Basket abandonment. It’s a headache for online retailers and top of the to-do list for many digital marketers
Thursday August 22nd 2019
Refer rates and basket abandonments: how do yours stack up?
Basket abandonment. It's a headache for online retailers and top of the to-do list for many digital marketers.
You have already gone through so much of the hard work: getting your product in front of the right shopper at the right time; making the product appealing enough that said shopper actually adds it to their basket; potentially collecting some of their financial or delivery details; and then -no payoff.
Estimates for average basket abandonment rates in online retail vary between around 60% and upwards of 80%, with 2018 analysis by SaleCycle coming in at 75.6%. That means that around three quarters of online shoppers who go to the effort of placing an item in their baskets never actually go through with the purchase.
It also means that online retailers who can even marginally improve their basket abandonment rate have a massive opportunity to increase revenues.
Reasons for basket abandonment
According to ongoing research by the Baymard Institute, the top reasons for abandonment during checkout include: overly high additional costs for shipping, tax, fees and so on, cited by 55% of respondents; the site requiring the shopper to create an account (34%) and an overly long or complicated checkout process (26%).
Cost and complication, then, has a substantial impact on whether an online shopper actually goes through with a purchase - and both factors are combined when it comes to refer rates for point of sale (POS) finance.
The role of the refer rate
Refer rates indicate what proportion of online shoppers applying for finance at the point of sale - whether a 0% finance agreement, finance with interest, a 'buy now pay later' model or a bullet lane - do not receive a decision automatically. Instead, their application is forwarded for manual checking, and they are kept waiting.
Clearly, this adds time and complication to the online checkout process - and potentially cost too, if the customer is not ultimately approved for the finance they wanted. And as we have just seen, cost and complexity rapidly lead to basket abandonment, and reduced sales and revenue for the retailer.
The upshot is that retailers that have (rightly) tried to offer their customers flexibility when it comes to payment, by introducing POS finance, can end up shooting themselves in the foot if that finance solution provider has a high refer rate. And many do - a refer rate of 30% is not uncommon.
The situation is exacerbated even further if a customer is referred for manual checking at the weekend, because they will usually have to wait until Monday to be reviewed. In the case of time-sensitive or urgent purchases, this could cause serious friction between the customer and the retailer.
Duologi: working to a minimal refer rate
This is why at Duologi we have worked hard to achieve and maintain refer rates of less than 1% - meaning that over 99% of customers who apply for POS finance with Duologi at the checkout will get an instant, automatic response. Furthermore, we have worked to reduce complexity at the checkout by creating an application form which takes shoppers under three minutes to complete.
This is arguably one of the most important aspects of choosing a finance provider; particularly for pure-play digital brands that operate on the power of their online presence alone. If you can't get the right customer to your site, and if that customer can't seamlessly navigate through your purchase journey, then providing them with tempting offers or low interest rates is almost pointless.
High refer rates can be an unexpected sting in the tail for retailers setting up an online POS finance solution. Look for the lowest rates possible to decrease basket abandonment.
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