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Out-of-Stock: Prediction and Prevention for retailers

out of stock

When customers discover that the item they wanted to buy from your store is out-of-stock, their response can range. They may buy a similar item. Or they may leave your store forever, unsure if they will ever return. Even worse, they could leave a negative review of your business online.

Out-of-Stock (OOS) Can Cost You Money in Several Ways

  1. Direct loss of sales: On average, one out of 12 items on a shopper’s list may be out-of-stock. And on average, one of every 10 promoted items is not available either. That means you’re losing on 8.33% to 10% of your potential sales every time a customer visits you.
  1. Loss of future business: You may lose future business from repeatedly dissatisfied customers who don’t come back.
  1. Loss of future revenue: You could also lose revenue from clients who never tried your store. This is because their friends complained about your frequent OOS problems.
  1. Increased carrying costsThis is due to holding inventory longer. You could have “OOS” items in back room instead of on the shelves where customers could buy it.

In a study IHL Group recently published in Wall Street Journey, they revealed that OOS cost retailers approximately $634 billion every year. That’s a pretty significant amount! Which is why today, we’re going to look at how out-of-stock rates are measured and analyzed. And how you can greatly reduce the amount of revenue you lose due to preventable stockouts.

Defining OOS Conditions that Affect Retailers’ Revenue

Simply not having an item on the shelf isn’t the only stocking issue that can prevent customers from making a purchase. Or the only thing to make them leave the store unsatisfied. Holman and Buzek propose five definitions for “out-of-stock” conditions. Some of which can prevent a purchase even if the product is physically present:

  1. No items on the marked shelf space: This is the most well-known and obvious type of OOS. An item may actually be available in your store. But if it is not in the space that’s marked for it, customers will usually assume it’s simply out-of-stock.
  2. The items are present, but cannot be accessed without help from staff who aren’t present:  In these instances, the product is on the shelf, but it’s too high up for the customer to reach. Or perhaps it’s in a locked safe or otherwise inaccessible without assistance from your staff. If no staff are present, the customer cannot buy the item.
  1. The staff cannot access it: Sometimes your staff may not have access to the location where a product is stocked. So, even if staff are present and the item is available, the customer still cannot buy the product. This and issue #2 can cause items to show up in your inventory management system, yet still unavailable to shoppers.
  1. Mismatched store price and promotional price: An item could advertised at a certain price. However, the in-store product may be marked up at a higher price. Many customers won’t ask about the discrepancy. And they may react as if the item is simply out-of-stock.

Standard Inventory Management Systems May Not Be Enough

In most cases, by the time your staff notices a stockout, several of your customers will already have noticed it. And you’ll already have lost sales and store loyalty. Many retailers use the following methods to prevent and correct OOS conditions:

  1. The manual auditing method: Store auditors visit branches over certain time periods to look for empty spots on shelves. They also identify stockouts and physically count reference items to measure their availability. Third-party providers are often engaged to carry out these in-store checks. This method can help you identify current and pending OOS conditions. But it lacks the constant, real-time activity that’s required to consistently fix and prevent stockouts.
  1. POS sales estimation: By analyzing store scanner and inventory data, retailers can identify instances when sales of a selected product are abnormally low. Retailers can also identify when there are no sales of that product, which can alert them to near or total OOS. It also helps them keep track of how much inventory is recorded as being on shelves. Which is compared to how much has gone through the checkout line. By comparing those numbers, retailers can detect out-of-stocks before they happen.
  2. Perpetual inventory aggregation:  Continual updates are made to either the general ledger or the inventory journal, as inventory-related transactions occur.

You Need a Real-Time Method of Detecting and Correcting Issues

Often, the task of noticing and correcting stockouts falls to some of your busiest and lowest-paid staff. And they might not become aware of the problem until it’s too late to prevent it from costing you sales. These associates might also lack clear instructions on how to predict when OOS conditions will occur. And what steps to take in order to prevent them.

That’s why it’s important to have a way to detect current and impending stockouts. Not to mention misplaced items and incorrect prices. It’s crucial this detection is done continuously and in real time. This is the why behind our business. Our technology allows for that exact kind of detection. And to top it off, it helps to improve customer satisfaction, store loyalty and your reputation at the same time.

Meet Fellow Robots

Fellow is the inventory management system you need. Plus it’s the customer service rep your customers will rave about! Our inventory management solutions scan your store day and night. It detects current and imminent stockouts. And it sends notifications that tell your staff which item needs to be replenished and where. It also detects misplaced and mis-priced items. The technology also identifies items that don’t comply with the store’s planogram. This is vital because an in-stock item that your customers can’t find will have the same effect as an OOS item.

Our robots can also interact with your customers via its advanced voice recognition and manual interface. Upon greeting a customer, this robot will ask if it can help them with anything. The customers can then tell it which items they’re looking for. And the robot will give them a selection of options. Once they’ve chosen the item they want, it will guide them directly to that item. The robot will provide data and infomercials about the product.

It can also help associates to find items. Now they won’t disappoint customers by telling them “Sorry, I’m not sure because I don’t work in that department.” Many people feel more comfortable interacting with technology rather than speaking with people. So, this can prevent your shy or introverted clients from leaving without being helped.

Do you want to greatly reduce the amount of money you lose due to OOS? 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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