Out-of-Stocks Never Die . . . .

Lisle, IL.  April 2, 2006.  Over 50 industry, academic and proprietary studies on merchandise out-of-stocks have been conducted over the last 12 years. The findings are consistent, and consistently depressing.

About one quarter of these studies have been done in the US, one half across Europe, and a quarter elsewhere across the globe in supermarkets, drug stores and convenience stores. Chain stores and independently operated stores were subjected to study.  

The studies were conducted in the early to mid-1990’s as part of the Efficient Consumer Response movement prompted substantial and expensive supply chain efforts by both manufacturers and retailers aimed at improving their in-stock position for their consumer. Those efforts were followed by another round of studies conducted just less than 10 years after the first round. 

Results AFTER all of those efforts mirrored the prior results. 

• 8.2% of all products were missing from store shelves at any given time. 
• 50% of products are out-of-stock at least once during any given 30 day period. 
• 20% of those missing products are re-stocked within 8 hours.
• 20% are missing for more than 3 days.
• The remaining 60% balance are somewhere in between.  
• Fast movers and promoted items are most affected
  • 15% of promoted items out-of-stock at any given time.
  • 19% of promoted items when those items are stocked only on the shelf

The impact of this out-of-stock problem is widely reported between 3 and 4% lost sales for retailers and between 2 and 3% lost sales for manufacturers. I participated on the team of consultants who completed the Coca Cola Research Study in 1995-6 while at efficient market services, inc. to try and understand the impact that out-of-stocks had on consumption and sales. Our analysis backed into sales impact through a variety of tried and true marketing research techniques using sales data, interviews with consumers and a variety of models to estimate sales impact.

I now believe the impact of out-of-stocks on retail sales was understated. The hint that out-of-stocks may be a more pervasive sales problem for retailers was observation gathered from online grocery shopping pickers in supermarkets. While running MyWebGrocer I noted that almost every online order picked with the store fulfillment model was plagued with out-of-stock items. Pickers routinely substituted items accounting for 10% of the total basket items selected by the consumer. Now at Gladson we are working with a retailer who has corrected well over two-thirds of their out-of-stocks using new shelf management tools. The impact on sales was swift and substantial. I started to look back in our archives and reviewed other research studies on solutions to out-of-stocks and found corroborating evidence. 

More on the Out-of-Stock Series in the next week’s newsletter.