Out-of-Stocks Never Die . . . .

Lisle, IL.  April 12, 2006.  Last week I reviewed the impact of out-of-stocks on Sales.  The derived impact reached by researchers in most of the 52 Industry studies was concluded to be a function of the absolute level of observed out-of-stocks.  That level, averaging 8.2% of observed items at any given time, was estimated to dampen retailer sales by between 3 and 4%, while impacting manufacturer sales by between 2 and 3%.

As mentioned in article one, out-of-stocks had a bigger impact on sales when online grocery orders filled at the store were analyzed.  Virtually every basket was plagued by out-of-stocks, and substitutions were routinely made for more than 10% of the basket items. 

A recent Gladson Interactive study reported that poor product replenishment and retail shelf practices resulted in 70 – 75% of all out-of-stocks.  The study revealed that improved product replenishment and shelf maintenance, as a result of using Image Shelf Strips and Tags, reduced out-of-stock incidence by over two-thirds.  Across multiple stores and categories store sales increased an average of 30% over control stores!  Not what anyone would expect if out-of-stocks affected less than 10% of products!   

Armed with these findings we looked back to see if we could find other studies which seemed to effectively reduce out-of-stocks and quantified the impact on sales.  The summaries of five studies were found:  two by NACDS and three studies completed at French, Australian and Chinese Grocers.  Various processes and technologies were used to improve in-stock levels with out-of- stock incidence gains ranging from 20 to 80%.  Sales gains for the products showing the improved in-stock position averaged just under 30%.   

So why does the successful reduction of out-of-stock have such a disproportionately positive impact on sales?  We can look at our own experience:

When using the Gladson Image Shelf Merchandising Tools:

1. The impact resulted in a very orderly, neat shelf.

2. It was easy for the clerk to notice stock-outs and run to the back to check for stock.

3. It was easy for the clerk to notice face-over attempts and adjust the order.

4. Management was able to note products out of place.

5. The consumer can easily relate product to price.

6. Promoted and fast moving items were inspected and corrected more often.

7. Usually, the store with the strongest gains was the only store in the immediate shopping area that had corrected its out-of-stocks.

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