Inventory is king for Christmas: New retail study warns SMEs to shape up when stocking shelves

Shoppers aren’t necessarily shunning bricks-and-mortar retail to buy cheaper goods online, a new survey argues, but flock to digital channels because traditional stores aren’t keeping a watchful eye on their inventory.

The study by the Monash University Centre for Retail Studies has found that out of the 4% of respondents who went to a bricks-and-mortar store, and then bought online, the vast majority did so because they couldn’t find the product they wanted on the shelves.

The survey of more than 600 shoppers found 61% of those who went to a retail store, but then bought online, did so because they couldn’t find what they were looking for.

“Obviously, for retailers that’s a bit of a problem,” says CRS researcher Jason Pallant. He argues the lack of stock is indicative of a much bigger problem: retailers being too slow to adapt.

“The idea of omnichannel is that if you go into a store and an item is out of stock, you should be able to walk out of there still having bought the product.”

“It shouldn’t be my responsibility to drive around town looking for another store that has that item. The company should just get it to me.”

The problem underlines the importance of inventory management, a sore spot among retailers. Keeping stock on hand can be expensive, especially during Christmas.

But Retail Doctor Group managing director Brian Walker says it’s a critical part of the business that too many SMEs ignore.

“I can say that over 60% of retailers we’ve viewed have missing stock in critical product categories,” he told SmartCompany.

“The whole product architecture is often not looked at closely enough. You look at a store like Myer, and they do an immense amount of work on product architecture, having the right range, and so on.”

It’s the old 80-20 rule, he says. The majority of your revenue should come from 20% of the product, and those products should continually be stocked up.

“You need to marry sales forecasting to categories, right down to the subcategory level. If you look at the historical data you can predict the outcomes with much more accuracy.”

“Make sure you have depth to your forecasting, and make sure you’ve got good back up stock available quickly.”

Pallant says the research backs up the idea that shoppers are simply becoming less tolerant of barriers put in front of them. They’ll take the option allowing them the most convenience.

He points out that a group of users tracked their experience while shopping using an iPhone app. The most common barrier they experienced was not being able to find goods in stock.

“If someone walks into a store, they should simply be able to make a purchase.”

The warning comes as Christmas-related data has been putting Australian retailers in a festive mode. According to new figures from IBISWorld, the season of merriment will have a good effect on the alcohol industry – to the tune of $33 billion over the next year.

And over the next five years, spending is set to increase by as much as 20.5%.

“While Australian alcohol consumption is expected to fall to a decade low of 9.80 litres per capita this year, down 2.4% from 2011, IBISWorld anticipates the move towards more premium products will see alcohol revenue continue to rise”, said IBISWorld general manager Karen Dobie.

“In 2012-13, Australians are expected to spend $33.1 billion on alcohol – with $15.9 billion being spent in pubs and bars and $17.2 billion in liquor retailers.

“Looking towards 2017-18, significant growth is expected across both sectors as the retail environment and consumer sentiment strengthen.”

The data comes alongside a forecast from the Australian Retailers Association that despite the RBA’s reluctance to further cut interest rates, the industry will record 3.9% growth this year to $21.2 billion.

However, executive director Russell Zimmerman said retailers are “holding their collective breath” for a rate cut.

“While we by no means expect shoppers to be beating down the doors to go Christmas shopping, especially in the early stages, the figures represent growth which will see retailers hear some rings of their tills and gift recipients will certainly find presents under the tree.”


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