This post has been updated and was originally published December 21, 2021.
There’s no escaping stockouts right now. US consumers saw more than two billion out-of-stock messages online in October, as retailers and brands battled to keep shelves stocked ahead of the festive shopping season. That’s a 250% increase on pre-pandemic levels.
The reasons are well rehearsed by now. Ever since the coronavirus outbreak, global supply chains have been disrupted by a string of shocks. Demand for CPG products skyrocketed at the start of the pandemic and has remained high, while raw materials and labor shortages have pushed up production costs and created huge manufacturing and logistics challenges.
Although retailers and CPGs have done a remarkable job keeping shelves stocked in tough conditions, availability has inevitably been hit. More than half of US retailers say out-of-stocks are the biggest challenge they’ve faced in the wake of Covid, and some regional grocery chains have reported receiving as little as 40% of their orders. In a recent Consumer Brands/Ipsos poll, 62% of Americans said they were concerned about CPG product shortages in the next few months.
With disruption expected to continue well into 2022, now’s the time to take a fresh look at your availability monitoring to ensure you’re doing everything possible to minimize stockouts and keep service levels high.
Robust availability monitoring is critical because CPGs can pay a high price for stockouts, especially on the digital shelf.
When you go out of stock online, you’re not just losing out on a potential sale. You’re not just wasting money you’ve already invested into getting your listing and getting your product on shelf and into the warehouse. And you’re not just frustrating the shopper, undermining brand loyalty, and potentially gifting a sale to a competitor. You could lose your listing altogether.
Some retailers will simply pull the plug on your online listing if you’re out of stock for a certain amount of time. This means all the digital assets you’ve built up for that listing are lost as well and need to be rebuilt. You’re essentially back to square one.
Even if you don’t lose your listing, being out of stock can seriously hurt your retail SEO. Some retailers will relegate you to the bottom of the search page if you’re out of stock, which means you lose all visibility. What’s more, your rate of sale will decline if you’re out of stock for an extended period of time, which, in turn, will further hurt your search performance. That’s because rate of sale is one of the factors retailers’ search algorithms take into account when determining organic search results.
The final killer comes from favorites and past purchases. If a shopper has substituted your product, that competitor product will now be in their favorites or ‘last bought’. As a large proportion of online baskets are built from favorites and past purchases (nearly 90% of US online grocery shoppers say they use their order history to reorder items they’ve bought in the past) this means you’ve not only lost sales at that one particular point in time – you’ll be losing future sales as well.
To protect yourself and your retail SEO from this chain of knock-on effects, I recommend focusing on five key areas.
Of course, CPGs are also having to consider more fundamental steps to safeguard availability. Some have already chosen to rationalize their manufacturing to focus on those SKUs that are highest in demand or create the most category value. Minimizing waste is also key. Every pallet is important right now, so packaging needs to be robust to prevent accidental damage or ullage.
Finally, promotional mechanics continue to be an important focus. Many sectors and companies have already stepped away from volume promotions, but it’s a good idea to double-check there’s nothing potentially problematic lurking in any of your upcoming promotional plans, and to review plans monthly.
As so often, prevention is better than cure. It can be difficult to fix stockouts once they’ve occurred, but regular, targeted monitoring will help you spot potential problems before they escalate and undermine your visibility on the digital shelf.
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