Stock-Outs Cost Retailers 4% of Sales Every Year


Share on LinkedIn

Image courtesy of Ashim D’Silva @randomlies

Stock can cause major issues for retailers when it comes to keeping customers happy and running your business smoothly. Overstocking items could mean reducing prices and squeezing margins just to sell it, as well as sacrificing valuable warehouse space that could be occupied by more popular products.

On the other hand, understocking in-demand products causes customers to be frustrated, disappointed and shop elsewhere. In fact, a recent study found if a product isn’t in stock in store, 37% of consumers buy it online from someone else when they get home.

The true cost of failing to manage stock effectively is staggering. A Harvard Business Review study suggests retailers lose nearly half of intended purchases when customers encounter stock-outs. Abandoned purchases translate into sales losses of about 4% for a typical retailer, that’s $500,000 of lost sales for every $12.7m made.

Retailers Are Stuck In The Status Quo

Sadly, many retailers are stuck in this status quo, unable to effectively manage their stock across multiple channels thus losing countless sales. They are stunted by systems and processes that simply don’t meet the needs of a modern-day retailer. Many are also heavily embedded with their legacy RMS systems which makes a change or an upgrade unthinkable.

In conversations with leading multi-channel retailers, we hear the same problems and frustrations day-in-day-out. Tired, outdated and inadequate retail management software that is overstretched and wheezing. These systems cause an endless stream of issues, particularly when it comes to stock management.

Common examples of stock management problems caused by these systems include:

  • Orders aren’t pushed through from different channels causing inaccurate stock figures
  • Stock isn’t being adjusted for bundled products
  • Stock isn’t being updated until the end of the day causing over/underselling issues
  • Stores can’t reserve, order or sell stock from other locations
  • Multiple reports have to be run to see stock across the entire estate

All of these issues are caused by inadequate retail management software solutions, which ultimately leads to retailers losing sales to online and in-store channels. However, improving stock management isn’t as simple as swapping one bad system for a new one.

System Integrations Are a Weak Link

While core systems are certainly a key part of the problem when it comes to managing stock across a retail estate, the integrations that link systems together are equally to blame. In the past, a separate system for each channel or function may have worked but this is no longer ‘best-practice’.

The reason for this is simple. You might have the best eCommerce site in the world, but if the integration fails between the system that holds your stock and your eCommerce site it’s no use to anyone. Stock isn’t updated, products are over/undersold, sales are lost, customers are frustrated. A nightmare scenario.

If you continue to rely on integrations to update stock across multiple sales channels you will experience the same problems, again and again, no matter how many times you replace the component parts of your retail set-up. The demands of modern omnichannel retail mean you can no longer afford to run the risk of not having data flow freely, in real-time across every channel.

Image courtesy of Blake Wisz @blakewisz

Retailers Must Realise There is a Better Way

The way to overcome age-old stock management issues caused by outdated retail management software is to think and act differently. Rather than continuing with a fragmented approach to retail systems and encountering the same issues over and over, retailers should look for solutions that enable an evolution to the traditional approach. Not just swap systems independently and hope for the best.

One solution is called ‘Unified Commerce’. Systems that fall under the Unified Commerce bracket are a new generation of cloud-based retail software combining CRM, eCommerce, a suite of retail management functionality including inventory management, warehouse management and reporting and EPoS in one system which are all updated from a central database.

Looking specifically at stock management, this centralised approach to data storage and distribution provides a solution to the problems that are caused by integrations, because unified commerce doesn’t have any. There’s no risk of integrations failing, stock not being pushed through to different systems or a lag in reporting. Everything happens in real-time and is always accurate.

In addition, Unified Commerce platforms are built with modern, omnichannel retail in mind. This can’t be said about legacy retail management software. One of the key differences is Unified Commerce platforms are built with a web-first mindset. Older systems simply can’t replicate this because they were developed before the cloud existed so struggle to keep up and evolve.

Wrapping Up

Effective stock management has always been a challenge for retailers. Creaking and outdated legacy retail management systems don’t make it any easier and frequently cause problems, not least because of the patchwork of integrations that exist to keep systems talking to each other.

As retail continues to change, it’s retailers that are prepared to evolve that will survive. For many, this means ditching old processes and systems and embracing the new wave of retail management software called ‘Unified Commerce’ or ‘Omnichannel Retail Software’.

Unified Commerce platforms help retailers to overcome many of the challenges associated with omnichannel retail, including improving stock management, so you can recover the 4% of lost sales and ensure that it’s going into your till, and not your competitors.

Benjamin Barnes
Ben Barnes (ACIM) is a diploma qualified CIM practitioner with eight years of practical experience of implementing strategy reviews and day-to-day tactical plans. He has worked on marketing projects and strategies for multi-national businesses and specialises in the software sector with his agency Barnes & Shirley.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here