nature of the need the product serves differs from product to product.
Meanwhile, Clothing has one of the highest abandonment rates of any product type, with around 40% of clothing in shopping carts being abandoned. That’s because there are multiple styles, designs, and colors to choose from when it comes to clothing.
Sizing varies greatly across brands and designers. Since these choices are subjective and customers have more options, they are more likely to abandon one item for another.
16 Reasons Shoppers Abandon Their Carts
Various factors lead to the abandonment of online shopping carts. Below is a detailed explanation of why shoppers abandon their shopping carts.
1. Lower Prices From Competitors
Do you know what happens when shoppers leave your website?
According to Statista’s research, when UK shoppers abandon their carts, less than 33% return to buy what they left behind, 26% get the same item from a competitor, and the rest 8% go to a physical store to buy the item.
Since the eCommerce field is saturated, shoppers now have several options when shopping online. So, they compare prices and look for better deals—and who doesn’t want to save money? When shoppers find a bargain, they abandon their carts and buy from your competitor.
2. Limiting Payment Methods
Did you know that 42% of US consumers will not complete a purchase if their favorite payment method is unavailable?
Shoppers are changing the way they pay for goods and services. Earlier, they’ve been using credit and debit cards, but are now also using online wallets, cards, PayPal, Amazon Pay, Apple Pay, cryptocurrency, direct bank transfers, and more.
3. The Speed of the Website
Slow website speeds directly impact your ability to convert visitors into customers, decreasing sales and increasing cart abandonment.
Research shows that the highest conversion rates in eCommerce happen in the first two seconds of a page load, with an average of 3.05% of visitors converting in the first second, down to 0.67% at a 4-second load time.
If your website takes longer than two seconds to load, you can expect to lose 0.3% of your potential customers.
Conversely, sometimes cart abandonment can also slow website speeds, mainly during high-traffic events like Black Friday and holidays. With tons of items in shopping carts, your server bandwidth can bog down and slow the entire site. As a result, you risk losing out on potential customers.
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4. Inflexible Return Policy
A clear return and exchange policy builds trust between a business and its customers. It’s one way for businesses to increase conversion and repeat rates. Returns policies are just as necessary before and after the sale, as 12% of US shoppers abandoned their cart due to unsatisfactory return policy.
5. Mandatory Account Registration
When shoppers purchase from your online store for the first time, they want a quick, hassle-free checkout experience. Filling out a form to create an account is the last thing they would want.
Sure, you can gather your audience’s information by requiring them to create a new account, but remember, it causes 24% of shoppers to abandon their orders during the checkout process.
Most people have difficulty remembering their passwords because they have to use many. A study reveals the average person has 100 Passwords. So, even if someone has created an account, they are likely to forget the account credentials, and resetting passwords or retrieving usernames can be frustrating and time-consuming.
6. The Checkout Process Is Too Long
Although some eCommerce sites don’t require account registration, they still lose 17% of potential customers by having a long or complicated checkout process.
Biologically, the human brain uses mental shortcuts to help us make decisions quickly while conserving energy (called heuristics). Naturally, people value speed, simplicity, and convenience when shopping online.
The ideal checkout flow should be no more than 12-14 form elements and 7-8 if only counting the form fields. Despite that, according to the Baymard Institute checkout benchmark, the average US checkout form contains 23.48 form elements displayed by default.
To put it another way, almost 1 in 5 shoppers have abandoned their shopping carts because of a too-long, complicated checkout process.
7. The Prices Are Unclear
No one likes to be surprised by unexpected charges. When shoppers see unforeseen fees at checkout, they have a negative response. No wonder 16% of shoppers abandoned their carts because they couldn’t see nor calculate the total price for their orders.
8. Additional Costs (Taxes and Shipping, for Example)
Speaking of unexpected prices, 48% of shoppers abandoned their carts because of additional costs like taxes and shipping fees. Here is a perfect example of additional costs that can be found in a $3.99 shirt plus an extra shipping fee of $8.99, excluding the sales tax.
9. Inflexible Delivery and Limited Shipping Options
The standard delivery time ranges from two to eight days. However, online shoppers prefer the next-day shipping option over standard delivery.
When customers add an item to their carts, they realize they won’t receive the item for several days or even weeks and are more likely to abandon their carts—22% actually did because of slow delivery speeds.
Dropshipping vendors may take 12 to 60 days to deliver a product based on location, putting them at a huge disadvantage.
To add insult to injury, some online retailers offer the option to pick up your item at a local store to prevent slow delivery. Unfortunately, dropshippers don’t have this option.
Notebook therapy‘s delivery timing is a bit on the steep side—but it still reduces cart abandonment by offering free delivery worldwide and guaranteeing a full refund if the item isn’t received within eight weeks.
10. The Site’s Security Measures Were Less Than Ideal
After the 2020 identity theft incident, 18% of shoppers abandoned their carts due to skepticism about the eCommerce site and the inability to trust it with their credit card information. 43% of US consumers stay away from merchants that require them to enter their payment credentials more than once.
