News

It’s Time to Address Out-of-Stocks

BY CSA STAFF

By Jeff Weidauer, [email protected]

Talk to anyone who has been in the retail business for a while, and they will tell you that the world has changed, and continues to do so. Technology is changing daily how shoppers think about the trip, how retailers track sales and shopper behavior, and the way CPG manufacturers approach category management. Metrics abound, and the seemingly simple business of retail now depends on complex algorithms and data analysis to grow and profit.

Despite the availability of myriad data solutions, challenges remain; not all of the problems have been solved. Perhaps the biggest — and possibly most misunderstood — is the problem of out-of-stocks at retail. A number of studies have been done over the past decade or so; OgilvyAction, GMA, and IHL Group have all looked at the problem of out-of-stocks, and found that significant opportunity remains for retailers in this area.

The food industry average, based on numerous analyses, is estimated to eight percent of the total store that is out-of-stock at any given time. That should be an alarming number — in a typical 40,000 SKU store this equates to over 3,000 products. But that’s only the tip of the iceberg. Shopper perception is closer to 25%, i.e. shoppers see a much greater problem because the items that are out-of-stock are more frequently on sale or otherwise high-demand items.

In fact, an OgilvyAction study estimates that 13% of shoppers leave the store without making an intended purchase. The GMA estimates that 25% of out-of stock items are in the store, just not on the shelf. Further, fully three-quarters of out-of-stocks happen in-store, meaning they aren’t caused by supply chain problems. These out-of-stocks all equate to roughly 4% of total sales, never mind the dissatisfied shoppers who eventually move to another store.

There is a compelling case here to do something about reducing the incidence of in-store out-of-stocks. Solving the problem — or at least the majority of it — will take some time and resources, but the return on that investment promises to be significant.

The first step is to define and understand the problem at the store level. This is where the majority of out-of-stocks are originating, and there are a number of possible causes.

As stated previously, as much as 25% of out-of-stock items are actually in the store, but not on the shelf. Typically this is caused by one of three scenarios:

  • “Holes” on shelves filled with other items – this is the single most common culprit. Often store personnel try to hide holes by facing over them with other product. In some cases the shelf tag is removed; subsequently the product is never reordered, and the temporary out-of-stock becomes a permanent one. Even if the product is in the backroom, it never makes it to the shelf because the spot is gone.
  • Hidden items obscured by adjacent product – this happens when the available space isn’t enough to put up a full case of product. The new product is crammed into other areas, and takes over the space next to it, burying the item that should be there.
  • Inaccurate shelf tagging – this situation has become more common as inexperience personnel, unable to decipher the often cryptic item descriptions on a shelf label, misplace it on the shelf.

The primary cause of all these “in-store out-of-stocks” is poor planogram compliance, according to numerous studies. The problems often begin with errors during the initial shelf set, and only gets worse from there. While printed planograms may provide a useful guide for where the products are intended to go, ultimately the person doing the reset determines how much space and how many facings each product receives. The stocker also must place subtle variations and different sizes of the same item in correct configuration.

While there are POS-based solutions that can alert the store if a top-selling product is no longer coming through the checkout, these are “after the fact” alerts that don’t prevent the problem from occurring in the first place. The goal is to have a system that will ensure planogram compliance for the initial set, as well as a way to protect that integrity over time.

Strips mounted into the shelf molding are an effective way to accomplish both of these goals. Seemingly simple, shelf edge planogram strips provide a visual map of how the planogram lays out on the shelf. These include the product description, the number of facings, and an image of the product. That last piece is important, as it assists both the reset/stocking teams, as well as the shopper when looking for an item.

Because shelf strips are full-length and customized for each shelf, out-of-stocks won’t become permanent, and the tag won’t disappear or get moved around. This is especially helpful in direct store delivery (DSD) categories like bread where planogram integrity is especially difficult to maintain. In addition, new item cut-ins can be done quickly and easily, and the new product is virtually guaranteed to end up in the right spot.

The other benefit to using a shelf edge strip solution is the labor savings component — as high as a 50% savings compared with using the standard printed planogram. This savings is more than enough to cover the cost of the strips.

