Supply chain · 28 September 2015

Small firms pay a heavy price for stock-outs – Here’s how to avoid them

Shopper sympathy around unavailable products is in short supply, with customers taking their service elsewhere
Shopper sympathy around unavailable products is in short supply, with customers taking their service elsewhere

Despite having access to data like never before, retailers still don’t always meet buyer demand. Our international supply chain expert, Kurt Cavano, discusses why stock-outs can be very bad news for smaller businesses and why they need to focus on their ability to execute the movement of goods.

We are living in the most dynamic and expansive age of all time with immediate and nearly total access to information, which is changing how businesses make decisions, how they operate and, crucially, how they interact with their customers. In recent years, retailers have invested fortunes in big data technologies that promise to harness all this data and accurately predict customer demand. The desired end result is having the right products in the right place, at the right time.

Unfortunately, according to a new survey conducted by YouGov, on behalf of GT Nexus, many of today’s UK retailers aren’t in the best shape. In the past 12 months alone, 83 per cent of UK consumers found the product they wanted to buy unavailable in-store, while 70 per cent had found the same online. This really highlights the paradox that in this “golden age” of ubiquitous data and the connected consumer – where businesses have access to unprecedented levels of information on shopping behaviour and trends – planning and prediction efforts are still not guaranteeing that retailers can meet buyer demand.

The research also found that the availability of fashion and footwear caused the most frustration; when asked about their most frustrating experience of out of stock items, a third of disappointed UK shoppers (33 per cent in-store; 34 per cent online) said the unavailable product they wanted to purchase was a clothing or footwear item.

Mind the gap

The apparent gap between consumer expectations and retailers’ ability to fulfil them isn’t the best news – not least given that the winter holiday shopping season is just around the corner. Unsurprisingly, shopper sympathy around unavailable products is in short supply – the survey found that businesses can pay a heavy price for stock-outs. When recalling the most frustrating in-store stock-out in the last 12 months, 57 per cent of disappointed in-store shoppers said it resulted in a lost sale for their first-choice retailer – they took their business elsewhere or didn’t buy at all. And, the impact is even more acute for online retailers as 65 per cent of disappointed online shoppers bought from another site, store, or abandoned their intention to buy entirely.

For smaller retailers with slim margins dependent on the turnover of goods, any negative impact on repeat purchasing needs to be understood and addressed. The mainstay of their business is meeting customer expectations when they visit the store or online site.

Another area of particular concern for retailers is around one particular consuming demographic. The survey revealed that 84 per cent of millennials (18-34 years) found they couldn’t always get what they were looking for in-store in the last 12 months. We know that millennials are an ever-demanding priority target market that does not subscribe to brand loyalty as much as the generations before it. As such, today’s retailers would be remiss to let their brand reputation suffer in the eyes of these shoppers.

Technology to circumvent stock-outs

So, the question remains, how can today’s retailers co-ordinate the flow of products based on predictions and the emergence of new trends, whilst still taking account of all the unexpected disruptions that can occur that are difficult if not impossible to plan for?

Success hinges on the success of a retailer’s supporting supply chain infrastructure. Supply chains are very complex and often involve hundreds of trading partners. While retailers continue to invest in the front-end of their business – the customer facing web sites and in-store promotions and so on – they are lagging in their ability to execute the movement of goods; the ability to sense and respond to demand through greater inventory visibility and intelligence.

To remain competitive, savvy business leaders must look to cloud-based technologies so that they can not only collaborate with their trading partners in real-time, anywhere in the world, but also respond to sudden bursts in demand. Stocking the right goods, at the right time, at the right place, in the right quantities takes an enormous coordination effort – but, at the end of the day, that is what today’s shoppers have come to rightly expect. Equally, it is entirely possible with the smart resources in place.

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ABOUT THE EXPERT

Kurt Cavano is the vice chairman and chief strategy officer of GT Nexus, a cloud based supply chain platform provider. It helps companies to manage their logistics and trade processes. Kurt is responsible for maintaining the company’s track record of innovation and market success, and for guiding key customer, industry and partner relationships.

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