For many of us in retail, the best industry insights come after work. When I’m not at Nextenture, I moonlight as a niche author. And in late August, while selling and signing copies of my new book at a convention, I sold out in two hours–despite having booked my booth for the full three days of the event.
Throughout the next two days, I had to repeatedly turn away many potential customers. Upon reflection, I realized that I had run into every store manager’s nightmare: stock-out.
For this post, I decided to take a look at potential ways to avoid or minimize the impact of stock-out.
Maintain Accurate Customer Insights
According to a study conducted by the IHL Group, retailers consistently miss out on nearly $1 trillion in sales because they don’t have what customers want to buy in their stores. The study notes that shoppers in total experience $984 billion worth of out-of-stocks and $144.9 billion in North America alone.
In my case, the risk was limited because I had a free booth; my only maintenance costs were my event registration fees and printing copies. It’s not so simple for large-scale organizations with tens, hundreds, or even thousands of stores. For such businesses, running out of a day’s worth of stock for a hot item can lead to thousands of disgruntled customers and a helpless workforce. Put simply, stock-outs kill stores. Whether individually selling books or running a location dedicated to selling books, it’s critical to deploy solutions and processes that accurately track customer needs. For my example, I could have scheduled in-person pickups at my booth well before the event, and then determined how many copies were needed. This would have possibly saved me two and a half day’s worth of lost sales. If I were a store manager running a book store, I could run a similar system for my store’s best selling books, like an appointment booking solution. This would help me build a more accurate sales forecast and place my associates in the best position to succeed.
Ensure Consistent Labor Standards
It’s worth considering that not all stock-out situations arise from the product’s absence in stores. In fact, being out of stock can happen because a received product hasn’t yet been unpacked and shelved for customers to buy. Not every retailer has access to exactly how much work goes into tasks like distribution, unpacking, shelving, or even conducting regular stock counts–all connected to stock-out. Conducting time studies across different locations can ensure consistent labor standards that feed into the rest of your workforce management suite. While stock-out is classically seen as a supply side problem, it inevitably has an impact on store operations. Without the inventory to match a projected sales forecast for a given product or in-store service, or an insight into what processes are slowing down your stores, your associates will be left in the dust.
Implement Contingency Processes and Solutions
Lost sales from stock-out can already be devastating. It only worsens when there’s someone else able to give what you can’t to your customers.
For billion-dollar retailers with hovering competitors, unsatisfied customers can easily turn elsewhere. Each consumer that walks away isn’t just one individual transaction lost; every one of them is a missed opportunity for developing recurrent revenue and long-term sales relationships. In a study conducted by the Harvard Business Review, up to 43 percent of customers said they would immediately go to a competitor upon realizing the product of their choice isn’t available.
Proactively creating processes or exception-based trainings for store associates for out-of-stock scenarios mitigates losing customers to competitors. For example, if a customer enters an electronics store and is looking for a specific type of computer to help them produce music, associates should have the domain expertise and training to keep them engaged and unchecked out of the sales process, potentially suggesting substitutes to fulfill the same customer needs.
Following through with better processes in your locations and ensuring that you have a bird’s eye view of your customer base will ensure that you both avoid stock-out and know how to deal with it. This way, your store teams can continue offering a quality customer experience, and you can guarantee that they will never fall short.
To learn about solutions and services that can help you avoid stockout, reach out to a Nextenture solutions consultant here.