Out-of-Stock – Out-of-Chances

Discussion
Oct 13, 2005
George Anderson

Editorial by George Anderson


Among the things that really burn customers up are walking into a store to buy something only to find it is out-of-stock. The vast majority of customers can understand this happening once or perhaps even twice but at some point, if the situation persists, they are going to take their business to another retailer. That brings us to our gripe of the day…


Trader Joe’s, known for its outstanding customer service, is like any other retailer in that it has some stores that deliver higher levels of performance than others. The company’s store in Westfield, NJ is among those with an established reputation for taking special care of its affluent customer base. I know this firsthand, having done some field research working as a crewmember in the store a few years back as well as shopping there since it first opened its doors.


But, customer service goes beyond friendly and knowledgeable staff. It also deals with having product in stock. In the case about to be referenced, it means having product in stock after 7:00 P.M. when the customer counts typically start to drop off.


Early in the store’s traffic pattern, having come through the front door, there is a frozen end-cap immediately on the shopper’s right. In recent weeks, the unit has been stocked with varieties of Trader Joe’s frozen pizza. Imagine my surprise a about a month ago walking into the store to buy frozen pizza, among other things, and finding the end-cap was more than half empty and didn’t have a single package of the varieties I was looking for.


A crewmember said there was probably some pizza in the backroom and that she would be happy to go check for me if I’d like. Again, having worked in that store and knowing that getting items out of the freezer (it’s quite cramped) could involve a lot of work, I said never mind, I would get it next time. Strike one — sorta.


Well folks, when next time came around, again on a weeknight after 7:00, the end-cap was in the same condition. Luckily, there was one box of the particular pizza I was looking for. In this instance, when checking out, I mentioned that the end-cap always seemed to be empty when I came in at night. The crewmember expressed regret, asked if I would like someone to go back and check. My response that it wasn’t necessary but what I would like the crewmember to do is mention to the captain or first mate that I saw a trend developing in the store and, as a shopper, I would like to see it corrected. Strike two — definitely.


Last night, I went for a quick shop at the same Trader Joe’s around 6:15 PM. Imagine my total lack of surprise to enter the store and see the end-cap more than half empty and, of course, none of the pies I wanted in stock.


When I got to the checkout, the crewmember asked if there was anything I had been looking for and hadn’t been able to find. I just smiled. Amy’s makes a very fine organic pizza; it’s just not sold in the Trader Joe’s where I shop. I had to make another stop on the way home for that.


Moderator’s Comment: Where do out-of-stocks, alternatively having stock on shelves, fit within the customer’s perception of the level of service offered
by a store? Is it common, as described in the column, for customers during certain day-parts to feel as though they are being shortchanged by stores?


Sunday morning 9:00 AM is the best time to shop at Trader Joe’s in Westfield, NJ. The shelves are full, the store opens at nine, and traffic is light. The
store can’t sell wine until 10:00 by law. Of course, this is not much solace for those shoppers who can not go shopping then but, instead, enter the store at 6:15 on a weekday
night.

George Anderson – Moderator

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30 Comments on "Out-of-Stock – Out-of-Chances"


