The one constant between eCommerce channels and brick and mortar stores is the critical importance of inventory stock availability. Consumer response to stockouts varies but will generally have a negative impact on your business or brand.
For retailers, stockouts lower the impact of promotions and can increase operational costs through the provision of ‘rain checks’, time spent searching for inventory stock in the warehouse or storeroom and through unplanned restocking activities.
Consumer response to stockouts
For consumers, it can be very inconvenient and frustrating to walk into a store or shop online only to find the item they are looking to purchase is out of stock. The impact of a stockout can extend well beyond the direct sales loss of a single item. Future sales, brand image and forward planning efforts are all affected.
Common consumer response to stockouts include:
- Switching stores or eCommerce platforms to buy the same item from another retailer, they may even switch brands entirely
- When a product has been heavily advertised or promoted, consumers encountering a stockout can feel let down or even baited, which is detrimental to both the store and the brand image
- If they are loyal to the brand, customers might substitute a different size or variety of the same product
- A particularly loyal customer not in dire need will possibly wait to buy the item later when it is back in stock
- In some instances, customers may even choose not to purchase the item anywhere
- eCommerce customers encountering an out-of-stock item before or even after they have added items to their cart may abandon the site altogether, including ditching other items already in the cart
- Customers given a reasonable delivery date are likely to be more tolerant. However, failure to meet the promised delivery date will increase customer dissatisfaction, potentially losing them permanently
For these customers and any customer affected by a stockout, there are some actions retailers can take to help maintain customer satisfaction.
Managing the consumer response to stockouts
One sure fire way to increase consumer dissatisfaction is to not make stockouts immediately visible. Therefore, an ‘out-of-stock notification’ should be visible to the customer on the product page and not presented only at checkout.
The first step to lessening the negative consumer response to stockouts is to suggest a replacement item or to recommend an alternative product. eCommerce retailers can seek to personalise recommendations based on information they have corresponding to the customers’ profile and previous purchase history.
If the recommended replacement product is slightly more expensive, consider offering a discount for that product to avoid alienating the customer. Alternatively, with the right inventory management tools, multichannel retailers can see in real time product availability at all locations and can transfer the product from a branch to fulfil online purchases.
Other ways retailers can positively influence the consumer response to stockouts is to place an emergency order with the supplier or purchase inventory stock from an alternate supplier. They can also record the customer’s contact details and provide a way for them to be notified when stock will be available.
Offering email notifications to your customers to advise them when an item is back in stock also provides you with a great tool for obtaining potential customer’s details even before they become customers. Managed in the right way, stockouts can be turned into a great opportunity to capture a visitor’s email.
Technology is your best line of defence against stockout incidences, making it easier to now monitor and correct stock shortages before they disrupt your business. To avoid stockouts, companies should:
- Implement software solutions to improve demand forecasting using data from past sales, inventory turns, promotional activities and seasonality to reduce the risk of stockouts
- An efficient inventory control system will track how much inventory stock you have on hand, assist in determining par levels and forecast how long your stock will last based on current sales activity. Maintaining par levels will shield against the negative effect on customer service
- Product reordering should be undertaken when there is still enough inventory on hand to satisfy customer demand during the anticipated supplier lead time
- Investing in the right inventory management tools helps to drastically reduce the negative impact of stockouts and ensure your customer’s expectations are being met
Integrating databases throughout the supply chain will vastly improve operational control and identify inventory situations at all sites. Providing retailers with the real-time status on backorders and pipeline inventory to maintain customer confidence and increased, not lose sales or customers.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.