Last week I wrote a post about in-store availability – highlighting the fact that around one in twelve products are out of stock in stores. It created a lot of comments, all agreeing that making products available to shoppers should be a very high priority for retailers and brands alike. This begs the question – why does the problem still exist? And why (judging by many comments) is the problem getting worse, rather than better? There are only two possible answers. That either improving on shelf availability is impossible, or that it isn’t such a high priority after all!
Let’s discount the first possible answer. Improving on shelf availability isn’t impossible. Some retailers already do it better than others, so improvements are possible. So, therefore it appears that we must consider the second possibility – that on shelf availability isn’t the biggest priority at all.
Why isn’t on shelf availability a priority?
So why does this happen? There seem to be several factors which are making things worse, not better, for shoppers.
One of the biggest problems is that retailers aren’t reliant on selling stuff to shoppers as their sole source of revenue. Retailers make loads of money selling stuff to manufacturers, too. Retailers take fees from suppliers in the form of listing fees, and payments for space. Space is given based on how much a manufacturer pays, not on how many shoppers want to buy it. In an ideal world, retailers would only list products that were likely to be popular with their shoppers. Likewise, they would allocate space based on what shoppers want, and how much space is required to remain in stock.
But each time a retailer accepts a payment for a listing, or for space, there is the potential of distorting this. Each time a retailer lists a product that shoppers are less interested in, it takes space away from a product shoppers do want to find, increasing the risk of an out of stock. Don’t believe me? Check out this post where I highlighted a range of seventeen shaving foams in a Tesco store. I find it hard to believe that there are many shoppers who need a choice of seventeen shaving foams! So why are they here, if it isn’t for the shoppers? One can only assume it is for the fees. The net result is that the best-selling foams are now more at risk of going out of stock.
Retailers make money out of other stuff too. They make money out of selling promotional space, and running promotions (both again funded by suppliers). Yet, as this post shows, promotions make out of stocks worse. It seems that some retailers perhaps have taken the eye off the ball, and are focusing on revenue, rather than shopper satisfaction.
How many sales are really lost due to poor on shelf availability?
But surely, you ask, retailers lose sales when a product goes out of stock. Don’t they care that shoppers can’t find what they want? Well of course they care – the question is, do they care enough to do something about it? Do they care enough to reduce revenue from suppliers to improve the shopping experience?
The reality is, that they don’t lose as many sales as you might think. In any out of stock situation, some shoppers will just switch to another product. It varies by shopper, shopper mission, and by category, but the retailer is insulated somewhat from the revenue pain of lost sales. What they are not insulated from is shopper dissatisfaction, but that doesn’t manifest itself in the short-term revenue, so perhaps doesn’t get enough airplay in the retailer’s office.
And what about suppliers? Suppliers, surely must feel the pain and prioritize out of stocks. After all, if someone switches to another brand, they’ve definitely lost.
Well. Over the past few years I’ve worked with many organizations, and in preparation for this post I’ve spoken to many more. And while it isn’t a statistically solid sample, from these companies, barely a third of them are even tracking in-store out of stocks. There are plenty of companies offering these services, and umpteen tech solutions available, but most companies don’t seem to bother monitoring this.
How many of you who work for suppliers go to stores regularly? I mean once a week? One of my most read blogs was this – yet I wonder how many people really go and see stores often enough.
And while some brand teams do get reports on out of stocks, do they see the commercial impact? And perhaps they feel powerless to stop what is, after all, a space controlled by retailers.
Let’s make on shelf availability a priority
None of this is going to be easy, and none of it will be quick – but given that we all seem to agree that there is a problem and that fixing it is a priority, perhaps it does call for some drastic action?
Build on shelf availability into customer business plans
Too many customer business plans and joint business plans focus on the ‘sexy’ stuff: the campaigns, events and new product launches. Ensure that customer business plans contain objectives detailing in-store on-shelf availability improvements. Ensure that efforts are made to understand the real situation and the costs, and that there is a clear understanding of the causes of out of stocks. Develop cross-functional strategies to improve the situation.
Do less as well as more to improve on shelf availability
Review your current activities and identify those that may have a negative impact on in-store availability. Excessive promotions are often a major culprit. Identify ways of reducing activities which are likely to disrupt in-store availability.
Incentivize on shelf availability using trading terms
If in-store on-shelf is so important, find ways to make agreements and payments to retailers conditional upon this. Many suppliers pay for listing: is it possible to extend this to actual on-shelf presence? After all, that is what the brand is paying for. It might not be an easy thing to ask for, but it certainly has legitimacy.
Start measuring on shelf availability, and act on the findings
As the adage goes, if it isn’t worth measuring, it isn’t worth doing. Ensure that plans are made to effectively monitor on-shelf availability.
Build on shelf availability into KPIs
Lastly, if you want something to get focus, link it to someone’s KPIs. Within a supplier team, there is legitimacy in customer managers and trade marketing teams having on-shelf availability as part of their KPIs. Supply chain teams too: After all, it’s the ultimate measure of their success, isn’t it? Having the right amount of inventory in a warehouse doesn’t help if the shelf is empty.
Ultimately, this is about making both suppliers and retailers more shopper-centric. It’s about making sure that business plans, measurements, KPIs and incentives encourage both businesses to deliver better for shoppers. If you’d like to learn more about shoppers, and how to make your business more shopper-centric, check out Shopper Marketing Experts: it’s a trove of fabulous resources to help you on your way.
I don’t pretend to be able to fix this long-standing and challenging issues within the 1,000 words or so of a blog post. I recognize that the issues are protracted, and resolving these things are challenging. But faced with such overwhelming agreement from readers that this issue needs attention, I thought I’d get the ball rolling. If you have any further suggestions, please add to the comments below.