Harper Grey: Out of Stock – Inventory Solutions
by Harper G, May 10th
Out of stock. Those three words can be the most discouraging words a shopper can hear. Retail stores struggle to find a balance between over-stocking and under-stocking. Especially in a down economy, over-stocking can create huge losses if the product doesn’t move. It’s safer to order a smaller amount of product, knowing that it will all sell and just take the risk of losing out on some sales, right? Not always. If your business gets the reputation of never having enough stock, you’ll lose customers – maybe forever.
A recent survey of retail shoppers reported that 40 percent reported out-of-stock issues as a common problem. (1)
I’ve already told you about some of my spring shopping escapades (see my articles about store layout and store temperature). During those shopping trips, I also ran into some out-of-stock issues while looking for new clothes.
The Cute Boutique Left Me Empty-Handed
One cute little boutique shop in my town always has stylish stuff. It’s a really small shop, though, so stock is always limited. The day I was there, the displays featured tons of adorable clothing and I was ready to buy. But every time I tried to find my size, all the store had left was extra-small and extra-large sizes. I finally asked the owner what she had in the store in a medium size and she confessed that she didn’t have much – just a few plain t-shirts. She would be getting a shipment in the next two weeks. Unfortunately, I wanted to buy clothes now. I left empty-handed.
Studies show that if the customer wants an item and it is not in stock, 30 percent of the time they leave immediately, without buying anything. (2)
The Chain Department Store Failed
I tried a larger, chain store. I like this store because it has a huge variety to choose from, the quality is decent and the prices are great. But I ran into the same issue. Tons of choices in the extra-small size. A few extra-larges. No medium or large items, except in the horrible colors or garish designs no one wants to buy. I cornered an employee near the fitting room and asked her what was up. “We’re getting a shipment soon, I think. Those medium and larges always sell out in the first few days.” Well, that makes sense. I think most people out there are a medium-ish size. There are a few model-thin extra smalls, and a few chubby extra-larges. But most of us fall somewhere in the middle. Many of the items I wanted were on sale. Not a fabulous clearance price of 80% off or anything, but a nice little reduction.
EPC Global reports that out of stock issues jump from 8 percent to over 20 percent when the item is on sale.
The Upscale Department Store Got it Right!
Starting to feel discouraged, I tried a third store in the mall. I love this store—it’s an upscale, plush department store (I wrote about it in Fitting Room Experience). It’s gorgeous, with beautiful fixtures, a pianist playing soothing classical music, and an overall decadent feel. It’s expensive, but not Beverly Hills expensive; just a little higher than what I’m accustomed to spending. But I do shop there occasionally. The buyers at the upscale department store have figured out how to order inventory. Everything I saw that I liked was available in my size. Some of it was on sale, some of it wasn’t. I found a few cute new outfits and dropped a bit more cash than I had planned, but at least I found something.
EPC Global says that 47% of consumers shop elsewhere if an item they want is out of stock.
The Inventory Issue
It’s easy for the upscale department store to keep items in stock. They’re a huge national company with a great reputation, so some of the brightest minds in retail vie for their corporate office jobs. They have the money to install a comprehensive, integrated inventory system, so that every time a t-shirt is sold, the system takes note and automatically orders more product before it’s even needed. The lower-scaled store has some kind of automated system, but it’s obviously failing. And the small boutique owner? Are you kidding? Her inventory tracking system is not automated – it’s her.
So what to do?
- Know your customers. If most of your customers are teeny-tiny women, then stock in plenty of size 2’s. But if your customers are just normal people, you need to order mostly clothing that falls in between the extra-small and extra-large sizes.
- Plan ahead for promotions and sales. If you’re having a huge sale and advertising heavily for it, make sure to stock in plenty of merchandise or you’ll just find yourself with a bunch of frustrated customers.
- Pay attention to external factors. What’s the weather like in your town? Does it pay to carry sweaters past February? In my town it would—we’re all still wearing sweaters and coats until May. In my town, if you have a boutique full of bikinis and shorts in February, you’re not going to sell much for at least three months. Think about what your customers need and order accordingly.
- Look into inventory tracking systems. These are available in a wide array of prices and you might be able to find one to fit even a small budget.
The thing about shopping for clothing is that most women don’t show up with a specific idea of what we want. We just want to find something cute. The weather is changing, so we need different clothes. We show up at stores, hoping to find something that catches our eye. Then we buy it. If we can. 70 percent of shoppers make their buying decisions after they are inside the store. So, once we decide to buy, it’s in your best interest as the store owner to have what we want.
1. Accenture Retail and CGS Innovation Survey: US Results. January 2007.
2. PC Gobal, 2012.
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