Out-of-Stocks Cost Retailers Sales from 20% of Consumers: Study

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Out-of-Stocks Cost Retailers Sales from 20% of Consumers: Study

To add fuel to the fire of an already poor economy, retailers are losing sales of at least one item to as many as 20 percent of consumers visiting their stores, according to a recently released research study from IHL Group. This circumstance leads many consumers to stop shopping that retailer entirely, the firm noted.

"Retailers remain in denial when it comes to consumers' perceptions of out-of-stocks," observed IHL president Greg Buzek. "Consumers don't care why the product is not available. They come in with money to spend at the stores and have to leave either because the shelves are empty, there is no one to help get a locked item, or the staff simply cannot find the merchandise even though the computer system says they have it. Nine percent of all consumers in our study have simply stopped shopping at one or more retailers in the last 12 months, due to the problem."

Consumer electronics stores are losing the most, with consumers saying that they leave the store without buying at least one item 21.2 percent of the time, meaning that those retailers are losing $1.35 for every customer that comes into their stores because of their level of out-of-stocks. Warehouse clubs are losing $1.78, and grocery stores 68 cents in sales for every customer that can't find a particular product or an reasonable replacement.

"The reason the figure is higher per out-of-stock and per customer for a warehouse club has to do with the merchandise mix and average size of the transaction," explained Buzek. "The average transaction size was $75 for the warehouse club [which had 15.4 percent of customers unable to find an item they wanted], but $52.62 for consumer electronics. No one goes into a warehouse club for one or two items. They often do, for a CD or phone accessory, at an electronics store. So consumer electronics had more out-of-stocks for every 100 customers, but each one was less than the warehouse club.

"A second factor is the number of customers involved," he added. "The warehouse clubs are membership-driven, so they have fewer customers than the electronics stores, which are open to everyone. So the cost of each out-of-stock is spread against fewer customers."

Available at www.ihlservices.com, the study, "What's the Deal with Out-of-Stocks," examines why retailers lose sales to consumers who want to spend money at their stores, but leave without buying for non-price-related reasons. Among the out-of-stock performances rated are those of Wal-Mart, Kroger, Best Buy, Circuit City, Costco, Albertsons, The Home Depot, Lowe's, and others in the food/grocery, home improvement, or electronics channels.

Among grocers, Safeway turned in the best in-stock performance, with just 14.7 percent of consumers experiencing out-of-stock of at least one item, and the worst were Food Lion and A&P, with 22.8 percent each.

Franklin, Tenn.-based IHL is a global research and advisory firm that provides market analysis and business consulting services for retailers and information technology companies that focus on the retail industry.