Out-of-stocks and overstocks plague retailers as they struggle with the omnichannel experience.
Finding just the right balance in the omnichannel world is a serious challenge for retailers any time of year, but especially during the holiday shopping season, it can be downright impossible. This year, a number of retailers faced bloated inventories while others had to contend with disappointed customers due to out-of-stock items.
Out-of-stocks are particularly common in the “hot toy” category, with items like the Barbie Dream House, Paw Patrol, or Shopkins items, and it is likely the omnichannel efforts of retailers that have made these out-of-stocks more prevalent.
Adobe found that out-of-stock rates on online shopping sites are 10 to 15 percent higher this year than they were in 2014. On December 21, Adobe says that out-of-stocks were at 14 percent, or 1.4 out of every 10 product views, as high as they were on Cyber Monday.
Perhaps not surprisingly, out-of-stocks were particularly prevalent among toys, including the Pie Face game, a new Hasbro toy in which players get hit in the face with a heap of whipped cream. The game was out-of-stock online at Target, Walmart, and Toys R us. Amazon.com had the game available, but not until January.
The out-of-stocks are most likely a symptom of the struggle retailers are having with omnichannel, which pivots between digital and in-store shopping. As customers push for faster, more efficient delivery of orders, retailers are using stores as e-commerce fulfillment centers to fill “click-and-collect orders,” making stocking more complex. And stores are also working from leaner inventories, in an effort to stock items that more precisely reflect their anticipated sales.
“With each step forward, we uncover problems of the past that retailers just haven’t fixed yet, and inventory placement is a big one that retailers have not fixed,” Steve Osburn, a partner at the consultancy Kurt Salmon who studies retail supply chains, told The Washington Post.
Another interesting factor is that out-of-stocks throughout the season have been highest on Mondays. The highest rate so far this season came on Dec. 14, when 16 percent of product views showed an out-of-stock. That was followed by Monday, Dec. 7th, when the rate was 15 percent, and then Cyber Monday and Dec. 21, which each had a 14 percent out-of-stock rate.
Out-of-stocks can be a costly occurrence for retailers, as a study commissioned by IHL Group has found. In 2015, out-of-stocks, overstocks, and returns are costing retailers an estimated $1.75 trillion a year, and “out-of-stocks accounted for $634.1 billion in lost retail sales for the year ending in the spring. This represented a 39 percent increase over 2012.
Overstocks, too, have contributed $471.9 billion in lost revenues, a 30 percent increase from 2012, with unseasonably warm temperatures leaving many retailers stuck with coats, boots, and other winter gear. The overstocks will inevitably lead to end-of-season markdowns that will eat away at retailer profits.
The retailer struggle with omnichannel shopping is not a new one: in May, the eBay Enterprise Technology Update found that retailers were not performing well in omnichannel alignment of product information and supply.
"It's been clear for some time that shopping has become an omnichannel process," CFI Group CEO Sheri Petras said in a statement. "To present consumers with a proper retail experience, those channels need to communicate efficiently. Doing so promotes confidence and trust for the consumer, while avoiding the frustration and confusion that comes with receiving inconsistent information."
"Shoppers today are empowered," Petras said. "As more of them take advantage of the mechanisms available, retailers need to stay competitive by providing accurate online information and a healthy line of communication about that information across all channels."
Retailers also need to find the delicate balance of in-stocks versus overstocks or out-of-stocks to meet the omnichannel demands.
