Making Lemonade Out of Lemons: How Retailers Save the Sale
From personal experience, everyone knows how frustrating it can be to go to your local store only to find the item you wanted is not in-stock. This feeling of disappointment can even be amplified during peak holiday seasons, particularly if the item in question is something a child or loved one really desired. Merchants that struggle to keep key items in stock may run the risk of letting their shoppers down, and that may even result in loss of loyalty on top of missed sales opportunities.
Retailers need to realize that running out of stock is not acceptable. Some merchants may write some of these lost sales off, assuming that a single sale is not worth the potential loss of ordering too much inventory. As Harvard Business Review noted, a common fallacy among some merchants is that customers will likely just purchase a substitute item anyway if the product they are looking for is not available.
However, the fact of the matter is that not all customers are that flexible, particularly in this day and age where so much time and effort goes into pre-planning purchases. If an item is not in stock, customers will just find somewhere else to make that purchase – as HBR puts it, stock-outs cause walkouts.
While the precise shopper response changes based on a number of factors, such as the product in question, people are very willing to simply look elsewhere. For instance, the HBR study found that 43 percent of cosmetics buyers would opt to purchase the item at another store instead if it was out of stock. Conversely, only 20 percent were willing to to make a substitution in-store.
Making a sale without the stock
Maintaining inventory levels is no easy task and no matter how much forecasting and trend-reading merchants do, there are some unforeseeable factors that will lead to merchants occasionally running out of specific products. However, that does not mean that retailers are forced to lose the sale. In fact, they have a number of options for salvaging these purchases, thanks in large part due to omni channel tools that can help retailers serve their customers, even when they don’t have the right product in stock.
Modern inventory management and supply chain tools allow retailers to track the precise location of stock, down to a shelf level. They can tell whether it is misplaced on a shelf, sitting in a warehouse or in transit from one retail store to another. Merchants can use this real-time knowledge to help them ensure customers walk away happy.
One example of using this technology to save the sale is by simply finding misplaced product within the store. Customers may grab an item off a shelf and decide they don’t want it before they check out and put it on a nearby shelf to avoid returning it to the original spot, or perhaps an employee was new or in a rush and did not place the product where it was supposed to be on display. This can create situations that look like out of stocks, but with RFID tools and other technology, merchants can quickly determine whether they are actually out of stock or whether product was misplaced and can quickly save the sale.
The endless aisle
The more common scenario, however, is that merchants do run out of stock but this does not mean that sellers need to give up the sale. If retailers understand where their stock is located at any given moment, they can give customers the option to purchase the item right then and there and then decide how they’d like to receive that item. For example, they could opt to pickup the item in-store when it is in stock again, they could go to a nearby sister store to pickup the item or the in-store associate could arrange to have the item shipped straight to the buyers home (either by shipping it from a distribution center or when it arrives in store).
This is called the endless aisle concept, because retailers can effectively sell goods even if they are not currently in stock. What is even better is that merchants can handle this in a variety of ways. Store associates could engage customers with their tablet devices and use these tools to check inventory in other locations, reserve products, make purchases and otherwise close the sale. Conversely, retailers could setup kiosks throughout the store that allow customers to read up on goods and make purchases, without having to even engage with store associates.
Running out of stock does not have to mean a lost sale. Retailers can often save the sale by simply making better use of their cross channel inventory, which may play a pivotal role in not only driving sales but also improving the shopping experience.