Friday, November 13. 2009Just in time to stand in line, empty handed
The announcer on the radio tells me that we've started the "unofficial" shopping season for Christmas. For many consumers, this news conjures thoughts of vast parking lots filled with cars, longer checkout lines, out of stocks, and reruns of those classic Christmas programs. It's not all bad, though, is it!?
Unrelated to my personal shopping expectations, I was also reviewing research on retail technologies when I came across a 2008 report called "Retailer's Guide: 2008 POS Software for Softgoods Retailers" by IHL Group, based in Franklin, TN. Published on Aug. 8, 2008, the report highlights the point of sale leaders as well as citing other trends impacting the industry. As you might expect, there is a section on key trends effecting retailers, including economic conditions, pricing pressures, rising labor costs, internet use, share-of-wallet and terrorism. Here is the part that caught my attention. "...consumers asked about things that bug them most about shopping, #1 on the list is standing in line and #2 is frustration caused by not being able to purchase a product the store is expected to have or has promoted in an ad." Retailers, both large and small cannot control economic conditions, rising labor costs, internet adoption, or terrorism. What they can control is the consumer experience within their store and that is what makes the IHL Group findings more unique. There's more. Based on released in the 2008 IHL/RIS News Store System Study, "data suggests that many retailers are in denial about the extent of this problem...retailers judge out of stocks through the eyes of paid personnel and reports from inventory systems." Common belief is that, "...the typical retailer will be out of stock on 8 percent of items, for promotional items, 15 percent, and Wharton School of Business found perceived out-of-stock rate by shoppers is near 24 percent!"
Who or what is to blame for out of stocks? There is a huge opportunity cost to retailers who get this wrong. According to the report, the top 5 reasons for out of stocks are:
What happens next? According the study, and my personal experience, the sale is not lost entirely. The consumer goes to another store or merchant that has the product in-stock. One store wins, another looses. If you are a small or medium business (SMB), I suspect you cannot just pull stock from another store. For that SMB retailer, not forecasting correctly has implications beyond the transaction and includes damage to the brand image. Planning tools and forecasting techniques would appear to be the obvious place for SMB retailers to excel, to compete most effectively against giants like Wal-mart or Target. Why do so many rely on spreadsheets? Instead of being frustrated, maybe we should all just leave our own personal note on the empty shelf that says: "Stopped by with my wallet today. Trackbacks
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