Out-of-stocks in convenience stores: why are they different, and how to hold them with a small team?

What changes at the scale of a convenience store

Out-of-stock studies mostly cover large stores: the 8.3% average measured by Gruen, Corsten and Bharadwaj, or in the UK the on-shelf availability of about 92% on fast sellers measured by ECR UK, concern supermarkets. In convenience, four differences weigh:

• The shopper comes back very often, sometimes daily, for a few products. A repeated out-of-stock on one of them is taken personally (out-of-stocks and loyalty).
• There is no substitute: one size of milk, one or two coffee brands. When the product is missing, the sale is lost rather than substituted.
• The back room is tiny: stock is on the shelf or does not exist. Facing acts as stock (facing and shelf capacity).
• Deliveries are less frequent and minimum order quantities per case weigh on slow movers.

In return, the manager knows their shoppers, sees their shelves several times a day, and can act fast.

The four rules

1. The never-run-out list

Thirty to fifty SKUs that make the daily traffic: bread, milk, eggs, butter, coffee, water, a few toiletries, newspapers or tobacco where sold. They get a single instruction: reorder point and facing are set to last until the next delivery, even on a Saturday. On the rest of the range, an occasional out-of-stock is tolerable.

2. A reorder point set on the next delivery

In a large store, the reorder point is calculated on the delivery lead time and a safety stock (automatic ordering and out-of-stocks). In convenience, with two or three deliveries a week, the question is simpler: “do I have enough to last until the next delivery, counting the busiest day?” For products on the list, the answer must be yes at every order.

3. A replenishment before the evening peak

The convenience peak is at the end of the day. A replenishment pass around 5 pm on the list products, even ten minutes, avoids out-of-stocks in the 6-8 pm slot, the busiest and the most visible (organise replenishment).

4. The log of unmet requests

A notebook or a note on the phone, kept by the whole team: every time a shopper asks for an absent product, the product is noted. At the end of the week, the list says what to order more of, what to list, and what never to let run out again. It is the convenience version of the dashboard described in out-of-stock dashboard, without software.

What not to do

• Overstocking for fear of out-of-stocks: space is short, short dates rotate badly, waste eats the margin. On fresh products, the trade-off between out-of-stock and waste is the same as in a large store, described in fresh aisle: reduce out-of-stocks without increasing waste.
• Relying on book stock: in convenience it is often kept less well than elsewhere (fast receiving, unrecorded waste). Looking at the shelf beats the screen.
• Treating all SKUs the same: the never-run-out list exists precisely to concentrate effort.

A worked example (hypothetical)

Take a fictional 250 m² convenience store, 2,500 SKUs, three deliveries a week, four people. The manager draws up a list of 40 never-run-out products and notes unmet requests for two weeks: 38 requests, 22 of them on list products, concentrated on milk, sliced bread, coffee and nappies, almost all between 6 and 8 pm. They raise the facing of those four products, add a 5 pm replenishment pass, and order nappies two cases at a time instead of one. Unmet requests on the list fall to a handful a week. The order of magnitude is realistic; the figures are illustrative.

What shopper reporting changes

In convenience, the shopper who reports a missing product with ShelfAlert keeps the notebook for the team, including when they are alone at the till. The manager gets the list of products asked for and absent without having had to note it, and sees which products come back week after week. 14-day trial, no payment card: see the plan for store managers.

Sources

• Gruen, Corsten, Bharadwaj, “Retail Out-of-Stocks: A Worldwide Examination”, GMA, 2002: full study (PDF).
• ECR UK / IGD on-shelf availability measure: On-shelf availability: the case of a UK grocery retailer.
• Corsten, Gruen, “On Shelf Availability”, 2004: summary.