Monday being the beginning of the week, Supply Chain Matters takes the opportunity to highlight what we believe was significant news and developments last week.
The Grocery Manufacturers Association (GMA), announced a new report indicating that potential online sales losses for offered products could be as high as $17 billion a year globally because products are not available when consumers want to buy them.
The report, “A Worldwide Study of Extent, Shopper Reactions, and Implications for Non-Food Online Retail Categories,” assessed online availability of baby care, fabric care, hair care, oral care, skin care, and shave care products at retailers in China, France, Germany, Japan, United Kingdom and the United States.
According to GMA, the report is one of the first that focuses on online availability of consumer products as opposed to physical stores. Some summary findings included:
- The number of items that are available online is 80 percent worldwide and 85 percent in the U.S. The 15 percent out-of-stock rate online in the U.S. is nearly double the out-of-stock rate of 8.3 percent for physical stores.
- Consumer reaction to out-of-stocks are quite different in the online sales compared to stores. U.S. consumers are more likely to remain on the E-commerce site and switch a brand or substitute an item within the brand, which the researchers dubbed “the Amazon effect.”. However, if a physical store is out of a product, the consumers are more likely to switch to another store to find the product.
- Worldwide, brands and retailers both suffer the adverse consequences equally when consumers do not find products available online. The report found that worldwide, 31 percent of the total loss is to retailers and 33 percent is to brands. In the U.S., retailers on average suffer 25 percent of the adverse consequences compared to 35 percent for brands when products are not available online.
We hold-heartedly agree with the summary findings that online availability of high volume consumer goods present considerable challenges for online retailers and their product suppliers. According to the report data, the online shopper is more than likely going to switch brands or online properties to complete their purchase.
With the explosion of new interest for ordering all forms of consumer products online, the noted 15 percent online out-of-stock rate is obviously not-acceptable for all partners involved.
It is more than likely a sign that retailers and suppliers have not as-yet been able to align SKU, overall packaging, multi-channel inventory management and retailer-specific stocking strategies. Distribution and stocking strategies that were originally designed to distribute bulk products to physical stores, cannot easily adjust to individual item-level distribution to online channels without added modifications in automation and inventory planning at the item level.
For manufacturers and distributors, if your customer is for instance the online retail for either Amazon, Walmart or Kroger, such in-stock availability rates are marginal, at-best, and a heck of a lot of additional online emphasis remains. Our prior blog commentary on the announced acquisition of Supervalu by United Natural Foods is very much about developing augmented capability to serve expanded requirements in online customer fulfillment for consumer products.
Much more integrated planning and customer fulfillment execution remains.
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