Out-of-Stocks Could Humbug the Holidays

Discussion
Nov 11, 2009
George Anderson

By George Anderson

Every year, retailers, analysts and publications publish lists of the toys that will be in most demand for the holidays. In the past, manufacturers have often taken the public relations hit for not producing enough toys to keep up with demand. This year, however, consumers may be pointing their fingers at retailers as shortages, some that are already occurring, result from merchants being cautious with inventory rather than a lack of manufacturing capacity.

According to an Associated Press report, Zhu Zhu Pets hamster by Cepia Inc., Mindflex by Mattel, and Barbie Fashionista are becoming difficult to find weeks ahead of Black Friday.

Jim Silver, an analyst at Timetoplaymag.com, told the AP that will be shortages on the top 100 toys by early December versus the top 15 in typical years.

"Stores just under-ordered across the board," he said.

Discussion Questions: How will out-of-stocks affect retailers this holiday season? Do you think merchants will be "paying" for being out-of-stock on popular items even after the holiday season or will consumers be understanding of the situation?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

20 Comments on "Out-of-Stocks Could Humbug the Holidays"


Sort by:   newest | oldest | most voted
Doron Levy
Guest
Doron Levy
11 years 5 months ago

Firstly, can you blame retailers for under-ordering? Is it a smart move?

While at TRU, our biggest problem was keeping Tamagotchi’s in stock. We kept ordering and running out and ordering and running out. In the end, we were stuck with 500 of these things because they fell out of favor. (I heard the nearest Walmart was stuck with much more.)

Ordering trendy items is a tricky business. Running out of Zhu Zhu before Black Friday is a purchasing mistake, plain and simple. You can reduce allocations on other items but you don’t want to run out of your top 50. Customers will run from store to store to find high velocity trend items. That’s a customer that is leaving your store empty handed. There is no loyalty when it comes to pleasing your kids.

Max Goldberg
Guest
11 years 5 months ago

Out of stocks are never good. They make consumers upset at retailers and manufacturers. Consumers are in no mood to cut any slack to the big companies that they already distrust. Retailers must be completely transparent to consumers during this holiday season. They should tell consumers how many of the hot toys they have, when they will have them, develop a system that fairly distributes them and help consumers find them when they are out of stock, even if that means sending a consumer to a competitor.

David Livingston
Guest
11 years 5 months ago

When you give a customer a reason to leave mad and waste their time, it always affects business down the road. It probably is better to raise the prices on high demand toys to slow down the pace of sales.

Dick Seesel
Guest
11 years 5 months ago

Most retailers put together their fall financial plans during the worst of the demand slump last spring. And many of them made commitments to import merchandise several months ago, before their comp sales showed signs of becoming “less bad.” I have said before that some of the weak sales likely to happen in the fourth quarter will be self-induced. It’s understandable that retailers want to avoid carrying excess inventory into 2010, especially on seasonal goods, but the winners are likely to be the ones with the most nimble supply chain and the ones most alert to opportunistic buys.

Nikki Baird
Guest
Nikki Baird
11 years 5 months ago
Whether consumers are tolerant or understanding or not, I think a tougher question is how it will impact retailers. Some predictions of the holiday season have said that sales will be flat or down compared to last year. That seems really extreme to me–I see last year as an over-correction to an uncertain environment, so it would be pretty hard to do worse this year. While unemployment is still high, at least people know how bad it is and how much worse it might really get (or not get). Certainty is helpful. But estimates of consumer spending for the holidays have been based on how much consumers are willing to spend. What is the possible value of goods that consumers can actually buy? If retailers have under-bought, particularly if consumers are still being quite discerning about their purchases, then it doesn’t matter how much money consumers want to spend if there aren’t any products to buy. It becomes a self-fulfilling prophecy. For my part, my holiday shopping is almost all done. It certainly makes me… Read more »
Kenneth A. Grady
Guest
Kenneth A. Grady
11 years 5 months ago

When talking about toys, being out of stock this year is much better than ending up with excess inventory, even if it means being well understocked. The carryover market is nil except for deep, deep discounting and customers soon forget. For other categories, retailers have to take a very close look at cash management. A disappointed customer and being in business is much better than more satisfied customers and inventory carryover and markdowns.