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Warren Thayer
Guest
15 years 4 months ago
It’s a big issue, of course, but I do think retailers in general are getting better at staying in stock. The trend toward SKU rationalization gives room for more facings of each SKU, but the hidden problem here could be the de-listing of regional or specialty items that helped differentiate the store. (Within all this, drilling down a bit, is the problem with new items that ultimately bomb replacing items that were doing pretty decent volume until they were cut.) I was just chatting with my pal Mona Doyle of The Consumer Network about consumer perceptions of stores and how they are tied to stockouts, and she said many people in her panel write off the frozen food department forever if their favorite ice cream is out of stock more than once. It gets down to having favorite flavors/brands in stock — the ones where shoppers won’t substitute on that good old decision tree. The retailer’s job is to know which products these are, and to make sure they have enough facings/holding power. Execution is… Read more »
Mohamed Amer
Guest
15 years 4 months ago
It is evidently clear to customers, retailers and CPG companies that OOS is a big problem. The store is the proving ground for each retailer’s value chain and operational processes. Trader Joe’s is a favorite of my family for the interesting variety, high quality and good service. Our store gets two sets of deliveries each day: perishables in the morning and dry goods at night. Expiring meats and cheeses are pulled off the shelves at night for discard. Before scanning went in at our Trader Joe’s, they used shipment data and the Captain’s hands-on-management of a 8,000 sq ft store. I don’t know if there is less reliance on the crew’s input since scanning data was introduced, but if that data is not complemented by crewmembers, then you are relying on the sophistication (or limitation) of the scanning data or hindered by possibly poor use of existing technology (which might mean it is inappropriate technology). If I track product only at the Amy’s pies level and not to the individual flavor, then I am missing… Read more »
Justin O
Guest
Justin O
15 years 4 months ago
My biggest in-stock problem was at Target where they never had “Y” vacuum bags and for some reason didn’t even have a peg hook with a label for this item. After five trips to the store, I finally went to Bed Bath and Beyond because I knew they were never out of stock on the most commonly purchased vacuum bag – “Y”. The thing that irks me more than an OOS is an everyday top-seller OOS. That’s totally unacceptable in my book, but it keeps happening. They were even out of 2 liter Pepsi for a week!?! I guess it comes from the low wages these big-box retailers pay…we are getting fast food service nowadays. I stopped by Taco Bell the other day and they were out of hot sauce!!! What’s next–going to McDonald’s and being told they’re out of Big Macs? KFC is out of original chicken – oops that’s actually happened to me too. There should be real time data reports that managers are looking at to ensure their top 1,000 items are… Read more »
Franklin Benson
Guest
Franklin Benson
15 years 4 months ago

The relevant data items are: rate of sale, quantity on hand, quantity on order, and lead time. If you know these four things, there is no excuse for out of stock. Of these four things, three of them should be rock-solid numbers that you can trust, and it is only on the rate of sale that there *may* be some creative interpretation of the numbers to arrive at actionable data.

If, at the rate of sale, the quantity on hand will not last through the lead time, more frequent replenishment is required, or a larger presentation quantity. More frequent replenishment comes with costs of its own (labor, for either the retailer or the vendor) and larger presentation quantity means some other product will be getting less presentation quantity.

Sometimes the only solution is to build a bigger store.

Ever wonder what led to the advent of 200,000+ square feet stores?

Colin Peacock
Guest
Colin Peacock
15 years 4 months ago
Great discussion. I concur with Michael that the answer is more likely to be “people” rather than technology. In the UK, one of the first thing a major supermarket chain (regarded as the best in managing “in stocks” in the UK, ie: surveyed as better than Asda or Tesco) did when they took over a rival supermarket chain was to ditch the auto replen technology of their rival and moved them to the manual ordering system they used where a department manager reviews their section regularly (and with pride) and places orders based on their knowledge of what is actually in the store / on the shelf and what will sell in the next period. Of course this system is not flawless (holidays, sickness, etc) but when a well motivated, focused and incentivised management team is in place, they make it work. Senior management attention of course is ultimately the key to achieving consistent and sustainable results, CEO’s need to care about out of stocks (and that means having good reporting systems/metrics) and when they… Read more »
John Rand
Guest
John Rand
15 years 4 months ago

To Michael Banks’ comment, I totally agree. I’ve been loitering around the grocery industry for more than 25 years, and here in New England one of the best at in-stock was always Shaw’s – who had computer assisted ordering more than 15 years ago. It absolutely required a clerk (called the SRO clerk) to align the front end computer’s calculation of remaining inventory with the in-store on shelf reality on a regular basis. This corrected for shrink in all its forms as well as outright error.

But that only worked for regular on-shelf positions. Display quantities always required human intervention and adjustment. Always.

It was never a particularly elegant system, but it worked really well.

Mark Barnhouse
Guest
Mark Barnhouse
15 years 4 months ago

What a great discussion. Every retailer of any product should read it, and I hope many will.

I wonder though, how much price factors into tolerance of OOS. In Colorado, we don’t have the pleasure of having TJ’s available, but we do have a lower-priced chain of natural food stores that compete quite effectively with the other two big natural chains. Any time they run a promotion on some product I buy regularly, it’s gone by the time I get there at 3:00 on a Saturday afternoon, and it always frosts my cake (I’d buy the product on-sale or no). But I accept that this retailer, with a very small footprint, has a tiny back room, and I put up with the OOS as part of the cost of the everyday lower prices the store offers. But if I really need it, I stop by a competitor on the way home.

