Abandoned Carts Are an Opportunity

Abandoned cart recovery can be a goldmine for ecommerce marketers, but not how one might think.

In 2024, ecommerce shopping cart abandonment rates among U.S. adults hover around 70%, according to the Baymard Institute. It’s a big opportunity.

Baymard suggests focusing on design, noting that “if we focus only on checkout usability issues which we…have documented to be solvable, the average large-sized ecommerce site can gain a 35% increase in conversion rate though better checkout design.”

For the overall U.S. and E.U. ecommerce industry, that 35% increase is about $260 billion in additional revenue.

Beyond Design

The problem is that usability and design haven’t solved abandonment thus far. Ecommerce cart abandonment rates have been essentially flat since 2018 and have risen since 2006.

Ecommerce managers have been unable to solve the shopping cart abandonment problem, or the rate does not have the impact on sales we think it might.

What if shopping cart abandonment is normal for ecommerce, and the real opportunity rests in treating folks who abandon carts like warm leads instead of lost opportunities?

That does not mean that online merchants should ignore design or conversion optimization; rather, it implies an opportunity to market to shoppers who didn’t complete the checkout process.

Cart Recovery Email

A cart abandonment email sequence is perhaps the most popular and effective way to recover the sale. Ecommerce platforms such as Shopify and BigCommerce include those emails as default features.

Familiarity, however, may be a problem. It may be too easy to turn on the feature without optimizing it. A better practice could be identifying the shopper as early as possible and creating an automated behavior-based email to convert.

The steps could be:

• Capture the shopper’s email address as soon as possible,
• Understand when to send the first cart recovery email message,
• Know how many messages the series should include,
• Optimize and personalize the message content.

Merchants should test and optimize each step for their audience and setup. For example, some marketers send the first recovery email 90 minutes after the abandonment, but others prefer 30 minutes or less.

Retargeting Ads

Another recovery tactic is to retarget cart abandoners with advertising. Retargeting ads should complement the abandonment email series. When the series begins, it should add the shopper to a retargeting campaign. This requires automation to launch a retargeting campaign and then turn it off.

The campaign should run on Google and Meta and in programmatic email via services such as LiveIntent. The goal is to remind shoppers of the abandoned items.

As always, testing and iterating is the key to remarketing success.

Text Messages

After email, the most powerful ecommerce communication tool is text messaging. Text messages are now the preferred transactional communication channel for many shoppers.

A typical online buyer prefers text-based order and shipping notifications. Marketers can use that affinity to remind shoppers via text about abandoned items. Make the message as transactional as possible and avoid repeated messages.

Better Recovery

Since 2006, ecommerce cart abandonment rates have risen from about 59% to 70%, peaking at almost 72% in 2012 with the rise of smartphones before leveling off.

Yet cart abandonment is an opportunity. Without neglecting design, merchants can improve their recovery efforts with coordinated email, retargeting ads, and text messages.

AI Tools for Ideal Customer Profiles

An “ideal customer profile” describes a company’s most valuable prospects, those who find a product or service seemingly perfect for their needs.

Ideal customer profiles help merchants:

• Select marketing channels,
• Create ad copy and design,
• Narrow outreach,
• Build email sequences,
• Produce how-to, problem-solving videos.

AI platforms have vast databases of businesses and their audiences, helpful for defining an ideal customer. I tested three platforms for this article.

Custom GPT: ICP Generator

“ICP – Ideal Customer Profile Generator,” a custom GPT (available for ChatGPT Plus subscribers), creates profiles based on a URL. I tested it on Smarty Marketing, the site I launched last year. The results were useful, although lacking specifics. My company’s ideal customers per the custom GPT are:

• In the growth phase: Companies aiming to expand their online presence, increase website traffic, and enhance brand visibility.

• Digital forward: Businesses that understand and value digital marketing’s impact on growth and are ready to invest in innovative SEO strategies.

• In competitive markets: Enterprises in industries where online competition is fierce, making them more likely to benefit from unique and effective SEO and link-building strategies.

• Content creators: Organizations that produce valuable content and can leverage infographic marketing and social media to engage and expand their audience.

• Seeking long-term results: Businesses focused on building lasting brand awareness and not just short-term gains, aligning with Smarty Marketing’s emphasis on long-term outcomes.

I could continue prompting the custom GPT for the best keywords in organic and paid search campaigns, the best social media platforms, helpful Facebook audience targeting, and so on.

Lemlist

Lemlist builds free ideal customer profiles based on a URL. The profiles are personas with names, demographic details, goals and objectives, and their potential outreach strategies. The reports are useful for ideas and brainstorming. The most helpful sections are:

• An ideal customer’s responsibilities and pain points,
• The ideal customer’s most effective marketing channels (“touchpoints”),
• Risks to ideal customers of not achieving goals.

Lemlist builds free ideal customer profiles based on a URL — with names, demographic details, goals and objectives, and potential outreach strategies. Click image to enlarge.

For example, Lemlist identified my company’s ideal customer as a marketing director (spot-on) with these pain points:

Struggling with understanding organic search strategies, underperforming marketing campaigns, and lack of unique digital content.

