In the new world of retail, consumers are constantly faced with health risks at every store they visit. With that in mind, picture a customer making their regular trip to the local grocer, only to find that their favorite brand is out-of-stock (OOS). It’s very likely this exact scenario has recently happened to you since OOS have been much more prominent for some SKUs since the pandemic started.
Given today’s climate, the frustrated patron is unlikely to visit another store for the product, so they have a few options to consider: choose another brand, choose to postpone the purchase, or choose not to buy the product at all. None of these scenarios are all too favorable to that brand.
Half of all consumers will opt for a competitor’s product when their preferred product is out-of-stock, so being able to quickly identify out-of-stocks is imperative to the success of a brand. OOS are a critical problem brands face every day, but how often do they occur and how much do they end up costing a brand?
Research has shown that more than 50 of the largest consumer goods companies reported OOS levels of 1.5 to 2 percent, however, the real-life audited OOS levels in retail stores is approximately 8 to 10 percent, and is twice that level for promotional items. That’s nearly one OOS for every 10 items a shopper intends to purchase.
Another common fallacy surrounding OOS is that they typically don’t last long enough to warrant a response. While 75 percent of OOS last three days or less and only contribute to 14 percent of lost sales, when considering the full impact of OOS, it’s important to measure the number of OOS episodes by their average duration–revealing a much more daunting statistic.
More than half of lost sales days come from 2 percent of OOS that last more than 10 days. Addressing these long-lasting events can have an incredible impact on your sales and brand loyalty. Brands that leave their slots empty for extended periods are at risk of losing shelf share and are likely to hurt their reputation with retailers.
And identifying the root cause of an OOS is just as important as identifying the OOS in the first place. About 85 percent of the root causes of on-shelf availability issues (shelf-only OOS, phantom inventory, or both shelf & phantom inventory) go undetected and lead to the vast majority of lost sales because brands end up focusing their efforts on the much smaller opportunity visible - store replenishments.
Making sure the field team consistently reports the on-shelf and backroom stock levels, as well as upcoming replenishment orders at every store visit, is a surefire way to minimize OOS occurrences. But the reality is that this strategy can leave room for error, is time-consuming, and doesn’t prioritize the most costly OOS.
The most effective approach your brand can take to make sure shelves aren’t sitting empty is through automated OOS reporting. With so much data readily available today, monitoring in-store conditions remotely through automated out-of-stock reporting can empower your team to make better decisions in the field by prioritizing store visits to limit the duration of OOS events, and to identify and correct the root causes of OOS—overall reducing the cost of OOS.
In today’s age of big data, brands that can leverage their point-of-sale data to find actionable growth opportunities will outsmart their competition and become top performers in their field. Check out the CPG Sales Guide to learn five ways your brand can use POS data to prioritize accounts and grow sales in near real-time.
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