The Branded Pantry

Meet the Out of Stock Family.  You DON’T want them in your neighborhood!

ShelfSnap, working with its leading clients, has identified not one but four basic types of out of stocks!  In a number of studies covering both DSD and Warehoused products in the top four grocery sellers, we found 25% of the planogrammed SKU’s effected by at least one of the following out of stock conditions.Of course, it doesn’t really matter if the number is 8% (as usually reported) or 25%, if you aren’t equipped to fix the problem.The Out of Stock Family Tree

1.     Traditional Out of Stocks:  Products that are clearly supposed to be in a space on a particular shelf in the store.  This was the type of out of stock that the industry identified and quantified in over 54 International studies done since the early 1990’s.  The results of those studies are consistently 8% of the SKUs in any given category.  Scores of “solutions” have been offered and billions of dollars have been spent . . . the out of stock results have not been helped at all.

2.     Distribution Voids.  An Out of Stock is defined as a product being absent from a shelf and distribution voids are very much a type of Out of Stock.  Business plans rely on a product being exposed to enough consumers to generate expected sales.  If those products are in the plan, but not on the shelf then they cannot contribute to the expected sales results.  Some industry experts believe that distribution voids are quantitatively, as great a problem as traditional Out of Stocks.  Our experience is that voids are a much bigger problem than Out of Stocks.   In order to understand assortment voids ShelfSnap evaluates the plan in addition to capturing the in-store conditions upon which our assortment measurements are built.

3.     The third Out of Stock involves a product that has Fewer Facings than Planned.  Facings are not only part of the greeting that a product is supposed to offer to a consumer . . . they are part of the supply chain requirements to KEEP the product in front of the consumer.

4.     The fourth type of Out of Stock is an Under-Stock.   This is a condition where a multi-faced item is totally out in one of more of its facings.  When a multi-faced product has holes on the shelf it looks incomplete, unable to greet the shopper-consumer.  It may also be an indication of inadequate facings.  This is an important condition to quantify and report.Multiple Out of Stock Conditions Typically Exist in the Same Store.

In this particular category the number of products with under-stocks was equal to the number of products with out of stocks.  And the stores that had high out of stocks tended to also have a high number of under stocks.

Fix the ProblemOut of Stocks continue to be a vexing problem for this industry.  Understanding the type of out of stock with which we are dealing is important in identifying how to solve the underlying problem.  Traditional Out of Stocks are complex and hard to fix.The good news in almost every case is that it is possible and profitable to fix the out of stock conditions at the shelf. 

Type 1 and Type 4 SolutionIn the case of chronic Type 1 (Traditional) and Type 4 (Under-Stock) Out of Stocks there are only three possible solutions:

1.     A thorough review of the set to identify products that can either be culled or facings reduced to make room for the chronic Traditional and Under-stocked items.

2.     Less likely is the requirement to build out additional space to meet demand for the category.

3.     Allocation of additional labor to increase frequency of routine re-stocking efforts.

Beverages generate about a half million in sales per store each year.  The out of stocks and under-stocks affecting this category are about 8.6% of the 305 sku’s in the category, but those are some of the highest volume items accounting for at least 14% of sales.  Conservatively, we should be able to generate about $15,000 in incremental sales through the re-stock frequency program.If we chose a strategy to re-stock more frequently, we can approximate the benefit and the cost of the program.  SKU rationalization can only have the desired impact if the selected product is available to the loyal shoppers.  Restocking and maintaining shelf presence is better than the alternative of losing the sale.Big problem, Big Reward, Easier SolutionThe Sales Impact of out of stocks has traditionally been pegged at 3-4% of total sales.  Based on our findings there is a 10-15% loss with more than 25% of sales affected by one of the four out-of-stock types.  Not every store will generate these results, but how many could return these results if they were not affected by the four types of out of stocks we have identified?The critical and historically missing link here is realizing that the problem exists in the first place and viewing the category through the same “lens” as your shoppers.  Having a quick response, task-oriented capability based on the store measurement findings is this lens for store “doers”.  For the first time we have a tool to directly impact at least part of this very ugly family.ShelfSnap™ a word is worth a thousand pictures.