Of course Out of stock impacts the Retailer – sales, shopper experience, inventory. But how does it impact the supplier of items? The manufacturers and the CP (Consumer product) brands? (Collectively referred to as Supplier in this blog posting)
I would say that Out of stock impacts the Supplier even more than it impacts the Retailer. And hence, Out of stock mitigation is as much a responsibility for the Supplier as it is for the Retailer. Mitigating Out of stock can increase Supplier revenues, enhance customer loyalty, enhance product branding and improve promotion effectiveness. (Often promotions are run by brands and the Retailer is unaware of it)
As per the research published by HBR, about 26% of shoppers could substitute brands if they encounter an Out-of-Stock:
A Supplier needs to be proactive with their Retailers by ensuring their products are delivered and in-stock so they’re not losing potential sales and revenue from end-consumers. And since over half of OOS instances occur for more than 24 hours, Suppliers need to identify and understand the reasons for the OOS in a timely manner and be able to capitalize on potential revenue by supplying products at Retail locations when they’re needed.
In most instances, Suppliers that are DSD(Direct Store Delivery) do not know the in-stock/out-of-stock situation until they arrive at the store. Those Suppliers who participate in VMI(Vendor Managed Inventory) lack the insight into individual store stock conditions. They only see withdrawals from the warehouse.
DSD and VMI suppliers need the tools to predict and mitigate Out of Stock since they are impacted by it far more than those suppliers who deliver to the Retailers DC.
Ultimately, Retailers care about selling product from their location(s). If a Supplier’s product is OOS and a customer can purchase a substitute, the retailer still sees the revenue from that sale. However, it still resonates as dissatisfaction for the customer and a loss in sales for the supplier.
To protect their brand and maintain their sales, Suppliers need to understand their OOS needs in real-time and not force customers to purchase a competing product when the Retailer does not have what they want. It’s time for developing a true partnership between Retailer and Supplier to share data for the sake of the customer!
Brady Knippenberg Director, Strategic Partnerships at Everyday Health
Experienced digital media professional and consultant with focus on Health, Lifestyle, Retail and CPG verticals. Changing the way brands connect with consumers in both the online and offline worlds.