According to the 2023 KPMG Consumer Pulse Holiday report, the availability of stock is among the top three attributes impacting the selection of retailers, It is crucial for sellers to avoid out of stock situations when customers are at the point of purchase.
The survey findings indicates the importance of accurately measuring and monitoring out of stock when selling merchandise online.
What is Out of Stock?
Out of stock is a scenario when a particular item is unavailable at the point of purchase when the customer is ready to buy.
Measuring Out of Stock Rate in E-Commerce
Keeping track of inventory has several benefits. Here is a simple formula for calculating the rate of stockouts.
The stockout rate defines the percentage of total inventory that is unavailable for sale. A high stockout rate indicates missed sales opportunities.
Sellers with fewer SKUs most often calculate inventory manually using spreadsheets. However, for sellers having vast product portfolios, it is more feasible to monitor real-time inventory data.
Read more on How SKU Rationalization Works?
Scarcity Marketing vs. Out of Stock
Scarcity marketing is a type of persuasive strategy used by brands to build the perception that something is in limited supply.
On the other hand, out of stock is not a planned strategy. It is not a scenario that brands and retailers look forward to.
Reasons for a Stockout
A sudden demand surge, a shortage of capital, and external factors disrupting the supply chain are not in a retailer or brand’s control. However, investing in the latest technology helps to a great extent to manage inventory distortion, stock the right amount of goods, and prevent missed sales.
Customers’ Perception When Merchandise Go Out of Stock
A combination of overstock and out of stock, referred to as inventory distortion, causes retailers significant financial losses.
Though the US market reduced the overstock problem, according to research firm IHL, retail loss due to stockouts in North America increased by about 17.7% in 2023 compared to the year before.
An out of stock can happen at any point in the supply chain, but when customers shop in the marketplace and land on a listing where there’s nothing to buy, it translates into an unpleasant shopping experience. So, stockouts impact sellers and brands the most.
Among the 1081 shoppers surveyed by KPMG, 40% said they are concerned about stockouts during their shopping journey. When a customer experiences frequent stockouts at a retailer or a brand’s website, it may erode brand trust, and ultimately shoppers may shift their loyalties to competitors.
Thus, retailers and brands who understand the benefits of monitoring out of stock in e-commerce stand above competitors.
What Categories Are Most Affected by Out of Stock?
Managing inventory, especially in categories such as games, hobby supplies, furniture, electronics, and appliances, is important for an e-commerce platform because they are the most affected by stockouts.
Strategies to Prevent Out of Stock Issues
Here are a few proactive strategies brands and sellers use to handle an out of stock product on e-commerce platforms:
Investing in the Latest Inventory Management Software
In the present dynamic retailing environment with multi-channel selling, brands upgrading their decision-making on assortment planning and inventory management from legacy software to the latest inventory monitoring technology are performing better than their counterparts.
A centralized, unified commerce platform gives a single view of inventory and orders across all channels and sales. Sellers are able to:
- Track what’s happening across their entire business in real-time
- Maintain buffer stock to prevent unexpected stockouts
- Leverage historical sales data
- Observe trends to forecast demand accurately
Minimize the Risk of Stockouts with AWD and FBA Services by Amazon
Inventory availability maintains customer satisfaction, one of the most important factors to rank high on Amazon’s search results.
In addition, sellers can avert logistical challenges by opting for Fulfillment by Amazon (FBA) for fulfillment needs or AWD’s “supply chain as a service.” Thereby, sellers minimize the risk of stockouts and increase their eligibility to win the buy box.
Amazon Warehousing and Distribution (AWD) is an integrated storage solution that offers replenishment for multiple sales and distribution channels beyond the Amazon store.
Increasing Price When Supply is Low
If a product is in high demand and retailers realize there is a shortage in supply in the market, a few retailers may increase the price to decrease demand, reduce stockouts, and increase margins on the product.
Handling Out of Stock Backorders Efficiently
Companies with large backorders with longer wait times tend to lose customers.
There are times when the goods can be replaced quickly. In such cases, sellers who communicate the expected replenishment dates and notify customers with a back-in-stock message save situations of lost sales.
Implementing pre-order or waitlist options is another method sellers use to capture demand while products are out of stock.
Also read about How Brands are Handling Overstock Issues
Lead Time Reduction Through Collaboration with Suppliers
To ensure timely inventory replenishment, collaborating closely with suppliers and ordering goods in advance during peak season helps.
For example, every year, factories in China shut down as most of their workers go to their hometowns to celebrate Chinese New Year.
Stockouts can be avoided if retailers importing goods from this region foresee this delay in production and shipping and order items in advance when there is enough safety stock.
Another option is to have a few suppliers as backups closer to home.
To speed up delivery, in certain cases, cross-docking directly from the manufacturer and drop shipping to the customers works well.
Prevent Inventory Shrinkage
In 2023, retailers in the US faced approximately $142 billion in inventory shrinkage primarily because of theft and entry errors. Phantom inventory or shrinkage is the mismatch between the recorded inventory and the actual inventory in stock.
To control theft in physical stores, RFID and the latest AI and computer vision technology are used to locate products and control shrinkage during check-out.
In case of entry errors in e-commerce, the customer pays and checks out but gets a refund hours or days later, along with an apology message. Such scenarios negatively impact the customer experience. Monitoring the inventory in real-time is the solution to this problem.
Advantages of Monitoring Out of Stock in E-Commerce
When selling on a network of retail platforms, tracking product availability manually is a challenging task for sellers.
Moreover, a seller who wishes to improve their rank on Amazon’s bestseller list in a given category and achieve the featured offer on Amazon has to please customers by always having the items they want in stock.
In this case, automating the inventory tracking process is beneficial. MetricsCart’s Amazon bestseller reports help you examine monthly data on the top-ranking brands in each category.
In addition, to assist every e-commerce player, MetricsCart offers robust digital shelf analytics services such as product page optimization, monitoring ratings and reviews, etc.
Here are the benefits of using MetricsCart’s assortment and availability monitoring:
- Sellers are able to maintain a competitive edge over other sellers in the respective categories
- Get real-time information on the stock that is running out of stock and needs replenishment both in-store and online
- A robust system to track a huge number of SKUs at a great speed
- A comprehensive dashboard with detailed updates on stock insights that can be exported for further analysis.
- The possibility to watch out for low inventory thresholds during peak demand periods
Now that you know the benefits of monitoring out of stock in e-commerce, contact MetricsCart today for value-for-money digital shelf solutions.
