Out-of-stocks are a conversion killer – online or offline. Offering the proverbial endless-aisle of product online is relatively easy, but managing the inventory and distribution logistics effectively is hard. All retailers need to manage out-of-stocks and there are plenty of solutions to help them do that. However, beyond “solutions,” retailers need experienced personnel to execute.

This is indeed a legitimate problem for online retailers — despite the theoretical silver lining referenced in this article.

I’ll be discussing this and other inventory issues at the upcoming ECRM Healthcare conference. Managing availability across the supply chain (whether online or brick-and-mortar) has been an age-old problem for retail. With expansive inventories offered online this problem is further accentuated and, yes, it is a significant issue affecting shopper satisfaction, retail experience and loyalty.

This points to some of the basics of retailing about which few people and publications are talking these days: merchandise planning, automated replenishment and inventory management. If retailers don’t do these things correctly, it matters little with what customers they engage on a highly-personalized basis. I would think that it is easier to stay in stock in distribution centers — where quantities of any one SKU are larger than in individual stores – than it is to stay in stock in stores. However, if a retailer is out of stock across the enterprise, but a purchase order has been placed with the supplier, it is possible to let the online customer know that the item will be available on a specific date (depending on the reliability of the supplier) and try to avoid the cart abandonment/save the sale.

I suspect that the numbers are actually worse than this study suggests because many grocers will show a product as being available but will then, when it comes to picking it, will find it is isn’t and will substitute an alternative.

Needless to say, all of this frustrates consumers and erodes loyalty, conversion and spend.

Out-of-stocks are a material issue for retailers. Consumers today are list-driven; having what you say you have, or what a consumer expects you to have in inventory is critical. Brick-and-mortar retailers require a holistic approach to maintaining high inventory accuracy. In-store, merging RFID, video, location and POS data with machine learning can yield incredible results of inventory accuracy, nearing 100 percent perpetually. This allows for smarter replenishment models, which leads to higher customer satisfaction and conversion, thus higher revenue, for in-store shoppers; while also realizing almost guaranteed hit rates for BOPIS and ship-from-store orders. The store needs to be digitized too.

Having gotten to the point of deciding to buy and then finding out what you want is out of stock makes for a frustrating experience. Some brands are using tricks online such as “Email me when a product is back in stock” but how well this works is unclear.

Having a handle on inventory and supply chain could help the online experience by providing a level of context of when something may be back in stock. Though I suspect out-of-stocks mostly appear when the sales are on and stock is being cleared, thus wont be returning. In which case being visibly proactive in suggesting relevant substitutes could help those who do look for substitutes, as George mentioned in the article.

What I would like to know is how the out-of-stock in stores was calculated. Is it out-of-stock percent for each store, averaged across all stores? Or was it the aggregate inventory level across stores and then calculated at that level? Because I suspect that the average store is not out-of-stock on only 8.3 percent of items — I would expect a higher out-of-stock number for individual stores. And then there is the whole “actual” out of stock vs. “perceived” out of stock — and I would bet that stores suffer way more here than online does. If a consumer can’t find the item in the store, even if it’s there, they believe the retailer is out of stock and that shapes their overall perception of the brand. I once saw an estimate of this phenomenon, and it was as high as 30 percent perceived out of stock, when the actual out of stock in the store was less than half that. This is why showing store inventory online is so important, even if it is… Read more »

First of all I find it interesting that the Grocery Manufacturers Association is doing a study regarding non-food when most of their members are food manufacturers! It seems self serving to me for the grocery industry to keep customers shopping in stores. That being said, I do see out-of-stocks for online retailers as a major problem since availability is one major reason to shop online. The same solutions of inventory management apply online as they do in-store, it is more a concern for the proper control of inventory at the warehouse and/or distribution centers. We are seeing the result of pure online retailers ignoring the solutions for inventory management thinking that they can manage inventory without solutions since they do not operate stores.

I am astounded by the study. Theoretically, out-of-stocks should not be a big issue for online retailers. The inventory is consolidated, the data is available, most of the inventory process and processes are automated. What am I missing?

The other thing that surprises me is my own experience. I am sure I have run into out-of-stock issues when ordering online, but honestly I can’t remember one.

As a guy who has been in retailing since 1976, I can tell you that managing out-of-stocks has been a perennial challenge since then. And “all the King’s horses and all the King’s men” cannot seem to move the needle. The numbers found in this study are almost exactly the same as a study in the ’90s that I remember.

Online and offline, out-of-stocks are the single largest factor in driving optimized revenue achievement. This will not change until we take this seriously. First, we need to take the human error factor out of the equation. There are tools in the marketplace today that can more than make up for the human touch. A couple innovative retailers are implementing these tools and leveraging AI as we speak.