And the risks to my ideal customers of not solving problems are:

Continued decrease in online visibility, inability to compete with competitors’ online presence, loss of potential leads and sales.

M1-Project

M1 Project offers various AI-powered marketing tools, including generators for an ideal customer profile and a marketing strategy. Input your URL and M1 Project will:

• Create a product description,
• List the problems your products solve,
• Segment your target audience.

Edit the descriptions, problems, and segments to your business. Then choose your preferred segment, and the tool will create an ideal customer profile. The downloadable document costs $99 and includes the ideal customer’s:

• Position, income, and pain points,
• Tools or platforms (potential partners for your business),
• Publications,
• Channels frequented,
• Followed social media accounts.

Online Shoppers Expect More from Sellers

Ecommerce sellers may be delivering a sub-par shopping experience and not even know it, according to a survey of 1,000 American consumers.

The survey from Deloitte Digital in October 2023 is a good reminder of the longstanding gap in how merchants and shoppers perceive the ecommerce experience.

Online merchants often overestimate customers’ admiration of shopping experiences.

Perception Gap

If the Deloitte Digital survey is accurate, about 80% of brands selling online “believe consumers are impressed by the online shopping experiences they provide. Yet fewer than half of consumers actually are.”

While that may seem shocking, it is not new.

One could argue that there has always been a gap between the perceptions of business leaders and their customers.

For example, a September 2015 Gartner article stated, “Employees are still seeing a vast gulf between the design and usability of the software they use outside work and the software they use in the workplace.”

The article noted that user-friendly consumer software had set new expectations among employees in the workspace.

Accounting and inventory management software are examples. Makers of that software thought the user experience was good; customers (employees) frequently did not.

Scholars and executives have long sought frameworks to identify the gap. Examples include W.E. Deming’s principles of Total Quality Management in Japan during the 1950s, SERVQUAL (assessing “SERVice” and “QUALity”), Six Sigma, and Net Promoter Score.

Why a Gap?

Having acknowledged the perception gap, we can wonder why.

The likely answer is that customer expectations quickly change. L.L.Bean and Amazon reset expectations when they pioneered free shipping. Soon, free shipping was not enough. It also needed to be fast. Then “fast shipping” evolved from five days to two days to one day, and now even the same day in some locations.

Online merchants — or really ecommerce platform developers — that improve the shopping experience set a new standard for their customers, thus the perception gap.

Take Action

The fact that shoppers always seek a better ecommerce experience should spur businesses to action for two reasons.

First, the gap could widen. Ecommerce sellers and platforms that do not meet shoppers’ expectations risk revenue losses or worse.

Second, closing the perception gap is a competitive opportunity. The Deloitte Digital survey found that “customers spend 37% more with brands they find deliver consistent and positive commerce experiences.”

Hence online sellers should regularly measure shoppers’ perceptions and update features accordingly.

Focus on Fundamentals

Taking action, however, does not mean chasing fads. Focus first on the essentials.

The Deloitte Digital survey identified four key ecommerce features where a perception gap exists, suggesting a selling opportunity.

For each of the four “gap” features, Deloitte reported the percentages of ecommerce businesses that believed shoppers were impressed versus the shoppers who agreed.

Sellers should research why they overestimate the shopper’s favorable views.

Take “Accurate Search and Discovery,” which had the smallest perception gap in the survey.

A July 2022 report from the Baymard Institute, a customer-experience research firm, noted that 42% of the 133 “major” ecommerce stores it reviewed had site search issues, such as allowing shoppers to search by product type, i.e., a couch versus a chair.

So even a small perception gap creates opportunities to improve.

Profit Boosters from Repeat Buyers

Businesses love new customers, but repeat buyers generate more revenue and cost less to service.

Customers need a reason to return. It could involve inspired marketing, outstanding service, or superior product quality. Regardless, the long-term viability of most ecommerce shops requires folks who purchase more than once.

Here’s why.

Higher Lifetime Value

A repeat customer has a higher lifetime value than one who makes a single purchase.

Say the average order for an online shop is $75. A shopper who buys once and never returns generates $75 versus $225 for a three-time buyer.

Now say the online shop has 100 customers per quarter at $75 per transaction. If just 10 shoppers buy a second time at, again, $75, total revenue is $8,250, or $82.50 each. If 20 shoppers return, revenue is $9,000, or $90 each on average.

Repeat customers are really happy.

Better Advertising

Return on advertising spend — ROAS — measures a campaign’s effectiveness. To calculate, divide the revenue generated from the ads by the cost. This measure is often shown as a ratio, such as 4:1.

A shop generating $4 in sales for every ad dollar has a 4:1 ROAS. Thus a business with a $75 customer lifetime value aiming for a 4:1 ROAS could invest $18.75 in advertising to get a single sale.

But $18.75 would drive few customers if competitors spend $21.

That’s when shopper retention and CLV come in. If the store could get 15% of its customers to buy a second time at $75 per purchase, CLV would increase from $75 to $86. An average CLV of $86 with a 4:1 ROAS target means the shop can invest $22 to acquire a customer. The shop is now competitive in an industry with an average acquisition cost of $21, and it can keep new customers rolling in.

