Promotions and out-of-stocks: why the promotion runs out and how to avoid it?

Why the promotion is the worst place for an out-of-stock

The shopper who comes for a promotion has seen the leaflet, travelled for this product at this price, and often put it at the top of their list. In front of the empty shelf, they do not take another product: the promotion was the reason for the visit. In the study by Gruen, Corsten and Bharadwaj, 31% of shoppers facing an out-of-stock buy the product elsewhere; on a promotion, that share is higher still, and the disappointment is remembered. In Spain, the AECOC on-shelf availability barometer found that 31% of sales lost to out-of-stocks were linked to promotions.

The causes, in order

1. The order calculated on usual sales. The reference sells 50 units a week normally; on promotion it will sell 300 or 500. An order based on the average is empty on day two.
2. The unchanged facing. The product stays in its usual place, with a facing of 8 units, while its velocity has been multiplied by five: it needs reloading every hour.
3. Wrong book stock. The promotion reveals phantom stock: the system believes it has 40 units in the back room, there are 6. The opening order is short without anyone knowing.
4. The supplier’s partial delivery, which faces the same peak across all the banner’s stores.
5. Morning-only replenishment, while the promotion sells in the afternoon and on Saturday.

The first three causes are the store’s; those are the ones you act on.

The five-point preparation

Order on promotion history

Not on usual sales: on the sales of the same reference, or a comparable one, during the previous promotion, adjusted for the price gap and the display (gondola end or shelf). Add a 20% margin for the first two days and Saturday.

Check book stock the day before

Physically count the back-room stock of every promoted reference before day one. That is an hour of work for a forty-reference operation, and the only way not to start with phantom stock. The subject is covered in phantom stock: what to do when the book stock says the product is there.

Size a dedicated facing

A promotion sells from a location whose capacity covers at least half a day of expected sales, using the calculation rule in facing and shelf capacity by sales velocity. A full-pallet gondola end for a product selling 80 units an hour on Saturday is not a luxury.

One replenishment pass per half-day

For the duration of the operation, promotional locations are reloaded at least in late morning and late afternoon, with a list of references to reload, not a walk. On Saturday, an extra pass in early afternoon.

Count the out-of-stock every day

Every day of the operation, at a fixed time, note the promoted references that are absent and since when. This record makes the order for the next promotion. Without it, the same reference is missing at every operation.

What it brings

A forty-reference promotion over a week with an out-of-stock rate of 15% at the end of the day loses six references a day, among the best sellers. With a real loss of 55% of missed sales and shoppers leaving for the competitor with their leaflet, the preparation above, which costs a few hours, pays for itself from the first day of the operation.

What shopper reporting changes

On promotion, shoppers crowd the location: the first to find the bin empty reports it in two seconds with ShelfAlert, and replenishment goes out before the next ones leave. The dashboard then shows, reference by reference, at what time each promotion ran out. 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).
• AECOC, OSA barometer (Spain): AECOC presents the OSA barometer.
• ECR France / IRI out-of-stock barometer, Les Marchés, May 2022.