Reducing online out-of-stocks critical for retailers, says GMA study

A new report shows that out-of-stock rates for online purchases of consumer products in the U.S. are nearly twice as high as in-store availability. The report, issued by the Grocery Manufacturers Association (GMA), shows potential online sales losses 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,” looks at online availability of baby care, fabric care, hair care, oral care, skin care and shave care products at retailers in the United States as well as China, France, Germany, Japan and the United Kingdom.

Extent of online products not available online (U.S.)

According to the report, The number of items that are available online (OLA) is 80% worldwide and 85% in the U.S. The 15% out-of-stock rate online in the U.S. is nearly double the out-of-stock rate of 8.3% for physical stores.

Consumer reaction to out-of-stocks is 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% of the total loss is to retailers and 33% is to brands. In the U.S., retailers on average suffer 25% of the adverse consequences compared to 35% for brands when products are not available online.

“This is one of the first studies on online availability after previous reports over the past decade studying on-shelf availability and its effects on consumer purchasing patterns,” said Keith Olscamp, a GMA director of industry affairs and collaboration. “The findings should encourage retailers and brands to collaborate and enhance online availability in the fast-growing area of online retail.”

The report highlights the significant sales revenue at stake for retailers and consumer goods manufacturers. To extrapolate to the industry level, the Global Top 100 publicly listed consumer goods manufacturers had sales of $1.7 trillion (wholesale) in 2016. The report estimates that if 5% of sales is online and what is available online is 80%, then online sales are $85 billion industrywide, and the online lost sales opportunity is $17 billion.

How shoppers react when product is unavailable online

“Greater on-shelf availability of products is already a top priority for our industry, and this report shows the critical importance of reducing out-of-stocks for online sales as well,” Olscamp said. He added that GMA companies are working to cut out-of-stocks through the GMA Supply Chain Committee as well as a separate joint task force with retailers.

The report was done by Daniel Corsten, professor of operations and technology at IE Business School, and Thomas Gruen, professor of marketing at the University of New Hampshire. They previously did GMA reports in 2002 and 2008 on retail out-of-stocks.