Stockout or Stock-Up?

Avoiding Stockouts In Your Store

Here’s the scenario: your customer walks in and starts perusing the aisles. She knows she loves brand X skin cream, but the shelf where she knows to find it is empty. Bummer. If you think, “No big deal, she will grab it next time,” you are WRONG. There is an increasing cost of a stockout in a world with Amazon Prime.

The reality is, customers are not loyal to a store like they used to be. They are more likely to be loyal to a product you carry than to your actual store. And if you don’t have that product, well, they can easily hop on Amazon and purchase it to be shipped directly to their doorstep…for less.

Well if we live in an “Amazon Prime” world, you may ask yourself, then why do they still buy from you? They may like your store and the environment, and it may be more convenient to grab the product they love while they are there and buying other items. Or your store may be located in a convenient location for them.

Make no mistake about it though, today’s customers—particularly millennials—are no longer beholden to buying things from you the way Gen X and Boomers were a decade ago. If you have the dreaded stockout scenario, customers will likely go online right then, or later that day, order the item online, often times at a lower price and with free delivery to their door. And because this is a repeated purchase, the next time they need it, what will happen? They won’t bother to look on your shelf, but instead, they will buy it online again.

Ok, they are still coming into your store. You didn’t lose the customer right? In many cases that is true, but you did lose the customer’s lifetime value of that stockout item. If that skin cream cost them $19.99 and they bought it every 3 months, that is $79.96 over a year, almost $800 over 10 years! And if this happens with multiple customers and multiple products, it can add up fast without you even realizing it.

How do you fight this phenomenon?

  • Stay on top of your inventory and empower your associates to do so as well!
  • Start using Open-to-Buy Planning to more proactively predict the right merchandise stock levels for your store.
  • If you are transitioning to the next “it” product, make sure your store (display, signage, staff) does a great job of explaining why this product is better than the last one and a must-have purchase.
  • Offer rain checks or another option (if you like product A, try product B on us)! That one-time cost to you is worth a lot more if the customer repeatedly buys the product from you over the long term.
  • Bring in unique or custom products to create a perception that your products are not available elsewhere or are very hard to find (a la Trader Joe’s) and keep that customer loyal to your store.

Stores need to carry popular brands to establish credibility in the marketplace, but at the same time (and often more importantly) you need to give them reasons to continue their relationship with your store and the brands that you carry.