Getting a handle on out-of-stocks before they become a bigger problem

Out-of-stocks have long been the bane of food retailers’ businesses. “They are one of our least favorite things because they are a double-edged sword,” says Abraham Nabors, second-generation owner of Mustard Seed Market & Café in Akron and Solon, Ohio. “You not only lose the sale, but you also make the customer mad and drive them to your competition. And if a customer goes down the street or online once, you risk losing them forever.”

To help you minimize out-of-stocks and lessen their negative impact on your store, we asked Nabors and Matt Ryan of the Independent Natural Food Retailers Association to share their best advice.

Category Management Expert

Accept the reality, then fix what you can. Many INFRA members are unhappy with the amount of out-of-stocks happening these days. They’ve become so prevalent they’re almost the new normal. On one hand, this is a point of celebration for our industry in that what we’ve created together has become so successful. However, because all the conventional big boys now want in on organic and non-GMO, there is now a shortage of products, causing more out-of-stocks for independents. It is therefore a matter of accepting that this is the new reality and then gauging how to pivot from there; it’s about staying on top of out-of-stocks, adjusting and then making the most of what you can do.

Do constant category management. If your categories are managed well, this will increase your ability to move quickly when a long-term out-of-stock occurs. If there is a hole on the shelf, you’ll know what you can fill it with. This is a chance to benefit from the relationships you’ve built with local and regional brands, as well as distributors. You can phone them to ask if they can bring over a replacement product as soon as possible. Are there any local products you could bring in quickly? For instance, if you carry two out of four ketchup flavors from a local brand, and you don’t get in a major brand’s ketchup that week, you can tell the local company you’d love to try out a third flavor in that national brand’s absence.

Unite with other independents. Out-of-stocks are another reason why you really want to look to your partners to see how you can collaborate to have a larger voice in the supply chain. This is where INFRA, National Co op Grocers and the regional Natural Products Associations can help. When you belong to one of these groups, you are still an individual store but your voice will be amplified and thus better heard. While you may not see the effects of this united front on a day-to-day level, it will become more and more important over the next five years.

— Matt Ryan, retail services manager at INFRA in St. Paul, Minn.

Staff Management Expert

Put pars on a scan gun. One of the best ways to create a numeric system is to upload pars into your reorder guns. You can scan a product’s bar code and enter in how many you should ideally have on hand. You can adjust pars over time.

Track out-of-stocks weekly. The goal for every retailer is zero out-of-stocks, but that’s an impossible task. Here’s what independents can do: At least once a week, literally count your out-of-stocks and send those reports to the buyers who’ll be reordering them. Every Monday we get movement reports from the previous week. Our whole store is on a graph: by month, week, year, two years, and we use these reports constantly to gauge what’s going on. If you don’t track out-of-stocks, it’s chaos. Simply trying to order as best as you can isn’t nearly as effective as having a numerical system. Data helps you make better choices.

Determine the why. We always ask why each item was out of stock. Was it an anomaly, as in one customer bought 12 s’mores kits for a birthday party? This happens, but definitely not on a regular basis. Sometimes the why is predictable. For example, with seasonal items you can predict when sales will fall and when they’ll come back. Other products go up and down due to trends, and you must think about where an item is in its life cycle and how it competes against others in its category. For instance, I know why soymilk is going down and almond and coconut milk are going up in sales: Soy is a phytoestrogen, and shoppers are replacing it with alternatives.

Encourage and incentivize staff. In the past, some employees haven’t grasped the importance of minimizing out-of-stocks. They’ve said, “I can’t control if someone buys 12 items at once, so it’s not my fault.” True, but instead of looking at out-of-stocks as though they are a never-ending uphill battle, we have them look at it as a glass half-full: How can we improve and stay in stock to best serve our customers? By regularly measuring out-of-stocks, we can set minimum goals and tell whether we have greater or fewer than the week before. Our buyers know that decreasing out-of-stocks is part of their performance measures, so this incentivizes them. Having a bunch of inventory in the back is bad because you pay taxes on it twice: once when you purchase the products and again when you pay taxes on inventory. This ties up money and makes products more expensive, so there’s an ideal tightrope you want to walk between never being out of stock and having extra inventory.

Vet startups and small vendors carefully. We have very high-volume stores, so we often outpace our local suppliers, especially the one-person operations. We’ll blow through in one day all of the products that took them a week to make. And typically, the smaller the manufacturer, the less capacity and slower turnaround time. We’ve learned over time to ask about capacity in our vendor application forms. We have certain movement expectations, so we’ll pull those reports to discuss with potential new vendors. We’ll remind them that they only get one first impression and it’s really bad to stumble right out of the gates. If necessary, we’ll tell people we don’t think they are ready for us yet.

— Abraham Nabors, second-generation owner and director of education and standards at Mustard Seed Market & Café in Akron and Solon, Ohio

This piece originally appeared on New Hope Network, a Supermarket News sister website.