The impact of out of stocks 

The most obvious challenge to the shelf, both online and in-store, is out-of-stock issues. Shoppers simply can’t purchase products that aren’t on in-store shelves—and the situation online can be even worse. In the digital world of algorithms, low and out-of-stock inventory triggers a downward spiral—your offering loses valuable ground in search rank, potentially harming sales even after your supply has been restored.

“Managing inventory and distribution is of paramount importance in our digital age,” says Jean-Baptiste Delabre, VP, NA Business Development, NIQ. “In the CPG space especially, where the purpose of the store shelf has changed so drastically, brick-and-mortar stores are now often online fulfillment centers as well. Managing inventory is incredibly complex when being tasked with supporting in-person shoppers, online shoppers arriving for click-and-collect products, as well as third-party shoppers like Instacart, Door Dash and Uber Eats.”

Noteworthy retail outages of late have been seen in specific categories, rather than the store-wide empty shelves retailers experienced four years ago. By spotlighting select products, we can see that the peak revenue losses were not only substantial, but represented huge outliers compared to anticipated yearly out-of-stock averages:

• Baby Formula: March 2022: $9.3M in weekly missed sales, representing 40% more than the yearly average.
• Eggs: November-December 2022: $10.3M in weekly missed sales, representing 150% more than the yearly average.
• Feminine Products: June-July 2022: $2M in weekly missed sales, representing 280% more than the yearly average. 

Companies can’t manage what they can’t see, so it’s crucial to leverage technology that monitors every sale, every SKU, every day to activate omni-level strategies at scale. This technology, fueled by accurate, real-time data, can help manufacturers and retailers level-up their retail strategies and inform decision-making on everything from on-shelf optimization to the effectiveness of their media campaigns.

To better understand how on-shelf optimization technology can impact a company’s bottom line, consider this case study of a popular beer manufacturer:

Making smarter inventory decisions with the full view

Let’s look at an example of how better inventory data can optimize the effectiveness of a media campaign to promote a product. For a campaign to be effective, you need to ensure that the product you are promoting is available/in stock. If you’re using sample-based data, it’s possible that your out-of-stock rates appear lower than they really are. Not tracking inventory levels–at the store level–could result in your team missing critical information about where a product is available (and where it is). The result? Lots of wasted advertising spend and dissatisfied customers.

On the other hand, if you have accurate data on product availability – at the local level – media campaigns will be much more efficient and could save your team up to 60% annually on previously wasted ad budget/media spend.

While completely eliminating out-of-stocks is a pipe dream, retailers with the right data can minimize their impact on the shopper experience and maximize profitability. With product availability as optimized as possible, stores can shift focus to understanding the nuances of consumption behavior in the e-commerce environment and in-store.

Update your omnichannel retail strategies

Online consumption behavior and in-store strategies have evolved to have many overlapping elements, and understanding the interplay between these behaviors is crucial for retailers and brands aiming to create a seamless experience. Consumers often engage in “webrooming” (researching online before buying in-store) and/or “showrooming” (browsing in-store before purchasing online) prior to making a purchase.

In-store retail strategies are best for products that a shopper is likely to purchase after they have had a chance to physically interact with a product or buy on impulse. Products more suited to online shopping are usually those that require less urgency or have wide familiarity–often with the convenience of doorstep delivery or pre-planning.

Successful retailers need to have access to the granular data necessary to create a cohesive omnichannel experience by blending the strengths of both online and in-store behaviors to cater to diverse consumer preferences. Even when evaluating products that typically skew toward in-store purchase, retailers must understand how online interactions (i.e. social media, websites, or loyalty programs) impact in-store success.

Digital personalization is an element of the omnichannel experience that is still in its infancy for many retailers. There is an opportunity for said retailers in the online space to go far beyond their current personalization options, which often just offer products that customers have purchased before. By leveraging data partners like NIQ Omnishopper, your business can follow shopper behavior and understand evolving consumer habits, enabling you to develop data-backed plans and tailor-made retail strategies that are as unique as your customers. Real-time hyper personalization, anyone?

Know how to solve assortment challenges

In both e-commerce and in-store retail, a delicate balance exists between product mix optimization and SKU rationalization. Product mix optimization involves curating a strategic assortment of products to drive sales and meet customer needs. SKU rationalization, on the other hand, aims to streamline and optimize the number of individual variants offered to improve efficiency, reduce costs, and enhance overall performance.

When we look at these common challenges side-by-side, we see that while the issues are not identical, the solutions to win on the shelf are often rooted in the same data:

Ultimately, assortment optimization relies heavily on the quality and completeness of your data analysis. Poor-quality data can lead to inaccurate or incomplete insights. Unfortunately, many brands are aware of the challenges listed above and are turning to incomplete solutions to solve them. Investing in the right tools and data to separate the numbers will provide a clearer view.

NIQ’s Omnisales data provides a precise and accurate measurement across online and offline channels, keying in on how consumers shop. 
 
“The massive assortment that defined e-commerce a decade ago is largely no longer what can be found online in today’s world,” says Lauren Fernandes, Global Director of Thought Leadership.

“Modern retail strategies typically seek to leverage two things: the store investments they have, and the store’s proximity to the consumer for delivery and click-and-collect availability. Because of this, it is often the case that online inventory closely mirrors what’s available in-store, except for instances where shoppers are willing to incur additional time or cost to procure a product located elsewhere.”

“Considering this narrowing of assortment – and the general trend of shrinking retail space, it is of utmost importance to ensure that the handful of chosen products on the shelf are performing well. A retail data partner must be able to instantly track sales and share performance, understanding drivers across brick-and-mortar, e-commerce and the broader omnichannel to identify trends and understand competitive and category performance. Without accurate data to track consumer journeys and using product attributes wisely, CPG companies will struggle to tailor their assortments by channel with enough precision.”