What happens when you walk through your trusted bottle shop looking for your preferred RTD, and it isn't there?
Your choices are to buy a different variant of the same brand, buy a different brand, search for an alternative product, postpone the purchase, cancel the purchase altogether, or go to another store.
None of these options will leave you feeling pleased… especially if it happens frequently.
Looking at the entire distribution chain, money is only made when the product is in the shopping cart; yet every year millions of dollars continue to be lost due to store out-of-stocks. It’s a challenge that retailers and manufacturers face every day, compounded by margin pressures due to rising raw material and labour costs. For shoppers, the frustration associated with out-of-stocks is often enough to change their behaviour to find alternative products, potentially switching out of your brand for good.
Case study: Out-of-stocks for RTDs
To measure the impact of the out-of-stocks and the size of the missed opportunity, SmartSpotter conducted an out-of-stock analysis for a selection of seven RTD products in nearly 300 bottle shops in the fourth quarter of 2023.
We found that while the average out-of-stock rate was around 8% across the RTD category in Australia, this percentage could reach as high as 25%. About half of these out-of-stocks could be attributed to the stores themselves, with key reasons including the number of facings on the shelf, the product being in the back of the store warehouse, restocking moments and frequency, missing price tags, incorrect shelf placement, just to name a few.
The revenue loss quickly adds up to a considerable amount annually. While this case study is a snapshot using a small sample, it still highlights the need to prioritise addressing out-of-stock situations.
In one out of six stores, one particular RTD product range of six SKUs (4-pack) was unavailable. In one in eight stores, shoppers were left empty-handed in their search for this particular RTD product.
Additionally, we observed that the above-mentioned product range was “almost” out-of-stock (two units left on shelf) in one out of five stores, and the risk of out-of-stocks increased even further during weekends.
Neglecting out-of-stocks is a missed opportunity
Awareness of out-of-stocks begins with measurement and tracking i.e. knowing if and to what extent they occur. If you know the average sales per store, the percentage of weekend volume, and the shopper's response to out-of-stocks, you can relatively easy calculate the potential revenue loss.
You will also have the insight you need to address and discuss out-of-stock issues with staff and trading partners.
Based on estimates taken from our sample, one banner could see an annual "weekend" revenue loss of over $183,000 for a top flavour SKU. While a single retailer could experience an annual revenue loss of $73,000... all for one SKU! This calculation was based on RRP figures.
In many cases, your out-of-stock situation can be quickly improved by focusing on the store floor. Once you've identified the cause and implemented a solution, you'll see results quickly.
So don't ignore the out-of-stock problem... because your shoppers won't!
You can request SmartSpotter for an Out-of-Stock measurement for any product(s) of your choice anytime.
Contact firstname.lastname@example.org for more information.