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Out-of-stocks can be costly for several reasons

Neil Matthews, Vice president of retail security firm Checkpoint Systems.

An excellent shopping experience is the foundation on which a successful retail operation is built and there can be few sectors where this is truer than fashion.

While knowledgeable and personable employees able to offer informed advice and assistance are important, the cornerstone of meeting shoppers’ requirements remains the availability of merchandise - ensuring the right items are in the right place at the right time.

Out-of-stock items can prove costly to retailers for a range of reasons, with loss of a potential sale being only the most obvious.

The Retail Feedback Group’s 2012 Supermarket Experience showed 50% of shoppers who couldn’t find an item in stock went to another store to buy it. Furthermore, out-of-stocks can harm future sales, with frustrated shoppers switching their loyalties to outlets that more reliably stock the items they are looking for.

In some respects, ensuring the right garments arrive in store at the right time is harder than ever - inventory turnover is faster, global supply chains are growing in complexity and internet retailing complicates stock level monitoring. In addition, theft poses problems for retailers and results in items being out of stock.

The good news is that supply chain and loss-prevention technologies address the issues of modern retail. One example is radio frequency identification (RFID), which is being deployed chain-wide by large clothing retailers and brand owners across the globe.

Unlike a barcode, RFID combines a product code with a serial number to uniquely identify each item. The additional supply chain visibility this offers is a powerful tool in reducing out-of-stocks and improving the consumer shopping experience.

Successful fashion retail involves knowing what has happened in store, as well as what will happen - it takes a synergy of hardware, software and data analytics to get right.

Readers' comments (2)

  • Thierry BAYLE

    Neil is right when he states that out-of-stocks affect the business now and in the future. It destroys Brand value and pushes customers to shop elsewhere.
    In addition, if your competitor is good, the customer may not only buy the missing dress but other pieces too and you have lost much more than just the price of just one item which was out of stock.

    Buying is about Art and Science. The Science part is covered by the Open to Buy plan and specifically answers the questions:
    How much to buy?
    When to bring the goods in?
    Many brands and retailers do not know this Open To Buy concept which applies to Retail operations even if you have just one shop.

    A buying error of £5000/ £10 000 at cost can pay for a whole year of the Open to Buy services.

    RFID... - Technology is taking a bigger part and must be used to improve operations.
    Can RFID technology allow an immediate stock count without having to go through counting each single piece?

    Thierry Bayle

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  • Neil has highlighted a key point here. Not only do out-of-stocks lose retailers a sale immediately, but they risk losing all future sales from that individual customer.

    Using data and analytics to understand customer lifetime value based on what they keep, not just what they buy, will show retailers exactly how customers should be targeted to retain this recoverable value.

    Another issue with out-of-stocks are changing customer behaviours. There are the 'overbuyers' who order many items online to make their final decision at home on what they will actually keep. This means customers who genuinely intend to keep a specific item lose out as overbuyers sit on stock they have no intention of keeping.

    Ellie Turner,
    Clear Returns

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