Out-of-stock is very broad and is defined as happening if the customer when they come into a shop and cannot get the stock, they came to get.

I was reading a new study of the retail industry of how much is currently being lost by these stock-outs it makes quite shocking reading. According to this IHL’s research here out-of-stocks losses total £419.9bn billion in lost revenue annually for retailers and the leading causes are:

1) The stock is not in the shop (£157.7bn)
2) The customer could not find anyone to help them ( £80bn)
3) Staff could not find stock (£45.1bn)
4) Price/offer did not match advertising (£49.1bn)
5) For everything else the loss was £87.1bn

Now taking out number (5) because we have no details and number (4) is a supplier issue which the retailer cannot do anything about which should not happen but does all too often. A typical reason for (4) is that a supplier spends a great deal of money on advertising, and the retailer does not know about it in time and/or does know but does not get the correct stock.

We can say that (1) not having sufficient stock is only about half of the problem and its either a shop problem because they have not ordered enough for various reasons or a supplier issue as they have not sent enough stock. The other half of the problem (2) and (3) is probably the shop layout and/or staff knowledge and training.

Now in my experience its not so much shop layout, which is logical and fine but that over time as stock gets moved around people do not know or cannot figure out where the stock is hiding.

As such most of this can be solved if people used the stock location. Then all they need do is call up the stock item and see its location. This location can be added quickly to any stock item or added in bulk when doing a stocktake by telling the point-of-sale system to update the location, click on image below for more details.

By this simple procedure, the part we can solve of the out-of-stock problem is solved.

One department that I believe my clients are doing much worse than they should is in drinks. Almost invariably when I do a big data analysis on one of my clients' shop data, what is clear is that the drink department is doing worse than it should. So what I do notice  when I go overseas, is the drink departments in many shops there in stores similar to my clients' stores in Australia are much bigger.  It must mean something.

I realise that it is for many a small department but still that is no excuse for not getting better value.

Another problem here, I think is that the mix in the drink department is fast changing, yet many of my clients are stuck on the old drinks like Coca-Cola and Lemonade. This is often due to your history files telling you what did sell but not what is selling outside your shop. As a result many are neglecting the growing functional beverage market such as health, energy and sports drinks all of which are rapidly growing.

Have a read here for more on this subject. [link removed]

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Neil Chandler
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