Why Retailers Must Address Phantom Inventory Issues

Retail Insight survey shows majority of shoppers experienced in-store out-of-stocks in past year

10/26/2023

Phantom inventory issues are still plaguing grocers both in store and online.

As omnichannel shopping grows and flourishes in the grocery industry, retailers must make moves to ensure loyalty and repeat purchases among their customers. One of those moves, according to software provider Retail Insight, is to identify and correct inaccurate inventory records to ensure unexpected out-of-stocks remain at bay.

Retail Insight surveyed more than 1,000 U.S. shoppers and found that “ghost” or “phantom” inventory is negatively impacting sales and long-term loyalty. That discrepancy between stock listed on retailers’ systems and what items are actually available in store is causing many shoppers to either abandon their shopping trip or choose alternate retailers to complete it.

Some 78% of respondents said they had experienced out-of-stocks in brick-and-mortar stores during the past 12 months, while 73% reported the same issue online. Additionally, half of the respondents reported items being listed as in-stock online but unavailable when they arrived in store, and 37% had experienced store associates not being able to find a product even though they believed it was available in the store.

“As one of the main drivers of inefficiencies, sales, and margins, phantom inventory presents a significant and costly challenge to grocers,” said Paul Boyle, CEO of Retail Insight. “Facing growing pressure on already razor-thin margins, phantom inventory risks becoming a profit-draining issue across every part of the retailer’s store operations, from wasted labor to out of stocks and increased shrink.”

Moreover, 24% of shoppers said shelf gaps would make them abandon their shopping mission and leave the store without buying other items, and 30% said poor stock availability would make them either stop shopping or shop less with a grocer. Another 24% of respondents said they would switch to a competitor if their preferred grocer had shelf gaps.

Real-time data and machine learning-driven software, however, can help grocers address these issues.

“With recent analysis suggesting that phantom inventory can cause as much as 80% of out-of-stocks, it is clearly a major driver of lost sales that retailers can’t afford to ignore,” Boyle said. “By leveraging real-time data, retailers can address and correct inventory accuracy faster and more efficiently, ensuring better product availability, freeing up store associates to serve and, ultimately, delivering store execution that protects, and even boosts, margins.”