Retailers are finding it necessary to take the out-of-stock problem seriously. Implementing shelf edge planogram strips is a cost-effective and efficient way to do so. The sales growth, labor savings and enhanced shopper satisfaction are well-worth the investment.

Jeff Weidauer is VP of marketing and strategy for Vestcom International Inc., a Little Rock, Ark.-based provider of integrated shopper marketing solutions. He can be reached at [email protected], or visit Vestcom.com.


More Web Exclusives/Guest Commentaries

keyboard_arrow_downCOMMENTS

Leave a Reply

gild123 says:
Jan-19-2013 11:02 am

The Oracle 11g R2: RAC and Grid Infrastructure Administrator certification identifies professionals who are skilled in Oracle Grid Infrastructure and RAC Administration. The successful candidate must be able to install and configure Grid Infrastructure. Oracle Certification exams, 1Z0-225, 1Z0-226, 1Z0-228, 1Z0-238

gild123 says:
Jan-19-2013 11:02 am

The Oracle 11g R2: RAC and Grid Infrastructure Administrator certification identifies professionals who are skilled in Oracle Grid Infrastructure and RAC Administration. The successful candidate must be able to install and configure Grid Infrastructure. Oracle Certification exams, 1Z0-225, 1Z0-226, 1Z0-228, 1Z0-238

TRENDING STORIES

Polls

Are you hiring seasonal employees this year?

View Results

Loading ... Loading ...
News

Food retail vets join board of supply chain technology provider

BY CSA STAFF

PARK CITY, UTAH — Park City Group, a provider of consumer goods supply chain technology designed to increase sales and reduce out-of-stocks, has announced the addition of food industry insiders Austin Noll, Jr. and Richard Juliano to the company’s board of directors. Peter Brennan, who has served on the board since 2009, has announced his retirement from the board for personal reasons. All moves are effective immediately.

“The addition of Rich and Austin creates a powerhouse board of directors, extending our already impressive reach into retailers, distributors and manufacturers throughout the industry. Through these relationships, we now have access to most of the key executives at leading food and supermarket companies across the country and will use these connections to expand our footprint in the sector,” said Randall Fields, chairman and CEO of Park City Group.

“The Park City Group board of directors also thanks Peter Brennan for his years of service and support of the company. We will miss his sage advice and wish him well.”

Juliano is currently engaged with The Radian Group, based in Minneapolis, and operates his own consulting firm. He began his career with Giant Eagle Super Markets, becoming the SVP and general manager of the GM/HBC Division and then SVP merchandising and marketing of the Phar-Mor Division. Juliano then served as EVP Thrifty Payless Drug and VP marketing and merchandising at Genuardis Family Markets in Philadelphia. Most recently, he was a senior executive at Supervalu, joining the company as EVP supply chain services for the Central Region and then moving to the corporate retail group as VP, GM/HBC, and ultimately Group VP center store merchandising.

Noll is the owner of Austin Noll & Associates, a trade relations and industry affairs consultancy based in New Jersey. Noll started his career with General Foods, spending 22 years in sales related positions. He then became VP trade relations for the grocery division of Borden Inc., and was promoted to VP industry and trade relations, before moving to Nabisco Inc. as SVP industry and trade relations.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you hiring seasonal employees this year?

View Results

Loading ... Loading ...
News

RadioShack loss widens as market challenges continue

BY CSA STAFF

FORT WORTH, Texas — RadioShack reported that total sales for its third quarter were $1 billion, compared with $1.03 billion last year. Comparable-store sales were down 1.6%.

The retailer reported a net loss of $47 million, or 47 cents per diluted share, compared with net income of $0.3 million last year.

Dorvin Lively, interim chief executive officer of RadioShack Corp., said, "Overall, our business performed below expectations. I am most disappointed in our post-paid mobility business where we saw a continued decline in margin performance. However, I am pleased with the progress we are making in improving and driving growth in our high-margin Signature platform, which generated its third consecutive quarter of sales growth and our pre-paid mobility business, which included the launch of the RadioShack branded line of phones. Importantly, we took action to reduce our overall SG&A cost structure during the quarter.

Lively said RadioShack will remain focused on improving profitability despite a challenging market.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you hiring seasonal employees this year?

View Results

Loading ... Loading ...