Out-of-stocks are a problem for any retailer including e-tailers. Disappointing a customer continually is not a good thing. It will lead to an eventual loss of trust and sales. Even though online shoppers might purchase another item more easily when their preferred item is out of stock, the disappointment factor will eventually cause consumers to shop somewhere else. The solution to this problem in stores or online is to have a complete and accurate inventory of all items being sold and building replenishment systems that are paired with the inventory systems. The advantage that e-tailers have is they can ship to anywhere from common storage locations whereas the retailer may be required to have the items in a physical store for BOPIS customers. On the other hand, the fact that retailers are having half of the out-of-stocks that e-tailers have, means they are currently better positioned with inventory than e-tailers.

To avoid frustrating consumers with out-of-stocks that reduce sales and erode loyalty, retailers have a few options:

1. Data: Up-to-date e-commerce data can improve forecasting accuracy, especially for bestselling products, by allowing retailer to know what consumers browse, buy, abandon and return. Review inventory analytics to ensure you have sufficient merchandise available based on your sales projections, include a best-case scenario.
2. Supply chain collaboration: Retailers can strategically use warehouse partners to store sufficient quantities of products near major markets.
3. Save the sale: If a product is out of stock, retailers can state when it will be available, allow shoppers to receive an email or text to learn when it’s available, allow pre-orders or offer similar products as alternatives.

Proactive preparation can help retailers offer sufficient product quantities and prompt service that improve the customer experience.

So much for all the hype about the endless aisle. The rate of out-of-stocks in stores has been about 8 percent for as long as I can remember. I wonder how long out-of-stocks online will stay at 15 percent.

This latest study by Corsten and Gruen, although limited to a few product categories, shines a spotlight on the dirty not-so-secret flaw in online retail: Most retailers don’t know how to keep tabs on their inventories, so they lie about it to shoppers. There is typically a disconnect between what’s in the online catalog versus what’s on the shelves in a particular store or in the bins at a particular fulfillment center. The problem is especially troubling for click & carry / click & deliver grocery retail, where I have heard anecdotally of order substitution rates as high as 25% of items. Talk about a breakdown in customer trust! This syndrome may be almost entirely averted with sound inventory practices — real-time, store/item-level perpetual inventory; accurate rolling sales forecast; and computer-generated ordering to increase item availability to 99%+. This is real. Ask Wegmans or Sobeys or Price Chopper how they are doing it. When an online ordering system is linked to a reliable PI, most of the troubles identified by Corsten and Gruen diminish greatly.… Read more »

Out of stocks are clearly an issue for all retailers. Inventory control and accuracy are of absolute importance to minimize the impact of out of stocks. I’ve seen data suggesting that for every 3% increase in inventory accuracy a 1% increase in sales can be realized. That said, one would expect pure online retailers to have a better control and accuracy of their inventory by default and that these out of stocks shouldn’t happen, but even then it’s possible when you get down to 1 or 2 item counts, multiple customers may be submitting a shopping cart at the same time and one of them ends up with an out of stock scenario. For brick and mortar retailers, many in-store technologies are available to help solve this — RFID, wireless scanners, video analytics, coupled with POS data and some machine learning can be applied. Retailers should also consider evaluating their store networks to ensure they have enough reliability, availability, and raw performance available to support all the real-time data flows these technologies require to maintain… Read more »

Being out-of-stock is an issue in any channel. If you don’t have what the consumer wants, you’re losing money. In the ecommerce space, you can often retain the sale by displaying the expected in-stock date and placing the item on back order; options you don’t have in retail. It all depends on the how fast the customer needs the product and if they’re willing to wait. Where ecommerce often fails is when they allow you to complete the purchase, but then cancel out-of-stock items through a follow-up email. Not a good customer experience! Providing real-time inventory onsite is critical to setting the right customer expectation.

The study is interesting that it addresses non-food retail, critical to most groceries due to sales of at least 2-3 aisles of products such as baby food, detergent or toothpaste. I’d love to see the out-of-stock comparison between food and non-food — but the study was sponsored by P&G.

Out-of-stocks are problematic, online or off. The study touches on online consequences of out-of-stocks such as lost sales and substitution effects. Many on this thread have already captured the basics, but I only saw one note about demand planning. Out-of-stocks happen when supply doesn’t meet demand at the point of purchase.

Nikki Baird nicely captured the actual and perceived out-of-stock (OOS) concept and herein lies the rub for the difference between online and offline OOS. In the online world, availability is what you display on the web page where delivery dates can be shifted to accommodate a fast-track back order. In the store the out-of-stock is real for the customer because expectations are immediate.

Much of the disparity I have found is the additional stress new models are putting on old systems and processes. If click and collect platforms are not connected to physical store inventory, in real time, then you always run the risk of the product not being available when the picker goes to select the item. Better forecasting and demand management capabilities (including new data models) must be developed for this new “phygital” economy.