Reversing the Negative Consequences of Out-of-Stock Situations in Trading

Reversing the Negative Consequences of Out-of-Stock Situations in Trading

Gaps in shelves, or “out-of-stocks,” are still one of the biggest problems in retail. Surprisingly, many out-of-stock scenarios can be easily avoided, as 25% are the result of a product simply not being brought from a warehouse to the shelf. As trivial as a blank space on a shelf might seem, it’s important to remember that if your product isn’t there, no one can buy it.

So how do consumers react to shelf gaps?

In most cases, they buy something else. In fact, a recent global study of out-of-stocks found that almost half of the consumers buy another product from the same brand or buy a product from a different brand. Customers postpone their purchase only 17% of the time, while 11% of consumers cancel their purchase and 32% buy the desired product in another store.

Out of Stock Responses

Studies show that because of the higher risk of making a bad buy with an unknown substitute, customers often resort to a cheaper substitution product if they can’t buy their desired product. Overall, out-of-stocks lead to considerable sales losses, both for retailers and manufacturers.

To see the lost revenue, or “lost opportunity,” multiply the annual revenue of a product by the percentage of the out-of-stock level. These calculations illustrate the considerable loss of just a few out-of-stocks.

For example, the snacks/apero category generated sales of approximately CHF 416 million in the Swiss food trade in 2019. If the average out-of-stock share is just 2%, the category would lose sales of approximately CHF 8.3 million. In a situation like this, even the most elaborate or creative any and all marketing campaigns—regardless of creative degree—are executed in vain if the customer is ultimately unable to buy what they want, when they want and in the desired quantity at the desired place.

Many measures are conceivable to efficiently reduce high out-of-stock levels. First and foremost, store management and employees should monitor stock levels on the floor and replenish items as needed. They are the ones who are primarily responsible for making products available on the shelf. With higher in-store diligence, retailers can do a better job of improving at least the out-of-stock situations resulting from products being available in the warehouse but not at the shelf. This will not only lead to an increase in sales; it will also lead to higher customer satisfaction.