Reducing out of stocks: 5 ways you can avoid losing sales

Stock is one of the biggest investments and risks for a retail business. Have too much, and you’re landed with a whole load of products blocking up your storerooms and warehouses which you can’t shift. Too little, and you can expect a load of disappointed customers who won’t shop with you again because they can’t get hold of what they want. It’s all about getting the right balance – but for many retailers this is a real struggle. The problem is they lack the insights they need to manage their stock in the most effective way. 

The study titled “True Cost of Out-of-Stocks and Overstocks – Can Retailers Handle the Truth?”   by global research and advisory firm IHL Group found that North American retailers missed over $349 billion in sales due to out of stocks and overstocks in 2022. The survey also found that challenges with theft, labor shortages, and spoilage led to inaccurate inventory counts by about 25%, causing customers to miss out on 1 in 5 items they planned to buy. But stockouts don’t just affect physical retail – online retail also suffers. Research from Boston College, which sampled over 840,000 Instacart customers, found that they were 25% less likely to purchase items that had low availability.   

Many customers visit your store to see the product in person, and some will have even done their research online already. They may have seen the item in-stock in your e-commerce store, and assumed it’d be available in your physical store, too, or vice versa. But imagine if it isn’t. You don’t have the color they want, and it’s going to take a few days to get it shipped to them. They will be disappointed – and chances are they’ll head to one of your competitors and spend their money with them instead. So how can you avoid sending them away empty handed? 

Here are five ways to improve the way you keep track of your inventory, and prevent out-of-stock scenarios:

1. Ensure your data is reliable and up to date

You may think that you already have good control of your sales and inventory data, but how reliable is it? Is some of it still input manually? How often do you run reports and analyze them? Weekly? Daily? Unfortunately, this just isn’t enough anymore. Today, if you want to be able to react to your customers’ demands and give them the service they expect, you need to be able to track your stock in real time across all channels. Ideally, you need this information to be held in a centralized system that connects your online and physical stores and have the tools to see exactly how products are selling in all your locations, where there are stock shortages, and if certain products are selling faster than others. 

Armed with this information, you can then put measures in place to make the best use of your stock and plan ahead more effectively. 

2. Anticipate demand 

You may have an overall picture of what stock you have, but you should also understand what you’re going to need in the future. To do this, you need to be able to analyze your sales history data to anticipate demand to accurately determine what products to order, in what amounts, and when. 

You may already be trying to calculate demand on your own by using your judgment and factoring in elements such as min/max replenishment. But is this giving you full control over exactly what’s going on with your inventory? You could save significant time, and achieve better results, by automating basic replenishment tasks. Advanced replenishment tools can calculate the exact quantities you should reorder for your stores and warehouses by considering multiple sales history trends, enabling you to allocate stock optimally across all your locations based on the most popular styles, sizes, colors, models, etc., and tracking how often out of stock situations occur. 

3. Understand the impact of key retail events and promotions

Easter, Christmas, back to school, the beginning of the summer holidays – these types of events all have a huge impact on your sales performance. The question is, can you compare these types of events year on year, regardless of where they fall in the calendar, and properly prepare for them? If you want to really understand your sales performance, you need to clean up your sales history data and know exactly what information you’re dealing with. 

Here’s an example. There was an annual music festival in your city last weekend. It brought a surge of tourists to the area, and they all purchased lots of cold refreshments because it was hot and sunny. But just because this happened last weekend, you cannot expect to see the same sales pattern the following week, but you do want to be able to plan for it the following year. When anticipating future demand, you need to be able to adjust for anomalies. And you also want to have the ability to accurately identify products with specific lifecycle patterns – such as swimwear and festive decorations – and account for regional variances. 

Similarly, discounts and promotions are likely to have a big impact on the quantity of products you sell in store, and you don’t want to risk under-stocking and selling out too quickly. Again, you need to be able to look back and identify sales spikes to see which products sold the most and when. 

4. Put tools in place to effectively redistribute stock

What measures do you currently have in place to balance the sale of stock across your business? How do you identify products that are selling better in some stores than others? There are ways to optimize your stock at store level and take advantage of digital workflows to see exactly which stores lack certain items and which have a surplus.  Then, you can determine in which of your stores certain products may perform better and easily transfer some of your stock from one store location to another. 

This is particularly necessary in the fashion sector, where trends fluctuate quickly, and clothing lifecycles are limited. Inventory redistribution in season is almost inevitable, and you need to be able to react fast to minimize lost sales and avoid marking down a lot of unwanted products.  

5. Identify trends and track customer preferences

Just because a product sells well this year, doesn’t necessarily mean it will perform the same way the following year. You can’t afford to become complacent. You must always keep up with current trends and identify the types of products people are gravitating towards. 

For example, Spanish fashion brand Zara says the secret to its success is the ability to follow rapidly changing fashion trends and bring new apparel to market with very little delay. Its teams watch how fashion is changing and evolving every day around the world, and then develop and put new designs into stores within a matter of days. 

Retailers need to be able to understand what their customers are buying, determine patterns in their shopping behavior, anticipate what they want, and have the right products delivered and replenished in the right places. To do this effectively, you need technology that allows you to harness the power of data and transform it into actionable information to meet consumer demand. This will help you pinpoint spikes or drops in product sales and see your customers’ most popular purchases. Once you understand how your customers shop with you, you’ll have a better idea of how you can adjust your stock to reflect their preferences and stay competitive.  

An advanced retail system that covers all bases

Many retailers today rely on a variety of best-of-breed systems to handle their inventory and planning processes. The trouble with this approach, though, is that it can be very difficult and costly to integrate them with your retail enterprise resource planning system. The good news is that there is another way. 

With our unified retail management software platform, LS Central, you can keep every element of your business under control using a single system. Get a real time view over your inventory for both your online and physical locations, and easily keep track of your sales and stock information while increasing visibility for both your customers and your employees. 

Contact us to find out how you can take advantage of this technology to drive your business forward and impress your customers every time.