Cost of out-of-stocks: why new OSA research matters

Are you ready for the most comprehensive global study of on-shelf availability in more than 20 years?

For retailers, the cost of out-of-stocks starts with sales that can be lost even when a customer is ready to buy.

Missing products can send shoppers elsewhere, leave online customers with unwanted replacements and add work for store teams.

Our earlier research put numbers to those consequences and tested ways to address them.

Ahead of the new report, authored by Prof Daniel Corsten, Colin Peacock and Thomas Gruen, that evidence shows just how much is at stake.

The sale an empty shelf puts at risk

In 2003, Daniel and Thomas Gruen brought together more than 50 studies to examine the scale of out-of-stocks, reporting a global average of 8.3%.

That figure helped establish how much of the shopping experience could be affected by missing products and the different actions shoppers could take when the item they want is not on the shelf

• choosing another brand or size;
• delaying their purchase;
• buying elsewhere;
• or even going without.

As a result, an empty shelf puts more than one product’s sales at risk; it can give a customer a reason to visit a competitor.

And even when a substitute keeps the sale in the store, a cheaper product or smaller pack can reduce its value.

Better records, more sales

One of the clearest demonstrations of the opportunity came from our 2020 research on the sales impact of improving inventory records.

Researchers compared stores where stock records were corrected through counts with comparable stores where they were not.

Correcting inaccuracies led to approximately 4–8% higher sales in participating retailers.

This provided a concrete commercial reason to look again at stock accuracy: counting could help recover sales as well as reconcile the books.

The shelf now serves the online customer, too

When stores fulfil online orders, the picker encounters the same missing products as the shopper in the aisle.

Someone then has to find a replacement, and the customer may receive something they did not choose.

Our discussion of substitutions for orders picked in store examined the extra work this creates.

A modelling exercise presented at the meeting estimated that, in a 25-item order with two items unavailable, finding and picking substitutes could account for 24% of total picking time.

While that model was based on assumptions, it illustrated how missing products can affect the cost of serving an order.

New ways to see the problem

New ways to see the shelf are widening the possibilities available to retailers.

In our podcast on shelf cameras, Daniel explored how images from fixed cameras, robots and staff-worn devices can complement existing availability signals.

He also discussed the store processes needed to act on what those signals reveal.

From shoppers switching stores to pickers searching for replacements, the consequences of missing products are well documented.

The forthcoming report brings fresh research to the question that connects all this work.

It will help retailers to get more of the products customers want onto the shelf when they want them.

The report, On-Shelf Availability Leadership, launches on 30 November. It’s free to attend, but places are going fast, so secure your spot today.