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October 10, 2024
Should Online Shoppers Be Alerted to High-Stock Delivery Windows?
According to new research, providing online customers with information about high-stock delivery windows can reduce stockouts and increase customer spending.
As profiled in the Harvard Business Review, two professors of business analytics at the Carroll School of Management at Boston College and a staff data scientist at Instacart conducted an experiment that enabled some Instacart customers to receive supplemental information on which delivery windows were associated with higher inventory levels, or delivery times when there’s an optimal likelihood that products are available.
The researchers cited a survey from Netscribes, which found product unavailability ranking among the top three pain points to online grocery shopping, cited by 63% of consumers, only slightly exceeded by quality assurance at 66% and delivery charges at 73%. A survey from Lucidworks also found online grocery shoppers frustrated with the substitution process when out-of-stocks occur.
Under the experiment, when customers in the treatment group checked out, they received notifications stating “Higher stock in stores at this time” for delivery windows between 10 a.m. and 3 p.m. The researchers noted that these delivery windows correlate with higher stock levels because most stores replenish their shelves early in the morning or overnight to avoid disrupting shoppers.
The findings from the experiment included:
- Messages about high stock levels led to a 9.8% increase in the likelihood of customers choosing a high-stock delivery window for their orders.
- Shoppers who had experienced a greater number of stockouts prior to the experiment were more likely to choose a high-stock delivery window because they had higher concerns about stockouts.
- Shoppers with larger orders were more likely to choose a high-stock delivery window “because they have more to lose if their order isn’t fully fulfilled.”
- Shoppers with more flexibility when scheduling their orders were more likely to choose a high-stock delivery window under the rationale that shoppers with less flexibility are often limited in their choice of available delivery windows.
The treatment group saw a 2.7% decrease in the proportion of items replaced and a 2.2% decrease in the proportion of items refunded, as expected considering that replacements and refunds are the typical responses to stockouts.
The researchers wrote, “This means that the policy of disclosing high-stock delivery windows might protect a customer from a bad experience and improve the reliability of the service, while also reducing the costs to Instacart that result from refunds and replacements.”
The drawbacks of alerting shoppers of high-stock delivery windows, according to the researchers, included that shoppers exposed to this information spent 15% more time going through the checkout process, which makes online grocery shopping more time-consuming.
Telling customers about high-stock delivery windows can also frustrate them if they happen to be unavailable to receive a delivery at that time. These customers may increasingly perceive that stockouts are a more regular occurrence.
Exploring the tradeoffs, the researchers found that from a revenue standpoint, a 4.6% relative increase in the average daily spend was seen among customers who received this high stock information over the course of a month. Customers were seen making larger orders as a hedge against future stockout risk by adding more substitutes to their carts. They were also found to be more open to “try new things,” which researchers felt could potentially be “driven by customers’ search for reliability” in avoiding stockouts.
The researchers concluded, “Our study demonstrates how giving shoppers a small bit of extra information can help them avoid an annoying experience and lead them to buy more. For buyers and sellers alike, this is a win-win proposition.”
A Grocery Manufacturers Association (GMA) study from 2018 found the out-of-stock rate online in the U.S. was 15% at the time, nearly double the 8.3% for physical stores.
Discussion Questions
Do you see more pros than cons in alerting online grocery shoppers to optimal delivery windows to avoid out-of-stocks?
Are there better methods you see helping reduce frustrations around online grocery out-of-stocks and the substitution process?
Poll
Loading …BrainTrust
Perry Kramer
Managing Partner, Retail Consulting Partners
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
Mark Self
President and CEO, Vector Textiles
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Interesting, but this seems like over-complication to me. It’s providing the consumer with more information to digest and process without actually giving them any detail as to what’s in stock or not. Rather than doing this, retailers really need to be solving out-of-stock issues. If they know there are times of peak demand, then they should respond to that with adequate supply or by giving customers tools to manage substitutions effectively. Of course, all of this is a particular problem for Instacart – where this was trialed – because it picks from the physical stores of other retailers, so it doesn’t control supply. Traditional retailers have more control over picking and fulfillment methods and stock levels.
In this use case the more transparency the better. For everyone-consumers, brands and retailers. I see no downside here.
I think the future of retail will include brands showing real-time inventory quantities through their app for a shopper’s local store and the product they’re eyeing. In the meantime, this more vague approach could be a nice addition for sure.
Yesterday I noted (what I thought was) RW’s first post written in code; today, I think we have another: providing online customers with information about high-stock delivery windows can reduce stockouts …I mean WTH is this even saying ?? After reading the article, I deduced it has to do with snycing demand and supply, but the problem remains: life is supposed to get simpler, not more complicated (a message that has been lost on companies that package their goods so tightly that “opening instructions” now seem mandated); asking someone to alter their routine to make the supplier’s
lifejob easier – and in the end I think that’s what we’re asking – is not a good thing. Voter votes “no”.I completely agree. This goes into the same bucket as the conversation on Wall Street the other day: an inability to write in plain English and to explain things clearly!
Solid Observation. Informing customers of high stock time windows for certain merchandise is a great opportunity to add another benefit to customers who are “reward or Loyalty” members. Retailers are always looking for additional incentives to have consumers become loyalty members. It is similar to allowing the top tiers of customers pick premier pick up times.
Retailers don’t need to complicate the purchasing experience for consumers with optimal delivery windows to avoid out-of-stocks. A much better approach is to resolve inventory problems to avoid out of stocks, and we certainly have the information and technology do to exactly that, every day of the year.
I question how useful this feature is. In addition to the pros and cons stated in the study, this information may qualify for information overload for many shoppers.
• Displaying on-hand inventory has its place in some retail formats and product categories, but not in all.
• Automatic substitution of items without the consumer’s permission is not smart business. This information can have a subtle effect of creating unneeded anxiety among many consumers.
• Retail life needs to be simplified, not complicated. The consumer will be better served when retailers – outside of unusual circumstances, such as port strike – can maintain a steady stream of their product assortment. We call this little nuance by many names:
– Just In Time (JIT)
– Demand Forecasting
– Collaborative Planning, Forecasting & Replenishment (CPFR), etc.
High-stock delivery notifications could be a game changer for shoppers who are picky about their brands and items. For those who get frustrated with product substitutions or getting shorted, having that extra bit of info could make a huge difference in their shopping experience and help reduce disappointment.