Very few shoppers who visit stores in person abandon their shopping carts during the checkout process. Once someone steps into line to work with a cashier or manage the self-checkout station, that prospect is committed to becoming a customer because the items that meet their needs are in their possession.
Online shopping is a different experience. When people add items to a virtual shopping cart or bag, they don’t have physical possession of the product. That means the commitment levels aren’t the same during the transaction process, making it easier to abandon the transaction when distractions occur or a better deal gets found.
The cart abandonment rate measures the number of checkout processes that start, but then never get completed. When this metric is high, the online retailer can review its internal functions and user experiences to determine what could be holding shoppers back from becoming customers. The most common reasons people leave before completing a purchase are forgotten passwords, hidden prices, and a lengthy or challenging registration process.
The shopping cart abandonment rate is a metric that reviews the percentage of online shoppers who add an item to a cart or bag without buying those items. It reflects the status of interested parties who leave before completing a transaction compared to the total number of created virtual shopping carts or bags over a specific time. This information allows retailers to understand consumer behaviors associated with indications that might be limiting revenue acquirement.
Cart Abandonment Rate = (1 - ( # of completed purchases / # of carts created)) * 100
The easiest way to calculate the cart abandonment rate Is to divide the number of complete purchases into the total amount of created virtual carts. Once you have that number, subtract it from 1 and then multiply it by 100. If you had 90 completed purchases with 400 total checkout processes, the equation would look like this: (1 - (90 / 400)) x 100 = 77.5%.
The cart abandonment rate is crucial for the modern online retailer because it helps them understand how visitors and shoppers behave. Some companies use it as a metric to determine the trustworthiness, simplicity, or intuitive design of a checkout process. Going one step further, it can also be tested against checkout speed. The faster, less-distracting the checkout experience, the lower the cart abandonment rate will likely be.
Although this metric is useful when taken within context, a site with few sales or visitors won’t offer meaningful data about the user experience.
Customer Lifetime Value (CLV) represents the total funds a consumer spends at a business for products and services without any specific time measurements restricting the data.
Stock Keeping Units, or SKUs, are alphanumeric codes that retailers assign to track products. The information helps them identify specific inventory items, measure sales, and promote more efficient shopping experiences.
Average Order Value (AOV) refers to the median total of every order a merchant receives during a defined period.