Lower CAC

Customer acquisition cost stems from several factors. Competition is one. Ad quality and the channel matter, too.

A new business typically depends on established ad platforms such as Meta, Google, Pinterest, X, and TikTok. The business bids on placements and pays the going rate. Lowering CACs on these platforms requires above-average conversion rates from, say, excellent ad creative or on-site checkout flows.

The scenario differs for a merchant with loyal and presumably engaged customers. These businesses have other options to drive revenue, such as word-of-mouth, social proof, events, and contest marketing. All could have significantly lower CACs.

Reduced Customer Service

Repeat shoppers usually have fewer queries and service interactions. Folks who have purchased a t-shirt are confident about fit, quality, and washing instructions, for example.

These repeat buyers are less likely to return an item — or chat, email, or call a customer service department.

Higher Revenue

Imagine three ecommerce businesses. Each acquires 100 customers per month at $75 per average order. But each has a different customer retention rate.

Shop A retains 10% of its customers each month — 100 total customers in month one and 110 in month two. Shops B and C have a 15% and 20% monthly retention rates, respectively.

Twelve months out, Shop A will have $21,398.38 in sales from 285 shoppers —100 are new and 185 are repeat.

In contrast, Shop B will have 465 shoppers in month 12 —100 new and 365 repeat — for $34,892.94 in sales.

Shop C is the big winner. Retaining 20% of its customers monthly would result in 743 customers in a year and $55,725.63 in sales.

To be sure, retaining 20% of new shoppers is an ambitious goal. Nonetheless, the example shows the compound effects of customer retention on revenue.

Omnichannel Retail Will Accelerate in 2024

Retail prognosticators have long predicted the convergence of physical and online selling. From the first book sold on Amazon in 1995, there has been a slow blurring of the lines, so to speak, towards multichannel and omnichannel.

Occasionally the change has been abrupt. The pandemic drove demand for buy-online, pick-up in-store services. That triggered the rapid development of software connecting online ordering with brick-and-mortar locations. Post covid, the demand has waned, yet the infrastructure and software remain, representing an omnichannel leap.

Here’s why omnichannel retailing will accelerate in 2024.

Customer Experience

In 2024, the first significant merging of ecommerce and physical retail could be immersive customer experiences.

Augmented reality fitting rooms, interactive displays, and in-store robots are now live in real shopping applications, explained Aron Bohlig, a managing partner at ComCap, an investment bank, in an email.

Augmented reality allows shoppers to virtually try on shoes.

The AR or virtual fitting room market could reach $3.17 billion worldwide in 2024, on its way to more than $6 billion by 2027, according to Business Future Analysis, an India-based research firm, in a LinkedIn post.

The investment in virtual fitting rooms is based on at least some initial success. A Shopify Plus case study with the fashion brand Rebecca Minkoff reported that shoppers were “65 percent more likely to place an order after interacting with a product in AR.”

Pop-ups and Partnerships

ComCap’s Bohlig also noted that online brands are experimenting with physical locations, including pop-up shops, experiential events, and partnerships with brick-and-mortar stores.

According to Bohlig, online-first brands want to cultivate direct customer relationships and gather immediate feedback.

Notable examples include:

• eBay’s “The ’85 Shop” retail pop-up store in Chicago,
• Shein pop-ups in Los Angeles, Toronto, and Birmingham, U.K.,
• BarkShop’s live pop-up shop in Manhattan’s SoHo district.

Consumer Outlook

U.S. and global inflation has declined, and consumer confidence has risen since mid-2023.

Nonetheless, some 12.6% of Americans surveyed in December 2023 expected their incomes to decrease in the short term, according to a report from The Conference Board, a nonprofit business think tank, while 18.7%  expect their incomes to increase, up from 17.7% in November.

Hence the U.S. consumer economic outlook is mixed. And consumers’ views of the economy will influence everything from inventory management and pricing strategies to technology investments.

Walmart, for example, will reportedly close as many as 150 underperforming physical locations in 2024, potentially shifting resources toward ecommerce. Walmart’s online sales grew from $25.1 billion in 2019 to $82.1 billion in 2023.

When physical retailers prioritize ecommerce, and vice versa, they can allocate resources for maximum profits.

Shopper Behavior

More than half of American shoppers (54%) use search engines to research purchase decisions, according to an April 2023 survey from eMarketer. And 43% search the Amazon marketplace and other retailers’ websites for products.

The same eMarketer report projects ecommerce to represent 20.6% of total U.S. retail sales by 2027.

Bottom line, most shopping journeys start online now and even more moving forward. Expect physical retailers to hasten online experiences in 2024.

Organizational Structure

A final milestone on the path toward omnichannel selling is the organizational structure of retail businesses.

A decade ago, most ecommerce functions at large retailers were nestled in the information technology or marketing departments. Managers of in-store operations reported to different executives than their ecommerce counterparts.

Those siloes have changed.

Ecommerce and brick-and-mortar managers now typically report to the same retail operations execs. This leads to daily collaborations and a unified sales channel — true omnichannel retailing.