Long term, the situation will (and already is) self-correcting. Retailers will return to more normalized inventory levels, though probably still below what they have carried in the past.

Jenny Tannes
Guest
Jenny Tannes
11 years 5 months ago

I think most retailers ordered the least amount they could, as this market is so unpredictable. I had a big demand for Zhu Zhu hamsters–even though we mainly sell flowers–and was able to find them. I ordered that TickleMe Plant Greenhouse from http://www.ticklemeplant.com.

If you do your homework, it’s not too late to order products that are selling fast.

Cathy Hotka
Guest
11 years 5 months ago

Paula Rosenblum has been talking about this for months. Customers who don’t want to be disappointed should start shopping now, and there are early indications that they already are. It’s amazing to see the amount of television ad money already being spent to urge shoppers to shop early and shop often. Let’s hope this holiday season is happier than last year’s.

Bob Phibbs
Guest
11 years 5 months ago

Ah yes and the first of the many reasons retailers will “maybe,” “probably,” “could” have a rotten holiday. Why are people who write about retail so quick to cry wolf?

Roger Saunders
Guest
11 years 5 months ago

Retailers can “watch the cash flow,” and order effectively for the holidays. The items that are to be promoted need to either be in stock, or have a fast turnaround to resupply.

This isn’t the year to be stuck with excess merchandise, and take markdowns–that practice merely frustrates shareholders, hurts the bottom line, and keeps the consumer in a mindset of “waiting until they spot the sale”–1st, 2nd, 3rd, Last Call.

Paula Rosenblum
Guest
11 years 5 months ago
Thanks Cathy…I was out of the office or I would have jumped on this right away. I HAVE been talking about this for months, along with my friend Andrea France (who happens to work for SAP, but also knows the footwear and apparel industry like the back of her hand). Wall Street has been rewarding inventory reductions in excess of sales reductions, and in truth, no one has a clue what demand is going to be. Port traffic has been at record low levels which was a leading indicator. The root cause of the problem isn’t going to be fixed overnight–our addiction to sourcing so far from the point of demand. We have completely lost our ability to respond quickly, probably at the worst possible time. The ONLY saving grace is that there is not one “must have” product or style…so retailers may likely be able to sell by category rather than by item. As Cathy says, it behooves the consumer to shop early. It behooves retailers not to have loss leader door-busters. For me,… Read more »
Ralph Jacobson
Guest
11 years 5 months ago

This is no surprise. Across all product categories, U.S. wholesale inventories dropped for the 13th straight month. This is a sign of the times. No retailer, wholesaler or CPGer wants to be stuck with any product, especially seasonal product at any time, particularly in this economy. Consumers are buying when margins are highest, and as long as retailers, and their suppliers, forecast accurately, business should be as expected. Not great, but as expected.

Jeff Bulger
Guest
Jeff Bulger
11 years 5 months ago
Out-of-stock positions are the bane of a retailer’s existance. A disappointed customer walking out the door may never walk back in again. The latest trend in replenishment circles is the philosophy of “never out” inventory state. This state is achieved by combining visibility within the entire supply chain (DCs, incoming trucks, other store locations…everything) with the willingness to find the product at another location, ship the product to a store or mail it directly to the consumer. Basically, if a retailer has the product SOMEWHERE in the supply chain, that retailer should tell the customer standing in the store that it IS in stock… just in stock somewhere else. The above comments expose the fatal flaw in this philosophy. The only thing worse than fighting traffic and the crowds to find out that the must-have item is out of stock is doing it TWICE in the hopes that the associate was right about what other store still had whatever item. When that customer shows up at location two to find out that the inventory number… Read more »
Herb Sorensen
Guest
11 years 5 months ago
Not as a shopper, but as a student of retail, I LOVE to see out-of-stocks! This means that shoppers wanted all that we had–wonderful! As Wayne Newton said, “Eat all you want, we’ll make more!” I make these comments simply to point out the disastrous performance of any store that always looks neat and faced up. Selling out is GOOD! OK, so having just enough so that you don’t quite sell out is even better, I just want to be sure that we recognize the flip side of having no OOS is not selling anything. Here is another place where the merger of online and bricks-and-mortar retailing will accelerate (beyond the important conceptual level.) For a great many holiday sales, delivering an OOS directly to the shopper’s home a couple days later would be very satisfactory for many, and certainly preferred by some. Imagine not having to lug all that junk home! (OK, the male voice here.) The point here is that OOS this holiday season will almost certainly accelerate movement to online shopping. Retailers… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
11 years 5 months ago

I think it’s far more likely that weak consumer confidence and demand will inhibit retail demand than out-of-stocks. Will the hot sellers be in short supply? Yes, but that’s been true for many years now, in good years and not so good.

