There are many things that hold back sales in reseller channels, but few hurts sales as much as when products go out of stock – especially when you are unaware of the problem.
Then it can last for days or weeks.
Whenever products go out of stock, especially your top-sellers, it means an instant drop in your sales numbers. Transactions simply can’t take place if the products aren’t there to buy.
It’s bad news also when products fall in search rankings or if a product lacks reviews, some consumers will find your products on direct search and buy them anyway if they know what they are after. But when a product runs out of stock, it means true troubles for that product in that sales channel – guaranteed. In the worst case, consumers will choose a competing brand – and stay loyal to them for years to come.
Out-of-stock issues are also more dangerous to brands online than in stores. Firstly, these issues are doubled in e-commerce (where out-of-stock rates of 12 – 20% are well known) versus in stores (where out-of-stock rates of 5 – 10% are common).
Consumer reaction to out-of-stocks are also different in the online sales compared to stores. The report, “A Worldwide Study of Extent, Shopper Reactions, and Implications for Non-Food Online Retail Categories” from GMA tell us that consumers are more likely to remain on the E-commerce site and substitute the item looked in 70% of all cases, which the researchers dubbed “the Amazon effect”. However, if a physical store is out of a product, the consumers are more likely to switch to another store to still find the same product.
In other words, dealing with the out-of-stock problem effectively in the online reseller channels can deliver a high return on investment for global consumer brands. Here are some ways to do it.
1. First, become aware of the extent of your out-of-stock problems.
Do you know where your products were out of stock this morning? How many have been sold out for more than three days? Many resellers are too busy to keep up with products that sell out, so your brand may be absent from the virtual shelves for days or weeks. It can be even harder to spot when multiple colour or size variants are involved. For example, a product might be available in blue and red, with zero stock of black. By automating stock availability checks for your products, you can close those sales leaks quickly.
2. Let the most relevant people get the most relevant updates about out-of-stock issues.
Companies that have hundreds or thousands of SKUs must filter the data to be relevant for the right people in the organisation. For example, a regional marketing manager needs to know about the out-of-stock issues showing up in a particular geographical area, while a key account manager is interested in a few resellers. Imagine getting e-mail updates saying: “Good morning! These 15 SKUs have been out of stock for more than three days now in the indirect sales channels you are monitoring.”
3. Get notified about out-of-stock issues when it matters the most.
Some products might be worth keeping an eye on daily, considering how much they contribute to total revenues. Other products are more important during certain campaigns, or during high-season weeks. Customising your stock monitoring lets you know what’s happening with the products that matter most, so you can ensure they are in stock while there is super-high demand.
4. Plan based on what happened in the past.
Which of your resellers have a history of running out of products during high season and need to focus on better stock replenishment this year? Once you have the data, you can cooperate with these resellers to make more solid preparations and improve sales.
5. Analyse your out-of-stock issues on a macro level over time.
For example, you can update your forecast models to make sure products are in stock more consistently. What if you could improve out-of-stock issues by 50 percent on the most critical sales days of every month, which are usually right after payday? What impact would it have on your revenues if you could reduce your out-of-stock rate from 10 percent to 5 percent across the board?