Out-of-Stock Means Out-of-Business

Out-of-Stock Sign

December 9, 2016

A customer goes into a store looking for a certain item, maybe they saw it online, maybe someone told them about it, but when they arrive the item is out-of-stock. This common problem means more than just one lost sale at the value of that item.

When a customer doesn’t find the item they are looking for, they almost certainly won’t be looking for other items to purchase during the same visit. “The probability of selling to a new prospect is 5-20%; the probability of selling to an existing customer is 60-70%,” according to Paul W. Farris, Marketing Metrics.

When a customer doesn’t find the item they are looking for, they will almost certainly head straight for one of your competitors. A recent survey showed that 81% of consumers will shop at a competitor if a product is backordered or out-of-stock.

So not only have you missed out on the opportunity to make a sale, up/cross sell and create customer loyalty, you have provided all these opportunities to your competitor. If a competitor has the item in stock and provides a good service, chances are you have lost this customer for life, or at least years.

When a customer doesn’t find the item they are looking for, that is the impression they get of your store and that is the impression they will share with others. Word of mouth is a powerful channel for bad publicity. From one disappointed customer may come a dozen bad references and potentially a dozen more from each of those. So one out-of-stock situation can snowball out-of-control.

Out-of-stocks are sometimes unavoidable, the key is minimizing them. By using RFID for inventory tracking alongside big data analytics for predicting sales demand, retailers can avoid the vast majority of out-of-stock situations. This is vital for ambitious retailers because out-of-stock can soon mean out-of-business.

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