The benefits of improving On Shelf Availability (OSA)

on shelf availability

Today, the marketplace is highly competitive and consumer-driven. Improving your customers’ user experience is a high priority. If their experience is consistently negative, they have a plethora of options to choose from. And some customers will abandon your store permanently. One of the most significant factors that influence your shoppers’ experience is their ability to find the items on their shopping list. Especially if those items were specifically advertised as being available in your store. Unfortunately, on-shelf availability (OSA) is an area where many retail outlets struggle. And the cost in current and future revenue is high.

Retail Stores Lose Profit by Failing to Keep Items in Stock

The Wall Street Journal recently published a study by research firm IHL Group. The study revealed that out-of-stocks (OOS) cost retailers approximately $634 billion annually. And those aren’t the only sales you risk losing if sought-after items continue to be out of stock. The first time a customer can’t find an item at your store, they’ll usually find a substitute. The second time it happens, they’re equally likely to buy a different item. They also may not make a purchase at all. Or they’ll simply go to another store.

If the item continues to be unavailable for three consecutive shopping trips, 70% of customers will leave that retailer entirely. And they will seek a store that consistently carries the products they want. Some will even abandon your store on the first occurrence. That chance is greater if their smartphone tells them a competitor has the item they want for an acceptable price.

As a result of this trend, many retailers pay large amounts of money on marketing to attract new customers. But they receive a far smaller return on investment than they should. This is mainly because a large number of the customers they paid so much to attract abandoned their store after only a few visits. OOS items are an extremely costly problem. Stores fail to sell items because they aren’t on the shelf. They also lose future sales because customers switched stores. A weak ROI on a marketing budget that attracts customers the store can’t retain causes loss. And last but not least, there’s the risk of losing additional customers due to bad reviews,

What reduces on shelf availability?

There are several factors that can prevent a store from noticing when an item is about to go out of stock and correcting the problem. These factors include:

Phantom Inventory (PI)

PI occurs when a product is out of stock. But the retailer’s inventory management system shows that there are products on hand. This can be caused by:

  • Theft
  • Customers picking items up and then abandoning them elsewhere in the store
  • Inaccurate estimates of shipment volume and sales
  • Typographical errors
  • Technological malfunctions
  • Items being dropped or otherwise damaged, and their absence not being recorded
  • Shipment, logistics and human errors

Busy Staff

Your staff is busy. They may already be occupied with other tasks or customers. And they might not be able to respond promptly when the system notifies them that an item is out of stock.

Products Void (PV)

Sometimes, an item is authorized for the store. But there is no allocated space in the building for that item. So, the product is not stocked.

Waiting Until Shelves are Empty

The staff may fall into a pattern of waiting until the shelf is empty before they restock an item. That runs a risk that several customers will visit that shelf between the time it runs out and the time when it’s replenished. Staff should be instructed to replenish shelves before they are emptied. This way there’s never a vacant period.

Failure to Account for Local Demand

What if the central management of a retail brand stocks its stores based on average sales volumes across its whole brand? That method risks failing to account for differences in the levels of local demand. As a result, some stores will be overstocked. While others will frequently find the product out of stock. Local demand must always be accounted for. Especially when calculating how much of a product to acquire for each branch.

The Impacted of Out-of-Stock Conditions

Some retailers offer buy online/pickup in-store (BOPIS) services. These orders may not be accurately recorded in the system. And they may not be accounted for when restocking. This can result in the BOPIS customer having trouble picking up the item they’ve purchased. It can also result in an in-store customer being unable to find his/her desired product. That is because the BOPIS order emptied the shelf.

What Can Retail Outlets Do?

There are a few things you can do to reduce your OOS and improve your on-shelf availability. Try having these several factors in place to start:

Accurate, Timely, and Consistent Communication

The decision-makers involved in the acquisition of stock need to have a clear picture of how much stock is needed in each location. Not to mention how demand fluctuates in response to sales, seasons, extreme weather, and other factors. Automatically-generated store-based planograms can help to ensure that enough space is allocated for fast-moving products. It also gives minimal facings to slower-moving stock.

Clear Instructions

Your in-store staff should know how to monitor shelves for signs of impending OOS condition. They should also know how low to let the on-shelf supply drop before they start restocking. And they also need to know how to prioritize restocking vs. other tasks. In-store staff should also be advised about promotions. Promotions are likely to increase the rate at which a product is purchased. This way they can monitor that product more closely and restock it more frequently.

An Effective and Accurate Tracking System

Businesses cannot rely on rough estimates of supply and sales volume. That’s a good way to increase the likelihood of lost sales due to OOS items. It’s important to maintain an accurate and up-to-date record of how many units you have in the back room. It’s also important to know how many are on the shelf. Not to mention how many are en route to the branch. And how many you’re likely to need in the immediate future.

You also need to account for saleable return. Plus the items that were damaged and rendered unsaleable in-store or during shipping before they could be bought. And products whose absence was not recorded because they were stolen or abandoned elsewhere in the store. This requires a way to consistently monitor your OSA. And to create and act upon alerts when OOS or impending OOS items are detected.

Automated Ordering

You face a lot of demand. Businesses have to plan. They have to deal with push-and-pull-based replenishment. And must coordinate staff and the myriad other tasks store managers juggle at any given time. OSA management has become too complex for your management staff to consistently and accurately forecast replenishment needs. Bring in automated ordering. It accounts for accurate in-store inventory counts, sales results, and demand plans. Automated ordering can create replenishment orders that are optimal for each store. This reduces overstocks and out-of-stocks.

Implementing These OSA Strategies

Businesses have to keep track of inventory. And ensure that inventory is where it needs to be. These tasks have become intensely complicated. And it only gets more complex and critical as technology evolves. Your customers’ options become more numerous and readily available. The inability to keep up with this steep innovation curve can cost you millions of dollars. Both in current sales and in future sales that you would have made.

The bad news is, you and your staff are often too busy to maintain agile product management. And too busy to be able to search for the best product management tools. The good news is, we can provide a solution that does a lot of this work for you. And that many customers will be more comfortable with than they are with approaching your staff.

Meet the Tech

One key element of this solution is an automatic inventory monitoring and product management robot. This is a robot that roams your store, inspecting it for potential problems such as:

  • OOS items
  • Mispriced items
  • Products that are not in compliance with the planogram, and might thus be overlooked by customers

This information can be gathered during the business day and overnight. And the information is uploaded to a cloud. The robot also creates alerts and assignments that tell your staff when action needs to be taken. This ensures that your products are in stock and in the right place.

The Best Kind of Customer Satisfaction

During the day, this robot can also interact with your customers. 70% of people would rather interact with technology than with people. So, this gives you an opportunity to assist customers who would rather leave unsatisfied than approach a human staff member. The customers can also ask the robot (Navii) questions. Navii will show them where the item is and tell them how much it costs. If. you like, it can even show a promotion for the item or another item in the store. Do you want to greatly reduce the amount of money you lose due to on shelf availability (OSA)? And be one of the first retailers to impress your clients with this fun and novel shopping experience? Contact us today!

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