Out of Stock Responses
When it comes to shopping, I know what I want and I go where I know I can get it. Does brand loyalty matter to me? Absolutely, but this loyalty comes from a track record – how reliable that store has been for me. If I visit a store, and it doesn’t have the products I’m looking for, then that store just lost some loyalty points. I might give them another chance, but if they continue the pattern of stockouts, then the loyalty jar will run out and I’ll end up looking elsewhere.
Stockouts are a major problem in the retail and manufacturing world, but the name of the game is to prevent it from happening. If a grocery store doesn’t meet the needs of its local customers, then it’s not fulfilling its purpose. The three words “Out of Stock” are at the heart of why manufacturers invest thousands of dollars in inventory systems and warehouse personnel.
Here are the five ways that customers respond to stockouts, and how those responses affect retailers and manufacturers (This list was inspired by an Emory University study).
1. Buy from Another Store
What’s the reasoning?? Most consumers aren’t willing to wait for a store to replenish their stock of a product. They know what they want and will go wherever they need to get it. This is particularly true for e-commerce because a competitor is a click away and most likely has comparable pricing.
How common is this? 31%
Loss for manufacturer?? No
Loss for retailer? Yes
2. Substitute Another Brand
What’s the reasoning?? In some cases, brands are close enough that consumers don’t mind going with an alternative. They might even think of it as an opportunity to try something new.
How common is this? 26%
Loss for manufacturer?? Yes
Loss for retailer? No, only if the margin of the substitute is lower
3. Substitute Same Brand
What’s the reasoning?? Many products come in different flavors/varieties. If a customer can’t find their favorite version of a particular product, they are often willing to choose another one within the same brand.
How common is this? 19%
Loss for manufacturer?? No, only if the margin of the substitute is lower
Loss for retailer? No, only if the margin of the substitute is lower
4. Delay the Purchase
What’s the reasoning?? Some customers are patient enough to wait a while to gratify their desires, especially if they’re looking to buy a big-ticket item.
How common is this? 15%
Loss for manufacturer?? No, but this affects cash flow and increases demand fluctuation
Loss for retailer? No, but this also affects cash flow and inventory management
5. Don’t Buy At All
What’s the reasoning?? This usually happens with non-essential products. For example, if a customer isn’t able to find the exact drapes they want to pretty up the house, then they may decide that their current drapes will do for now.
How common is this? 9%
Loss for manufacturer?? Yes
Loss for retailer? Yes
Consumer decisions directly affect revenue – and they mean a lot more when you can see their effect on your company’s bottom line. This is why companies invest so much in inventory management systems, the right personnel, and inventory audits. These are all countermeasures to losing revenue from stockouts, inventory delays, and inaccuracies. Don’t put your customers in a position where they need to make one of the five alternate choices, keep their loyalty.
About Robert
Robert Lockard is a copywriter currently with Fishbowl. He writes for several different blogs regarding inventory management, small business, manufacturing, and Quickbooks. Fishbowl Inventory is the most requested inventory management software by Quickbook users. Robert enjoys reading, running, writing, spending time with his children and wife, and watching movies. His favorite films include Fiddler on the Roof, Mr. Smith Goes to Washington, Lawrence of Arabia, and Back to the Future.