Preventing stock outages
You could be forgiven for assuming that now the pandemic has abated and that the global supply chain has returned to more efficient levels, that stock outages are less likely to be an issue for online retailers. But the reality is that even before the pandemic, eCommerce businesses faced stock outages, for various reasons. In this post, we’re taking a look at what stock outage means, why it is an issue for eCommerce retailers, what causes businesses to go out of stock, and what businesses can do to help prevent those pesky stock outages.
What do you mean by stock outage?
The terms out of stock, and stock outage are both used to describe a product that is not available for sale at the time the customer is looking for it. It could be that the business doesn’t have the product in stock, or it could be that the stock has been allocated for use in a different part of the business for some reason.
In retail, this most commonly occurs when there are no more products on the shelves in a certain store, but there is stock in other locations, such as nearby stores, or at warehouses. It can also happen when products have been ordered and shipped from suppliers, but haven’t arrived at the store on time.
For eCommerce businesses, where you see the out of stock symbol on a product page, that means that all the items in that category have sold out and customers cannot purchase anything from the listing. This could be because too many people have purchased these products (such as if an item suddenly starts trending) or because there are only a few items left and they have already been purchased by other customers.
Why is being out of stock a problem for eCommerce retailers?
Out of stock is a problem for eCommerce retailers because it can lead to a negative customer experience. Customers that have been searching for a product and finally find it in the store, only to discover that it is out of stock, may become frustrated and leave the store. This can happen when there are too many customers or when the product is sold out.
When businesses have out of stock issues, they are not able to fulfil orders from their customers. This means the customers are likely to be dissatisfied, and are unlikely to return to the business. As a consequence, the business is going to lose revenue, and see a drop in customer retention, as well as potentially facing poor reviews.
While this is a problem if the retailer is selling on their own website, there’s a bigger issue if they sell on marketplaces such as Amazon and eBay. On Amazon, for example, the second your listing goes out of stock, you’ll find issues start to occur, such as:
- Keyword ranking sliding
- No reviews being created
- Your listing being removed completely – a huge issue if you’re the only seller
- Other listings from your business being penalised
In order to avoid this situation, retailers should carefully monitor their inventory levels and make sure they never run out of any products.
What causes retailers to be out of stock?
We’re going to put this bluntly – in a large percentage of cases, issues with being out of stock is because of the retailer themselves, and likely because of something they didn’t do. There’s four main reasons for it happening – let’s take a look.
Reason #1: Lack of proper planning and management
You’ve almost certainly heard the phrase “proper planning prevents poor performance” – and there’s good reason that it continues to be thrown around. Without forward planning, businesses are likely to find that they experience stock outages – and indeed, many businesses that are out of stock in one or more of their lines are likely to be so because they didn’t plan ahead for peak business periods properly.
Reason #2: Poor use of capital
Following on from poor planning and management, poor use of capital is another reason for stock outages. It could be that the business used inaccurate figures and tools for forecasting, or perhaps they invested in stock because of a gut instinct. Whatever the reason, if the money simply isn’t available to buy stock, the risk of stock outages is much higher.
Reason #3 Incorrect inventory system setup
In some cases, it might be that there isn’t actually a lack of products available with the retailer, but that the system reports that one or more lines are out of stock – because it hasn’t been configured correctly. This is more likely to happen where businesses have more than one warehouse location, and where they don’t have the right technical support for their business.
Reason #4 Poor communication with suppliers
This may be the fault of the retailer, or the supplier, but essentially, it boils down to one or both parties not talking, or communicating their stock levels accurately. That might be due to CSV file exchanges being set up incorrectly, or it could be as simple as misunderstandings when speaking via phone or on email.
How to prevent and solve stock outages
While in some cases there won’t be anything you can do to prevent stock outages entirely, there are things you can do to help to reduce the chances of your listings from going out of stock, and the impact it has on your business.
Optimise inventory management
No business has a crystal ball to forecast perfectly, but there’s a crazy amount of information available – and that’s even if we consider what is available from Amazon alone. That means that there really isn’t any excuse for not getting the right stock in, when demand starts to increase.
Having tight stock control, and ensuring your inventory management system is configured correctly will help to minimise the chances that you’ll encounter zero stock, and allow you to take steps to prevent further issues.
Automation helps with avoiding stock outages too. If you’re sourcing from DropShipping suppliers, using CSV file transfers and manual DropShipping methods are much more likely to result in out of stock messages. Sourcing from a DropShipping marketplace, where there are multiple suppliers will not only help to avoid out of stock, but the best DropShipping marketplaces have automated all the processes required. This includes features such as being able to set rules that can help to reduce the chances of stock outages. If you’ve already got an inventory management system such as Linnworks in place, look for a DropShipping marketplace to source from that has an integration set up and ready for you to use.
It might be an obvious thing to say, but the main thing you’re going to need to do to prevent lines going out of stock is to have inventory available. If you hold stock in your warehouse, that means having cash available to purchase that stock ahead of time. In the current economic climate, that might be tricky – but there is an alternative. As we’ve already mentioned, sourcing from DropShipping suppliers means that you can make those items available without needing to pay for stock up front. There are loads of additional advantages of sourcing from suppliers on DropShipping marketplaces, including keeping your cash liquid, and making savings for your business. For example, you won’t have to worry about storage, or the additional resources required to pick, pack, and dispatch.
If you’re using PPC, and promotions, and deals to get customer attention, then you don’t want to waste money on customers clicking through and not ordering from you, and getting disgruntled when they find you’re out of stock. If you’re certain you’ve got stock on the way, or that you can source it elsewhere, then you may only need to do this temporarily, before hitting play again.
Increase prices to prevent overselling
Again, this might feel counter-intuitive if you’re selling well – but if you don’t have the stock you need, then until you’ve resolved the issue, you actually want to deter customers from placing orders with you, especially on marketplaces. By temporarily upping the price of the item that you’ve got an outage on, customers are more likely to buy from your competitors. While you don’t want to do this permanently, by doing so, you retain your listing, reviews, and you won’t be penalised by the marketplace for going out of stock. Once you’ve sourced the products you need, you can bring your price back to the appropriate level to encourage customers to buy from you again.
Stock outages are an issue that many online retailers will encounter from time to time, but there are plenty of ways to prevent them from becoming a bigger issue than they need to be. As we’ve talked about here, in most cases, it is a failure on the part of the business. Having inventory from DropShipping suppliers available to your business can help you to ensure that you avoid stock levels hitting zero, and to help you to continue to provide your customers with the best possible service, now and in the future. Sign up for your free Avasam account here to start sourcing from verified UK suppliers, and to reduce your chances of stock outages.