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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.