Solving The Out-of-Stock Conundrum
The great out-of-stock (OOS) conundrum is continuously debated over, and regardless if you’re a retailer, supplier or distributor it’s time for the industry to come together and create a solution. OOS have been hurting the industry for decades and it’s time suppliers and retailers unite and solve this logistical nightmare and restore shopper loyalty. Currently, some reports depict the average out-of-stock rate at a supermarket ranges from 10-30%, with promoted items exceeding 25%. Annually, this can result up to a 30% revenue loss. In a consumer-driven marketplace, product availability is one of the top 3 reasons determining where consumers shop. Unfortunately, when 1 out of every 10 items on their shopping list is unavailable, customers become unhappy and start making changes, fast. Data from the Grocery Manufacturers of American (GMA) and the Food Marketing Institute (FMI) Trading Partner Alliance details a “three strikes and you’re out pattern,” detailed below:
Strike 1: The average shopper will substitute a different item 70% of the time.
Strike 2: The shopper is now equally likely to substitute a different item, make no purchase at all or go to a different store.
Strike 3: You’re out. There is now a 70% chance the shopper will go to a completely different store.
Who’s Losing Out the Most?
In the beginning, the brand experiences a loss of revenue from the Out-Of-Stock item. Towards the end, the retailer experiences the loss as the customer switches stores entirely. OOS are harmful to both the brand and the store’s reputation. Not only will revenue be lost from the item, but there is an even greater loss of future revenue from lost brand or store loyalty. To eliminate this problem, both parties must work together to reduce and ultimately eliminate the amount of out-of-stocks that occur. Brands and retailers will benefit significantly by improving their on-shelf availability.
So what are the next steps to solving this conundrum? Retailers and suppliers first need to define what exactly an out-of-stock consists of and how to properly measure it. Once the industry agrees upon a universal definition and system of measurement, then the real work can begin.
More to come…
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