Supply chains continue groaning under the weight of material shortages and shipping delays leading to historic out-of-stock (OOS) positions, and are steering consumers to substitutions.
At best, it’s a lose-lose-win scenario. Customers don’t get desired brands, and brands lose the sale. The retailer wins — but only if the shopper accepts a substitute. If not, it becomes a far more serious lose-lose-lose situation that creates lasting problems for merchants and brands.
As The Wall Street Journal reported in November, “Out-of-stock messages to online consumers have risen 32% since June, with August levels being highest for apparel, followed by sporting goods, baby products and electronics, according to the Adobe Digital Economy Index.”
Attempting to quantify the problem, PYMNTS surveyed nearly 2,100 U.S. consumers on Black Friday weekend, finding that “inventory stockouts cost retailers up to $4.6 billion in lost Black Friday sales, as 38% of shoppers — 55 million people — could not buy at least one of the purchases on their list because retailers did not have it.”
PYMNTS’ research found that consumers had planned to spend an average of $253 on items that ended up out of stock, meaning “retailers lost a collective total of up to $30 billion.”
“The strong majority of shoppers who could not find the items on their lists the first time ultimately went to other retailers … or wound up buying alternative items,” PYMNTS discovered, adding that 15% of shoppers confronted with out-of-stock alerts bought nothing at all.
See also: Inventory Stockouts Cost Retailers up to $4.6B on Black Friday
Brands May Be the Biggest Loser
The OOS loss to consumers is experiential in nature — words like “frustrated” and “disappointed” apply, often accompanied by expletives — and the loss to retailers is steep.
What’s less clear is the hit that out-of-stock brands are taking as the situation drags on.
In a blog post, eCommerce channel optimization (ECO) firm CommerceIQ noted that “being out of stock has long-term impacts. The brand has … lost repeat sales on the product. The lost sale reduces the relevance of the product to future searches, reducing future sales overall. So, maintaining a good in-stock rate is critical for any brand wanting to succeed in eCommerce.”
Industry news site MarketingMind did some math on OOS that sheds light on losses, calculating that if a given brand experiences an OOS rate of 10% across 50 stores or eCommerce sites selling an average of 250 items per month each, lost brand sales total 12,500 items from just that sample.
The post added that “manufacturers do not want to give their loyal consumers any reason to try competitors’ products, let alone compel them to do so. Once these consumers experience something new, their loyalty might permanently shift to the competing product. In which case, in addition to the loss of current sales, the stockout results in the loss of future sales.”
See also: Don’t Expect Durable Goods Ordered in 2021 Until 2022 as Supply Chain Snags Drag On
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