Dealing with Stockouts: Retailer Strategies for Managing Inventory Shortages
Hey there! Let's talk about the ongoing retail dilemma—product shortages and stockouts, especially with lockdowns making a comeback worldwide. It looks like we're far from having a smooth sail back to normal supply chains and full store shelves. Retailers, as a result, are left deciding whether to be transparent about these stockouts or artificially fill up their shelves to give the illusion of abundance.
Both approaches have their advantages and disadvantages. Opting for transparency builds trust with customers by providing honest insight into product availability. However, empty shelves can make shopping feel like a waste of time and evoke feelings of urgency, negatively impacting sales. On the other hand, pretending to have full shelves might appeal to customers who aren't sure about their product choices (or aren't picky about brands) but could also jeopardize long-term customer trust and deter future sales if customers can't find their favorite brands in the usual spots.
So, which strategy should retailers select?
Well, customers want easier access to their preferred products. Changing products or stores might not be an attractive option for most, as it involves adjusting their weekly shopping routine and familiarizing themselves with new locations and product offerings. However, if a customer learns that a product is no longer available at their regular store and can be found elsewhere (such as at Amazon or Walmart), they're more likely to make the switch.
In academic research, we delve into the concept of "equilibrium language," examining how various physical and verbal cues signal something about the operating environment and encourage different responses. For instance, in call centers, certain announcements ("we are experiencing high call volumes" or "the expected waiting time is longer than 20 minutes") serve as signifiers aimed at inducing customers to stay on the line if their issue is critical or hang up if the wait is too long. Since the customer and call center are aligned in their goals, equilibrium language is achievable in this context.
However, in the case of stockouts and "faced up" shelves, the customer and store have conflicting objectives. The customer wants to know whether the stockout is store-specific or industry-wide—with different actions resulting from each scenario. The store, on the other hand, wants the customer to find a substitute and continue buying from them in the future, making equilibrium language less feasible in this situation.
In summary, for high-loyalty brands, it might be wise to inform customers when a product is out of stock due to industry-wide shortages. For brands with low customer loyalty, hiding stockouts through facing-up strategies may be more appropriate. And as customers, knowing that everybody is experiencing shortages at the moment, it's best to do some legwork to ensure you find the goods without driving all over town! Don't believe everything you hear—products may not be as plentiful as they seem!
- As technology advances, AI and research are playing a crucial role in the business world, helping retailers predict product shortages and stockouts, making inventory management more efficient.
- In the realm of public policy, there are ongoing debates about regulations that could potentially require retailers to be more transparent about their stock levels, aiming to prevent the practice of artificially filling shelves.
- With the rise of online shopping, platforms like Amazon and Walmart have become alternative choices for consumers when their regular stores face stockouts, making it essential for brick-and-mortar retailers to implement effective communication strategies.
- On TV news programs, experts often discuss the ongoing retail dilemma, providing insights on how businesses can deal with stockouts, whether through transparency or strategic product placement, and the impact these approaches have on consumer behavior.