Here are a few of the red flags that can make a customer suspicious and drive them away:
- Your website does not have an SSL certificate.
- Not having any customer testimonials or reviews.
- Not displaying warranties on your eCommerce website.
11. Too Many Add-on Sales Pitches
It’s understandable that as a business owner, you want to make as many sales as possible–and cross-selling (suggesting complementary items) can be helpful to both parties. However, if the cross-promotion is too aggressive, it may distract customers from their original purchase and drive them away.
12. Prices Are Shown in Foreign Currency
Tiny changes like showcasing prices in another currency can greatly impact cart abandonment rates.
Shoppers from other countries might be confused about their shipping options or how to convert the price tag to their currency. Subsequently, to avoid all the hassle, they abandon their cart.
13. Website Hiccups and Glitches
An eCommerce website can sometimes jam with a shopper’s experience and prevent them from completing their order. If the website has serious problems with performance, such as frequent crashes and errors, customers will look for an alternative.
Not convinced? 13% of shoppers abandoned their carts due to website crashes and errors.
14. Having a Hard Time Navigating the Online Store
Imagine a customer visiting your eCommerce site, finding an item they want to buy, and adding it to their cart. But instead of completing the purchase, they get frustrated trying to find other items.
The outcome of this situation is obvious, you’ve lost a potential buyer and possibly ruined your reputation.
15. Not Getting Discounts or Coupons
Online shoppers often sweep up in the excitement of promotions and discounts. Many eCommerce businesses offer coupon codes to first-time buyers to attract new buyers. This is because incentives are an effective way to encourage shoppers to choose your product over another.
If you don’t offer any discounts or coupons and your competitor does, you can expect your visitors to opt for your competitor. Stats suggest that 41% of shoppers are motivated to purchase an item due to coupons or discounts, and 21% are motivated by loyalty points.
16. No Intention to Make a Purchase
Realistically, you can’t save every potential customer who abandons your shopping cart. The goal is to prevent abandonment as much as possible and focus on saving potential buyers.
Many cart abandonments are simply due to how users browse eCommerce sites. When browsers leave the shopping cart without checking out, they might be doing any of the following:
- Window shopping
- Price comparison
- Saving items for later
- Exploring gift options
What can you do in this case? Unfortunately, not much.
Baymard Institute’s latest study reveals that 58.6% of US online shoppers have abandoned a shopping cart within the last 3 months because they were just browsing and nothing more.
How to Get Back Customers?
1. Give Shoppers the Best Possible Experience
Companies that emphasize value and service are less likely to lose customers over price. Competing on price can quickly lead to diminishing returns. Rather than trying to beat all your competitors’ prices, offer stellar customer service—like Tze Hing Chan, the Malaysian entrepreneur who ran the Shopify dropshipping store Subtle Asian Treats.
And consider offering discounts on multiple items to compete with low-cost sellers. For example, Tze had an average order value of $15-20, and he wanted to increase it. He offered a bundle deal where customers could get three slightly different toys for the price of two. Tze also provides free delivery, which is a huge plus—as mentioned earlier, 53% of online shoppers cited free shipping as the leading reason for their purchases.
The result was a success. In just two months, Tze made $100,000 in revenue. He spent $31,000 on advertising and $48,000 on goods and shipping, ending with around $19,000 in profits.
In addition to the bundle, Tze wanted to utilize every customer who visited his site, as he had spent a lot on ads to drive traffic.
He wanted to ensure his site visitors would buy as much as possible. He answered all customer messages and emails within half a day to ensure that customers never felt like they were dealing with automated bots or a fraudulent website. He was also engaged with customers through social media platforms and replied to all comments.
As a result, he was able to connect with influencers and build relationships that helped increase brand recognition.
Even though his competitor copied almost all his strategies, the bundle deal was the one thing they overlooked—which was a missed opportunity on their part. Incentives such as deals and coupons can take you a long way.
2. Use Transparency to Build Trust With Potential Customers
Tze worked hard to build trust with his customers by being upfront—letting them know what to expect throughout the buying process. He makes it easy for shoppers to find shipping times and return and refund policies on his website. He even includes where his products are coming from, as he believes it helps keep refunds to a minimum.
3. Set Up Your Ecommerce Site for Success
Your website is the bridge between losing potential sales and earning new customers. The following key elements on your site will help you save tons and earn more.
- Improve your site’s speed and performance
- Make your eCommerce site easy to navigate
- Give your visitors the option to check out as a guest
- Add exit-intent popups to your site to reduce the number of abandoned carts.
- Be clear and transparent about your policies
- Offer free shipping and incentives
- Use live chat to reduce cart abandonment
- Offer multiple methods of payments
- Configure your store’s email settings to send you an alert when a customer abandons their cart.
- Use abandoned cart emails to re-engage potential customers.
Now that we’ve covered that shopping cart abandonment is a widespread problem for e-commerce stores. Keep your business profitable and boost your revenues with these tips to combat shopping cart abandonment.