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How Running Out-of-Stock Affects Your Consumers

By May 31, 2021Features
How Running Out-of-Stock Affects Your Consumers

“Oops, we’re out-of-stock”. That’s one of the factors that significantly discourages online shoppers from patronizing a brand. It is also one of the major nightmares of every online business owner. And to be honest, it does suck. You’ve finally broken through the clutter of merchants online and successfully moved a potential customer down the sales funnel. Your marketing has spurred their interest in your product, and now they’re ready to give you the big bucks. Now, what’s standing between you and a successful sale? Poor inventory management.

Out-of-stock sales not only contribute to missed revenue, but they also decrease customer retention and lower loyalty levels. Consumers always feel disappointed when you don’t have what they need, and the last thing you want is to let customers down.

Luckily, there are a variety of alternatives to your out-of-stock problems. Many of the causes of out-of-stock events can be avoided by taking steps to better understand your company and goods and by improving your inventory management strategy.

This article will help you understand how to accomplish this. We will consider the common causes of out-of-stock and discuss how to prevent them. We will also look at the best ways to recover from out-of-stock events if you inevitably encounter them. Let’s begin.

Causes of Out-of-Stock

Below is a list of preventable factors that contribute to stock shortage:

  • Increase in Demand. An unprecedented spike in purchases of a particular item can also cause out-of-stock events.
  • Capital Shortage. If you’re a growing business, chances are that you don’t always have a stash of cash lying around. A shortage of working capital due to poor cash flow management or poor sales can limit the amount of stock supply possible.
  • Poor Demand Forecasting. Effective inventory management gives you insight into data such as stock turn, sell-through, seasonality, and sales history. All of this helps you make accurate predictions of your customers’ demands. A poor inventory management strategy will leave you lacking on all these fronts, opening you up to errors that reduce your ability to serve your customers.
  • Inaccurate Inventory Data. Another culprit of stockouts is discrepancies in inventory data resulting from misplaced products, returns, or stolen goods.
  • Poor Employee Training. If your inventory control staff are ill-equipped to monitor your stock levels and replenish when due, you are more likely to have frequent out-of-stock events.

How Out-of-Stock Affects Your Customers

The impacts of out-of-stock go beyond the direct loss of revenue on a single item. Your brand image, conversion rates, customers’ loyalty, and even your future efforts are affected. Customers are less likely to return to your brand if the first thing they encounter while trying to make a purchase is an out-of-stock notification.

woman online shopping
Out-of-stock means leaving money on the table.

Customer response to out-of-stock events may vary depending on the relationship they have with your brand. Common consumer response to stockouts include:

  • Purchasing from competitor merchants. Statistics show that stock availability is one of the top factors that influence customer satisfaction. Out-of-stock experiences tend to cause customer frustration and as a result, drive them to a competitor’s store. It is estimated that 91% of customers aren’t willing to engage with the same store after a bad experience with it.
  • If they are loyal to your brand, customers might settle for a different size or a variation of the same product.
  • Loyal customers who are not in dire need of the item may wait to buy the item when it is restocked.
  • In cases where a product has been heavily advertised or promoted, such as during sales or promo campaigns, customers faced with a stockout may feel let down or even goaded, which is harmful to your brand image.
  • New customers encountering an out-of-stock item while adding items to their cart may ditch the site altogether. They may even abandon other items in the cart that are not out of stock.
  • Customers are likely to be more tolerant of an out-of-stock encounter if they are given a reasonable restock. However, failure to meet up with the promised date will increase customer dissatisfaction and may lead to losing them permanently.

How to Prevent Out-of-Stock

Optimize Your Supply Chain

To reduce out-of-stock instances, it is important to ensure that every part of the supply chain is optimized for high-level efficiency. This means manufacturers, distributors, retailers, everyone involved in producing/delivering your SKUs.

Here are some tips to fix supply chain weak links:

  • Identify high-demand SKUs on a temporary and permanent basis so that manufacturers can be prepared to produce adequate product volumes.
  • Collect transparent delivery timelines so that there are no mix-ups with logistics. Give room for unforeseen hitches in delivery and optimize your operations accordingly.
  • Make arrangements for alternative distributors in case of bad weather or downtimes.

Connect Your Inventory to Your Storefront

Connecting your supply chain to your storefront is the secret of a highly effective merchandising team. You don’t want to be reactive and at the receiving end of a stockout condition. You need to be proactive and alerted when key products are about to sell out (stock-out threshold is extremely important here and you need to be able to adjust it for each product in each category) and when they are sold out.

As an online business, it is best to use a point-of-sale or inventory management system that automatically adjusts inventory levels as you make sales. This way, you won’t have to worry about manually updating your stock count. This is especially useful if you have multiple store branches because they allow you to manage all of them from one central system.

Recovering From Out-of-Stock

If you inevitably run out-of-stock on some items, there are ways to mitigate the effects on your customer retention. First, you need to be alerted that the stockout may be coming so you could figure out appropriate replacements and merchandise your site appropriately. This is an advanced feature but highly desirable!

To make the customer journey better, you could give users the option to receive email or push notifications when the out-of-stock items are back in stock. Also, you could nudge customers to find similar products on your storefront. Either way, staying in touch is a great customer support tactic that keeps customers coming back. Statistics from customer satisfaction research show that customers value quality of service more than speed.

Shein nudges customers to find similar items to the out-of-stock ones. Image: Shein

Conclusion

Running a business is taxing. There are so many aspects that you have to constantly monitor and control. It is incredibly helpful to have a system that ensures that your inventory is always optimized to meet your customer’s needs. Contact us today to get started with tools that help you position your eCommerce business for success.