Bill Bittner
Guest
Bill Bittner
15 years 4 months ago
I am sorry I got into this one so late, but from all the comments I think there is a lot to learn ….. First, we cannot under estimate the importance of presentation stock in the replenishment process. In essence, it is where it all begins. The definition of fast movers should be “anything that sells more than the presentation stock quantity in one day.” These items need multiple replenishments during the day or they need more presentation stock so they can be “loaded up” during the night. Second, we see why Wal-Mart has been so aggressive with RFID and better understand why manufacturers should be interested in making it work. If 26% of the people who encounter an out of stock switch brands, the big loser is the manufacturer. The precise area where RFID is meant to help is between the backroom and the selling area. Finally, we learn that just having the data is not enough – that having POS data that identifies what has sold is not enough to manage customer needs.… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 4 months ago
The most successful approach I’ve seen to OOS is a dedicated OOS Clerk in every store. Believe me, the position pays for itself. OOS Clerks use shoe leather, intuition, and supplier relationships to do their jobs most effectively. Technology helps, of course, in the form of in-and-out data, but the first three factors mentioned are the most important. Those with whom I’m most familiar work in 70,000 square foot stores, not iddy biddy 8,000 square footprints like TJs. At Tjs, it shouldn’t require a rocket surgeon or even an OOS Clerk to figure out how to order more of the most popular flavors of frozen pizza. Evidently someone – or a lot of someones – aren’t sufficiently engaged. The TJ example from which we’re all working on this topic clearly has lost sight of its objectives. To me, it’s a classic example of being production-oriented rather than sales-oriented. The store employees consider a good day one in which they performed all of their assigned functions. Unfortunately, none of their functions include making sure that customers… Read more »
Matt Werhner
Guest
Matt Werhner
15 years 4 months ago

Customer service does go beyond a knowledgeable staff. What is particularly alarming is that this end cap was in the front of the store. As anyone who has worked in retail will tell you, the front of the store gives the customer an immediate impression and, therefore, needs to be clean and fully stocked. Obviously this situation has provided a poor impression. Taking this one step further, this could be an issue of poor management or staffing. It seems many retailers today will sacrifice staffing the proper amount of employees in order to save for their bottom line. Cutting staff is an easy cost control but many times it results in situations like this, which ultimately have a larger negative impact. Either way, this is a problem for a company that prides itself on customer service.

Jason Brasher
Guest
Jason Brasher
15 years 4 months ago

The first thing I learned when working in a store was that the best way to serve the consumer was to have what they were looking for on the shelf when they are looking for it. Having a good price or promotion is irrelevant if the product is not there.

I find the comments about TJ’s adaptation of scan data increasing the problem particularly interesting. Could this case imply that scan data applied improperly is worse than no data? I have watched several retailers shoot themselves in the foot by relying too heavily on simplistic inventory models based on averaged movement and days of supply calculations more than once.

Are there any retailers that are taking the viewpoint that the stocking crew is the first phase in the customer service program? They may not always be visible to the customer but their work is viewed by the consumer for a larger portion of the shopping trip than any other point of contact.

Karen Kingsley
Guest
Karen Kingsley
15 years 4 months ago

OOS is serious – and one reason I can’t bear to go into Wal-Mart any more. But I am lately finding the act of stocking to be as large an issue. Every single time I’ve gone into my local super (and I’m noticing it in a variety of stores, but they bug me most), huge carts block the aisles – often as many as five in one dept (usually produce), making shopping incredibly difficult. The biggest shock to me is that this seems to happen on Saturday afternoons as often as not. Are stores really running OOS between morning and afternoon? If this is true, truly, shame on them as it’s a superstore I normally shop in.

My TJ’s is pretty good with OOS – I have been heartbroken more than not by them discontinuing beloved items, rather than finding them OOS.

Ron Margulis
Guest
15 years 4 months ago

As a shopper at the same Westfield, NJ Trader Joe’s store, the thing I find most interesting is that the OOS situation there actually got worse when they installed a scanning system a few years ago. That’s right, the store had a better in-stock rate, at least for the items we buy, by relying on shipment data rather than POS data. The only thing I can figure is that Trader Joe’s doesn’t have the needed analytical applications to fix the problem, or has the software but isn’t using it properly.

