For many retailers, out-of-stock status is a big peril when selling online. Damage can be significant – not only is a lack of inventory a lack of sales, it can also seriously harm customer relationships. There’s a lower chance you’ll be able to lure a potential first-time customer back without some promotional or marketing effort, and it tarnishes both customer satisfaction and brand.
But it’s always preventable. There are a couple of common causes, and just as many remedies.
Failure to Forecast
As far as causes go, inaccurate sales forecasts are oftentimes the culprit to stockouts, whether it’s due to overpredicting or underpredicting. They’re one of the hardest parts of running a business considering the many factors affecting both your business and a consumer’s willingness to buy. Feel free to throw as many data points or historical information behind it, a sales forecast is still a prediction, especially when you’re just starting out.
There’s a lot of material out there to guide better forecasts, but here are some of the very basics.
History – From the very first sale to the most recent, your sales history is a pivotal part of a sales forecast. It gives a baseline of what to expect. Once a business’ growth rate begins to slow down and sales stabilize, it should reveal purchase patterns.
Understand your buyer’s behavior – Piggybacking on that sales history, consider how and when your customer base, or your target customer base, is buying from you. There’s some demographical and seasonal elements, and understanding them allows you to better anticipate sales.
Consider your capital – To buy inventory, you need cash. And once you’ve bought it, your cash is now tied up until the product is sold. Always keep your capital levels in mind as you forecast to avoid a stockout due to lack of cash.
Take marketing into account – Have a promotional period that you regularly launch? Be sure to consider it when forecasting. You wouldn’t want to implement a fantastically effective deal only to have it sweep through all of your stock.
Keep tabs on your market – It’s always good to monitor your market for changes. Trends are always trending, so research your area to get an idea of what might disrupt or impact your sales flow. General demand forecasts, like ones placed by the Nation Retail Federation or Adobe, can help give a benchmark of what to expect, particularly around the holidays.
Forecasts aren’t fixed – Given the ever-evolving ecommerce landscape, never assume your forecast is said and done. Consistently revist it to check if it’s on track, and adjust it if your performance warrants it.
Sales forecasting solutions – It’s 2016, so there’s definitely some software for that. Plenty of forecasting tools are out there to help manage your forecasting – give it a good Google search.
Managing Mistakes
In some cases, poor management is to blame for stock outs.
Counting inventory, balancing spreadsheets, checking multiple sales channels for information… managing inventory can be incredibly tedious and time consuming, and human error is bound to happen. One sales channel may not accurately reflect product levels, an employee or warehouse may have been off with the count, plenty of things can go wrong.
Just like for sales forecasting, there’s software for this as well. Order management tools are your best bet for preventing any inventory errors. For the most, they’re equipped to automatically update inventory levels, and they can be used for a single sales channel, even multiple ones depending on whether it can integrate with the software. Plus, many have the ability to send purchase orders, so you can restock easily if need be.
That said, human error is always on the horizon, so proper training is essential when managing inventory, regardless of whether you’re copy-pasting between spreadsheets or tinkering with software.
Oh hey, what a convenient time to mention that we offer an order management system that automatically handles multichannel merchants’ inventory, pushing inventory levels out to each channel from a single app. Plus, our solution also allows e-retailers to manage their shipping, to boot.
But enough with our self-serving promotion. Sometimes, promotions themselves can act as damage control when out-of-stock strikes.
Lessening the Impact
In the event a stockout occurs, it’s time for damage control.
To make the most out of your out-of-stock status, it’s time to put marketing to work. If a product is no longer available due to stock shortage, distract interested customers by focusing on other inventory. Like a flashbang grenade, drop a flash sale on other products to divert the customer’s attention while keeping them engaged and buying.
When a customer, first-time or not, is peeved by an out-of-stock product, also employ some promotions to get them back. This means setting up some sort of discount to at least entice some spending. It can be applied to the very product they’re interested (once it’s restocked), it can be on any item in the store, or it can be on a specific one (like those hard-to-get-off-the-shelf ones).
Regardless of whether a promotion is in order, customer service will always soften the blow. Some personal attention may be enough to keep the customer in good graces, and it’s especially able to do so when combined with some promotional effort. A little TLC can work some major magic.
Image: Martin Thomas, Flickr
