‘Lack of product availability is a real and present danger to delivering sales growth’

Retailers have spent billions on smarter systems and forecasting over recent years, so you’d be forgiven for thinking that the industry should be operating more effectively than ever.

But the painful reality is that for many retailers, lack of product availability is a real and present danger to delivering sales growth.

In recent research conducted by OC&C, 45% of consumers have said that they had ended up having to shop elsewhere for items when their first port of call didn’t appear to have what they wanted in stock.

The industry has had some decent excuses for its struggles over the last couple of years as a catalogue of geopolitical and macroeconomic shocks struck their supply chains hard.

However, we live now in more stable times. In a world where industry volume growth remains sluggish, and retailers are hunting under every boulder and pebble for like-for-like growth, a proactive strategy for product availability should be high up the to-do list.

As retailers look for a solution, it is worth exploring some of the root causes of the issue. On my travels around the global retail sector, there are three prominent challenges I have seen as recurring themes:

• Many retailers are partially sighted about the issue altogether. Historic metrics provide false reassurance and often conflate stock availability (ie, do I have the product in my system?), actual on-shelf availability (ie, do I have it somewhere my customers can access?) and perceived on-shelf availability (ie, can my customers easily find it?).

I have seen first-hand retailers tracking smugly at 95%+ in stock availability in their daily trading reports but offering over 10% lower than that on the shop floor. As with all things, finding the right remedy starts with a crystal-clear diagnosis of the ailment.

• There are real tensions for retailers as they look to balance availability and cost efficiency. Significant focus has been placed on managing margin and operating costs through product, sourcing and operating models.

This has led to several challenges that dampen availability, ranging from overly cautious volume commitments, a shift back to cheaper but longer-lead sourcing routes, sub-optimal markdown management, reduced delivery frequency, reduced hours devoted to replenishment. The list goes on.

Many of the business cases for these actions have been built based on cost savings, but now need to be recalibrated to account for the sales impact they have.

• Retailers have lost the art of smoke and mirrors. Over time the level of transparency and rigidity of retail models has increased while range size and complexity have typically grown.

Shelf-ready packaging and electronic shelf-edge labels have reduced the ability to spread stock over the shelf gaps. In grocery, substitution rate has become a more prominent customer-facing metric, while in fashion, the industry has conditioned customers to see ‘when it’s gone, it’s gone’ as a negative rather than an exciting model for introducing newness.

Appreciating that it is not wise advice to suggest retailers look to pull the wool over the eyes of their customers to hide their availability challenges, there are more delicate and ‘advisory’ ways that retailers can guide their customers to alternative suggestions and limit the extent to which they lose the sale.

So, what does this all mean?

Retailers need to urgently revisit the metrics they are using to track and drive availability and build a clearer sense of where intervention through their end-to-end product model can drive downstream value – potentially, and selectively, releasing the shackles on some of their recent efficiency programmes.

They should also not lose sight of the fact that the solution will also require art, not just science. Reviewing how they insulate themselves better from individual product availability through the way they guide customers to make choices from the products that are in stock rather than fixate on the ones that aren’t.

Addressing availability is a big and pressing opportunity. Retailers need to seize the initiative and shouldn’t underestimate the potential a proactive approach will have in driving much-needed near-term sales growth and delivering long-term customer trust and loyalty.