Camille P. Schuster, PhD.
Guest
15 years 4 months ago

The Joint Institute for Unsaleables Committee published a report in 2003 saying that 26% of the consumers encountering an out of stock situation will substitute a different brand and another 31% will buy the item at another store. This is not good news for retailers or manufacturers. It is an industry-wide problem that exists worldwide. As was suggested earlier, either POS data needs to be monitored or someone needs to physically keep track of what is on the shelves so that low stock situations are identified and can be rectified before the out of stock happens.

Gwen Kelly
Guest
Gwen Kelly
15 years 4 months ago

Responding to this editorial as the consumer in me, I would say this is an example of why retailers need to constantly review their customer service programs which certainly impact customer loyalty. No question about it, customers should have and demand the same quality experience with the retailer regardless of the time of day they are in the store.

George, as illustrated in your editorial, TJ has a loyal customer in you. To be forgiven once for an out-of-stock situation which may happen infrequently is one thing; if it happens on a consistent basis, there certainly is a problem. And one that may drive the consumer elsewhere. Another point, a retailer with this particular challenge may want to review the options which a customer has in communicating problems in the shopping experience. For you George, I hope someone at TJ corporate headquarters reads this and takes heed to what’s been opined in the editorial.

Nikki Baird
Guest
Nikki Baird
15 years 4 months ago

What’s interesting to me is that a lot of OOS problems seem to be process related. There’s a lot of focus and investment on creating better information exchange and a smoother process between manufacturer and retail, but what about addressing the problem of stock held hostage in the backroom? For larger format retail especially, I am seeing an increased interest in treating the store more like a warehouse – with “shelves” being synonymous to “forward pick locations,” and not doing nightly stock runs, but having directed tasks triggered throughout the day to ensure that when there’s product in the back, someone gets it and brings it to the front. Then you don’t have to worry about how deep your facings are – you simply replenish them more frequently. Yeah, it’s a technology solution, and could require handhelds, etc. But underneath that it’s just a process change – instead of bulk restocking overnight, make keeping the shelves stocked throughout the day a priority!

Tom Zatina
Guest
Tom Zatina
15 years 4 months ago

Chronic out-of-stock problems are deadly and create an atmosphere of doubt for shoppers. When manifested on a regular or widespread basis, the doubt becomes a lack of faith in the store and its staff. A lack of faith leads to a loss of trust. When the trust is gone, so is the customer.

Mark Lilien
Guest
15 years 4 months ago

Out-of-stocks are a huge customer issue. Even if gas was free, most people don’t like to waste steps and time. Since shopping is a habit, customers quickly learn the OOS patterns. Examples: bananas get sold out when the sale price goes to 19 cents/lb, Halloween cupcakes get sold out before 5 PM October 31, etc.

I am sure that every RetailWire reader can contribute his/her favorite out-of-stock stories. As bad as it is for the customer, it can be horrible for the retailer. For most stores, retail profits after taxes are less than 5% of sales, and overhead is fairly inflexible. So that last 10% of sales really means the profit for the year. If a store is 2% out-of-stock, then annual profit can easily be cut by 10%. I sometimes envy T.J. Maxx and other closeout stores, who don’t have to worry about out-of-stocks on an item basis, just a category basis.

Richard J. George, Ph.D.
Guest
15 years 4 months ago

For a variety of reasons, out-of-stocks occur. The key is to minimize those out-of-stock situations which are controllable. My research has indicated that out-of-stocks on “specials” or “weekly sale” items are particularly annoying to customers and to a great extent controllable. Retailers know in advance what will be featured, therefore there is no excuse for running out of featured merchandise. Customers do not like highlighted promises unfulfilled.

The key is, what does a retailer do to “recover” from an out of stock situation? We know that rain checks are inappropriate. Give the customer the choice of a comparable (even higher priced) product or consider delivering the product to the home when the shelves are restocked. Simply saying “I’m sorry” is not enough.

