K2W Research
How does out-of-stock affect sales results
OOS - out of stock – lack of the product on the shelf
For various reasons, the product is not placed on the shelf according to the planogram:
According to a study by Oliver Wayman, in the absence of a product on the shelf, the buyer, in 32% of cases, leaves without a purchase; in 12% of cases, he buys an analog of another brand, and in 32% of cases, he purchases a substitute. In 76% of cases, the brand loses sales when a product is not on the shelf.
For various reasons, the product is not placed on the shelf according to the planogram:
- The product is not placed on the shelf because it is not in the store's warehouse.
- Or there is a product, but there is no one to put it on the shelf.
- Or the product is listed in the store's accounting system but cannot be found - a virtual balance.
According to a study by Oliver Wayman, in the absence of a product on the shelf, the buyer, in 32% of cases, leaves without a purchase; in 12% of cases, he buys an analog of another brand, and in 32% of cases, he purchases a substitute. In 76% of cases, the brand loses sales when a product is not on the shelf.
According to the research calculations, the store loses 1% of daily sales in only 2 hours OUT of Stock. The example below shows how one manufacturer lost $3.78 in sales on just one SKU that day.
What are the reasons for OOS (OUT OF STOCK)?
The table shows that more than half of the problems come from the store rather than the manufacturer, supply chain, or distributors.
Therefore, to solve the problem with Out of Stock, it is necessary to conduct a comprehensive analysis of the tree of causes. And to answer all the questions that arise, it is better to carry out this work jointly with the manufacturer and the retailer. The example below shows the methodology for identifying the causes of Out of Stock.
Therefore, to solve the problem with Out of Stock, it is necessary to conduct a comprehensive analysis of the tree of causes. And to answer all the questions that arise, it is better to carry out this work jointly with the manufacturer and the retailer. The example below shows the methodology for identifying the causes of Out of Stock.
Conventionally, you can divide the path for assessing the causes of OOS into two branches
1. If the product is in stock in the store
Possible causes of OOS in this case: Poor inventory awareness, Not enough labor in store, Issues with replenishment procedure, poor planogram compliance, insufficient space assigned on planogram, short secondary space assigned to promotion
2. The product is not on the shelf
Possible causes of OOS: inaccurate order planning, inaccurate sales planning (especially during summer seasons, holidays, or weekends), not enough goods in the distribution center, and non-compliance with logistics standards.
The task of the manager responsible for Retail execution is to identify the real reasons and correct the work of his trading team or coordinate additional activities with the trading network.
The full version of the article is available at the link:https://www.oliverwyman.com/our-expertise/insights/2012/oct/getting-availability-right.html.
1. If the product is in stock in the store
Possible causes of OOS in this case: Poor inventory awareness, Not enough labor in store, Issues with replenishment procedure, poor planogram compliance, insufficient space assigned on planogram, short secondary space assigned to promotion
2. The product is not on the shelf
Possible causes of OOS: inaccurate order planning, inaccurate sales planning (especially during summer seasons, holidays, or weekends), not enough goods in the distribution center, and non-compliance with logistics standards.
The task of the manager responsible for Retail execution is to identify the real reasons and correct the work of his trading team or coordinate additional activities with the trading network.
The full version of the article is available at the link:https://www.oliverwyman.com/our-expertise/insights/2012/oct/getting-availability-right.html.
K2W Research
How does product placement on the shelf affect brand sales? Marketing experiment in 2 stores in Reykjavík, Ireland!
A planogram represents a product on a shelf, indicating its quantity (actual inventory).
Usually, the position of the brand's product on the shelf results from complex commercial negotiations between the brand accounting team and category managers in the retailer. And sales depend on the product's location - often, you have to pay extra for the best places in the planogram and an additional number of "faces" of the product.
The marketing team experimented with a brand of potato chips in two stores in Reykjavík, Iceland.
The brand of potato chips evaluated in the experiment was an international brand with a salty taste. Shelf height (shelf height from the floor) was the same in both stores: low - 24 cm, medium - 123 cm, and high - 173 cm. They installed an additional showcase at the entrance to the store with a display of the evaluated brand.
The critical KPI of the experiment was the percentage of target brand units sold, which was calculated by dividing the target brand units sold by the 24 brand potato chip units sold in the store.
Usually, the position of the brand's product on the shelf results from complex commercial negotiations between the brand accounting team and category managers in the retailer. And sales depend on the product's location - often, you have to pay extra for the best places in the planogram and an additional number of "faces" of the product.
The marketing team experimented with a brand of potato chips in two stores in Reykjavík, Iceland.
The brand of potato chips evaluated in the experiment was an international brand with a salty taste. Shelf height (shelf height from the floor) was the same in both stores: low - 24 cm, medium - 123 cm, and high - 173 cm. They installed an additional showcase at the entrance to the store with a display of the evaluated brand.
The critical KPI of the experiment was the percentage of target brand units sold, which was calculated by dividing the target brand units sold by the 24 brand potato chip units sold in the store.
1. Base
The share of the evaluated brand to 24 competing brands was calculated without any intervention on the shelf, with the same layout in the store as before the experiment.
Experiment
2. The experiment organizers placed the evaluated brand at one of three different shelf heights (low, medium, or high).
At the same time, the regiment changed on other days of the week. In particular, the price remained unchanged on all days of the experiment; no one launched additional promotions, and two stores of the same format participated in the test.
Store A experiment results:
1. A distinctive feature of the base period of the experiment, that is, when there were no manipulations with the placement on the shelf, was the lack of sales stability: sales dynamics changed significantly depending on the day of the week.
2. With various product placement variations, be it low, medium, or high shelf types, sales have become more stable
3. The relative sales of the evaluated brand were different depending on the height of the shelf:
Middle shelf 123 cm -7.5%
Low shelf 24 cm -4%
High shelf 173 cm -3.3%
The results for store B repeated the proportions found in store A
4. Placement of goods in an additional display at the entrance to the store further increased the share of sales of the evaluated brand
The share of the evaluated brand to 24 competing brands was calculated without any intervention on the shelf, with the same layout in the store as before the experiment.
Experiment
2. The experiment organizers placed the evaluated brand at one of three different shelf heights (low, medium, or high).
At the same time, the regiment changed on other days of the week. In particular, the price remained unchanged on all days of the experiment; no one launched additional promotions, and two stores of the same format participated in the test.
Store A experiment results:
1. A distinctive feature of the base period of the experiment, that is, when there were no manipulations with the placement on the shelf, was the lack of sales stability: sales dynamics changed significantly depending on the day of the week.
2. With various product placement variations, be it low, medium, or high shelf types, sales have become more stable
3. The relative sales of the evaluated brand were different depending on the height of the shelf:
Middle shelf 123 cm -7.5%
Low shelf 24 cm -4%
High shelf 173 cm -3.3%
The results for store B repeated the proportions found in store A
4. Placement of goods in an additional display at the entrance to the store further increased the share of sales of the evaluated brand
Findings:
- Placement of goods on the middle shelf increases sales compared to standing on the high or low shelves. This increase happens because the middle shelf is at eye level, and the buyer does not need extra effort to find the product.
- For the merchandising team, on the one hand, it is crucial to place the goods on the middle shelf; on the other hand, if this is not possible, then set the task for the sales team to visually accentuate the low or high shelves so as not to lose sales.
- If it is impossible to display it on the middle shelf, then it will be preferable to place it on a low shelf since most buyers initially look down, which is logical from the point of view of travel safety.
Let it start...
