How tech is fixing a big issue in retail: out of stocks
Much of Salmon’s thinking focuses on the nascent and fast-advancing technologies that are set to transform and protect the fortunes of retailers in the coming years. Yet whilst AI, IOT, VR and AR are stealing the headlines, it’s worth businesses being alert to the tech solutions making a difference for brands today. Here’s one particular example that’s solving the challenge of inventory visibility in retail:
Out of stock items! (or ‘out of stocks’ as they say in the trade). Every shopper has encountered them. They’re frustrating. And a problem of XXL proportions. How big? Try this pair for size:
- 76% of consumers want retail agents to find out of stock items for them
- 74% of us will switch to a competitor if a retailer can’t locate an out of stock item online
These are two key findings of a 2016 IBM survey of 1,500 UK consumers on their retail expectations and their opinions on out of stocks. It doesn’t make for good reading for retailers. Worse still, it’s not just the immediate lost sale that’s the problem. The study revealed that consumers would also forfeit future shopping trips to a retailer when faced with an out of stock.
But there is a silver lining. If you can recover from an out of stock, the upside can be significant. IBM found that 78% of shoppers will buy an out of stock item if you can locate it online.
The challenge of solving Out of Stocks
The first step is inventory visibility. Your retail agents need to see all the inventory available in your stores and your distribution centres. That might sound like a mighty challenge, but today there are flexible order management solutions that do just that. They integrate easily with your Point of Sale and Warehouse Management Systems, and they can be accessed from a mobile device so your agents can interact easily with customers on the sales floor.
How can Order Management systems help?
For many leading retailers, especially in fashion, an Order Management system is now an essential component in their omnichannel fulfilment operations.
It acts like a cockpit, offering a single view of these various operations. It lets you see inventory across all locations (including inbound inventory), customer data, and order fulfilment status from all order capture and fulfilment systems in a single interface. It also lets you define and refine fulfilment rules to provide an optimal customer experience.
As it integrates data from multiple systems, you get a single, real-time view of your customer orders and fulfilment operations, which supports:
- In-store pickup of online purchases
- Ship to store
- Ship from store
- Real-time order status
- Real-time returns processing
- Promising against inbound inventory, not just on-hand inventory
It can also provide a mobile interface for your store agents so they can locate out of stock items for a customer at another location, and provide better cross-sell and up-sell recommendations.
What’s the commercial return on Order Management?
Let’s do the maths on basic out of stock recovery. And, bear in mind, there are other ways an Order Management system can reduce costs and increase revenue.
- Say you have 100 stores, and each store has 2 out of stocks a day
- Multiplying that by 362 days per year gives you 72,400 out of stocks across your store network each year
- Now 78% of customers will buy an out of stock item if you can locate it. Say your average item costs £30. If we multiply 78% x £30 x 72,400 out of stocks across your store network, that’s £1,694,160 in lost sales each year.
£1.7M. That’s a big number. And this doesn’t even take into account forfeited shopping trips due to an out of stock item, nor related purchases, nor the impact to your retail brand for delivering a lo-fi CX.
If you’re a retailer squeezed by ever-thinning margins and ever-increasing agile competitors across channels, ask yourself, can you afford not to recover that revenue and trust?
If you’d like to discuss your omnichannel strategy, and how to reduce out of stocks and optimise your inventory and fulfilment, Salmon will be happy to help.