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Out of Stocks affecting retail on and offline

Out of Stocks affecting retail on and offline

We’ve all been there; we’re in a store or shopping online and the item we want is not available. “Out of Stock” is not something any shopper wants to see because it forces us to either choose an alternative that in our eyes is potentially inferior because it’s not what we wanted in the first place, or it forces us to simply go without.

Shoppers who experience empty shelves more often than not with any given retailer will quickly start taking their business elsewhere. This is true whether you’re talking about baby powder or high-end luxury items.

Out of stocks have been a concern for retailers for decades and now it includes both online retail and bricks and mortar stores. What’s interesting is, varying studies say that when people can’t find what they want in a traditional store, they will go to an online source. However, online retailers have to deal with people going to a brick and mortar store if they can’t find what they want online. One would think those two scenarios would cancel each other out, but the truth is, both online and traditional retailers are losing money.

Online Availability issues rising

A recent study by the Grocery Manufacturing Association published in July looked at the online availability of six essential, non-food categories including baby care, fabric care, hair care, oral care, skin care, and shave care products at retailers in China, France, Germany, Japan, United Kingdom and the United States. Researchers found that physical stores had an overall out-of-stock rate of 8.3%, while at digital retailers it was 15%.

How do the shoppers respond when they run into their favorite product not being available online? According to the study, U.S. digital shoppers switched sellers 15% of the time, 60% purchased a substitute from the original digital retailer. An estimated 10% abandoned their digital purchase plans and went to a physical store instead, and 15% delayed or canceled their purchase.

What does that mean in dollars and cents?

“To extrapolate to the industry level, the Global Top 100 publicly listed consumer goods manufacturers had sales of $1.7 trillion (wholesale) in 2016,” according to the GMA report. “If 5% of sales is online and what is available online is 80%, then online sales are $85 billion industrywide, and the online lost sales opportunity is $17 billion.”Granted, many people who couldn’t find these items simply went to a brick and mortar store to make their purchase so in many cases, there was a shift of purchasing and not necessarily a lost sale for a retailer. However, shoppers not being able to choose where and how they get their goods creates a perceived negative customer service experience from the retailer and it takes money from the online provider such as Amazon.

Traditional store out of stocks rising

The finite amount of space in a physical store makes stocking and overall inventory management even more vital. On one hand, there is less space so fewer SKUs can be available as opposed to online retail. But the limited space also makes those empty slots on the shelves even more noticeable. Now that retailers are competing against online sources, they must be even more vigilant to make sure their customers have a positive experience while in the store.

It seems that out of stocks in traditional retail continues to be a problem.

“Retailers are missing out on nearly $1 trillion in sales because they don’t have on hand what customers want to buy in their stores, according to a study of about 600 households and several retailers conducted last month by IHL Group,” a recent summary of that report in Retail Dive said.

The study indicated that customers often decide to find their items online (usually Amazon) when what they want is not at their local store. Ironically, the study also says that retailers are increasingly causing their own out of stock problems when they attempt omnichannel services such as click and collect. This means they are taking items from their shelves to serve people who ordered online.

Customers report many reasons to go to a store rather than online to meet their needs: They want or need something immediately, want to see or try something in person, want to avoid delivery charges or support their local stores, or they just find it easier to shop in person, according to Retail Dive.

“But, too often, physical retailers are losing the sale. Amazon Prime members, facing empty shelves, are 52% more likely than other consumers to take out their phones and buy what they need online,” according to the study.

Actually, researchers estimated that “upwards of 24% of Amazon’s current retail revenue comes from customers who first tried to buy the product in-store.” In all, some $36.3 billion is lost to brick-and-mortar competition and another $34.8 billion is lost to Amazon or another e-retailer, according to IHL. Sometimes shoppers just give up on the purchase, and that costs retailers another $26 billion.

What to do about it?

We have several suggestions on how to battle the rising out of stocks problems faced by retailers of all mediums.

Examine your omnichannel network

Do you offer both online and in-person purchasing? Is one taking inventory from the other? Examine your processes and determine where the lack of inventory control is happening. Are you not ordering enough? Not on time? With customers having even more access to your goods, it might be time to start adjusting your ordering numbers as well as your procedures for getting items on the shelf.

Have real data

We use electronic data for our warehousing and logistics customers and it’s made all the difference. Having accurate, updated, and complete data will make or break you as a retailer. If you don’t know what’s in your back room, in your warehouse on the way to you, and on order to arrive soon, you will suffer out of stocks more often than not.

Data is also important when knowing what to order. You can no longer “by feel” when ordering products for your customers. Use year-to-year and even week-to-week data to determine where you need to adjust your inventory ordering.

Use local providers when possible

Shameless plug, right? It’s true. By using local and regional warehousing and providers, you can restock your shelves much quicker in traditional stores and can get items to your online customers much faster.

Do you have a retail location in Northwest Arkansas, Tulsa, Little Rock or surrounding areas? Are you using a local warehousing and delivery company to improve the customer experience? Use of technology partnered with local resources can help prevent the dreaded out of stock situation. We’d love to talk with you about our services!

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