James Tenser
Guest
15 years 4 months ago
Several comments about out-of-stocks worth raising in this context: 1) “Recovery” after the fact is a weak answer at best. Every out-of-stock represents a lost sale now plus a damaged reputation for months or years to come. In the share-of-wallet competition, every OOS is a tiny disaster. 2) Many store out-of-stocks are the result of distribution voids further back in the supply chain. These in turn may result from inadequate planning processes, especially with regard to short-term promotions. 3) This problem seems to be especially noticeable in frozen foods because freezers are not expandable to carry extra stock. Certain flavors naturally sell through faster than others. Replenishment “rhythm” must be matched to the fastest-moving SKUs, not some average level within the sub-category. 4) In some cases (including frozens) the replenishment responsibility lies with a distributor or third party merchandiser. 5) Holding store managers more accountable for in-stock position may be grossly unfair to them in many situations since the above causes lie largely outside their control. By the time they observe a low-stock situation in… Read more »
Jeff Schaengold
Guest
Jeff Schaengold
15 years 4 months ago
As an RFID promoter, the OOS Return On Investment for RFID has bothered me for quite sometimes. I consider the resolution to OOS the promised land for RFID to be one of the most dangerous “hypes” of the technology and the worse adoption criteria for retailers. From a pure cost and ROI basis, there is a solution available to retailers that will cost them less than 1% of the cost of adopting RFID for OOS and can be implemented without any change in physical infrastructure, and only the addition of a server and middleware configuration. RFID is supposed to be the intelligent solution to have 100% of the right product at the right place 100% of the time. In order to achieve this dream, we have to have 100% of the product RFID labeled, we need sensors covering every square foot of space in the building, we need the analytic tools to provide exceptions reporting and most of all “WE NEED PEOPLE AT THE STORE TO REACT TO EXCEPTIONS.” The alternative costs a fraction of… Read more »
Greg Moore
Guest
Greg Moore
15 years 4 months ago
Most of discussion ignores one fundamental issue in grocery: few grocery stores have changed their store ordering processes. Why have out-of-stocks not improved? Because the processes and systems used in this industry haven’t changed in 20 years. Few grocery stores know how much inventory they have, or don’t have, by item in each and every store. How can grocers manage out-of-stocks if they can’t systematically measure them? If you can’t measure the problem each and every day, how do you know what to fix? I would argue that the OOS problem is getting worse and more critical to a grocer’s long-term success. The problem is worse because it is getting more difficult to attract and retain good store personnel. It is also getting worse because the nature of promotions have changed, often focusing on mega-purchases of individual items (e.g. 10 for $10). Out-of-stocks are more critical because the nature of grocery competition is changing. Walgreen, CVS, and Rite Aid often have more convenient locations than the grocers, and often have better in-stock positions. How do… Read more »
Ed Dennis
Guest
Ed Dennis
15 years 4 months ago

I believe in some cases OOS is not the fault of the store. Years ago, an employer of mine purposely did not work a major customer over a holiday weekend just to prove to the retail chain’s division manager that he did not “run” his division. We were told that the division manager was supposed to “manage” the stores in his division and that his management style was contrary to the best interest of his company. Additionally we were asked to make sure (if we were in town) to visit this chain and ask for OOS product.

Also, certain sections in a supermarket are typically managed by a vendor. The vendor manages shelf space and often relies on display inventory to handle “specials.” This can easily result in OOS on the shelf but ample inventory on an endcap 4 isles over. However, most OOS are due to LAZY local managers who don’t have the ability to see recurring OOS patterns and work to solve them.

Tony Orlando
Guest
15 years 4 months ago

Out of stocks are bad, especially on a hot sale item. My problem is our wholesaler. They have cut our orders down to just 1 dairy, 1 frozen and 1 grocery order per week, to save money on deliveries. They have no lock out system for our pre-orders, meaning if some other store wants an extra 50 cases of brownies on Tuesday, than my Wednesday truck won’t have my pre-order. Some of you reading this may say find another wholesaler, but it’s not that easy. I substitute items, and go out of my way to take care of my customers. The problem is only going to get worse, because many regional suppliers have raised their minimum dollar amount for deliveries. However, I just continue to push more perishable i.e.: meats and deli-bakery, where I have better control on deliveries, and good prices. There is no good answer for a single independent, other than to take care of each customer, as if they were your own family!

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 4 months ago

Customer service, at times, is silent… as in product availability and recipe ideas, etc.

I never find Whole Foods, or our very upscale independent supermarket, out of stock.

Michael Banks hit it on the head. Grocers have to view stocking as a customer service, not an operational nightmare!!!

I have a hard time believing that high school and college students can’t be recruited to stock shelves and refrigerated cases for an hourly wage, and some level of groceries discounted…especially college.

Shame on the Big Boys, and supercenters, for not giving the customer service needed. This is why I shop the local meal, deli and produce shops, as well as make a trip to Sam’s once a month. No OOS.
And with little aggravation, thank you very much, Kroger! Hmm