In my judgment, the risks associated with carrying too much inventory right now are far greater than the risks associated with carrying too little.

Joel Warady
Guest
Joel Warady
11 years 5 months ago

The retailers have one role in the supply chain, and that is to have products on their shelves. The manufacturers make the products, the marketing team creates the brand awareness, the sales team sells the product to the retailer, the ocean freight company brings the product over from Asia, the trucking company delivers it to the retailer, and the retailer sells the product to the consumer. It is that simple. If the retailer does not have the inventory because they under-ordered, or did not forecast properly, they have failed their one simple job. And they therefore have no reason for being.

While a bit harsh, the fact is, the consumer expects that when they go to the store, the product will be there. And if it is not there, the consumer will be angry, as they should be. Retailers need to continue to do a better job at the one thing they are supposed to be good at; always having the product on the shelf, and having stores convenient to their customers.

Mark Burr
Guest
11 years 5 months ago
Consumers have been trained just as well on the ‘hot’ demand items as they have been trained to expect discounting later in the season on the ‘ordinary’ gifts. Those who feel the need for the ‘have to have’ gift for their kids in the toy arena have learned to shop early already or get on the list. Yet, as a kid, I don’t remember anything that I ‘had to have’, as a parent, I felt even less about those ‘have to have’ gifts. Always the optimist, I can’t be down on a holiday season that is barely beginning. Yet, the prediction of going OOS on the top 100 instead of the hot 15 seems a bit of a stretch. Aside from the fact that ‘the hot, have to have’ gift this year can’t be named…. With national unemployment over 10%–regionally, hitting 30% in many counties in my state–the outlook can’t be good. Gas prices are moving upward over 40 cents per gallon than the same time a year ago, and climbing. Although, the stock market… Read more »
Charles P. Walsh
Guest
Charles P. Walsh
11 years 5 months ago

In today’s environment with negative comps and a holiday from H*#@ last year, it isn’t surprising that retailers are already running low on stock of key items.

The example of the Zhu Zhu is easier to explain; they kind of came out of nowhere and while they currently have a cult status amongst children, what retailer could have bet on such a–and let’s be honest–unattractive looking toy gadget catching on so quickly?

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 5 months ago
In response to the question, retailers will sell less and irritate customers. A no-brainer. But, retailers will not create long-term animosity. Shoppers get it, especially those who have jobs that position them to short-stock THEIR customers. It’s like WWII and rationing. We all understand, deal with it, and perhaps even re-focus on the more important things in life. Stuff more important than toys. How about reading to your kids? That’s way more interactive than simply buying them a Barbie doll and leaving them alone. Night after night, I read to our children all of the Hobbit books, all of the Narnia books, and Madeleine L’Engle’s “Time Quartet” featuring “A Wrinkle In Time.” It took a couple of years. But twenty years later, the kids still talk about those times with smiles and misty eyes. They even quote various passages as inside jokes. But they also learned how to speak, how to pay attention, how to think, and how to imagine. Schools don’t teach that, and neither do Barbie dolls. (Don’t get me wrong, I’ve stepped… Read more »
Mark Price
Guest
Mark Price
11 years 5 months ago

In this year, when retailers faced such a harsh first half, inventories were drawn down to record low levels. Many holiday orders were canceled or dramatically scaled back.

Now that the economy shows some moderate signs of life, retailers will be facing greater out-of-stocks, at the same time that consumers are desiring instant gratification and great savings.

The winner in this holiday season will be the e-commerce vendors, who can access additional inventory from their suppliers and put it on the virtual “retail floor” in no time at all. I think this holiday season will put e-commerce even more on the map that it has been in seasons past.

wpDiscuz

Take Our Instant Poll

Do you think consumers will be more or less accepting of out-of-stocks this holiday season than they have been in the past?

View Results

Loading ... Loading ...