In the fast-paced world of consumer goods, one key factor that can make or break a brand's success is the on-shelf availability of its products. On-shelf availability refers to the ability of a product to be readily accessible and in stock on store shelves. While it may seem like a trivial aspect, it plays a crucial role in shaping a brand's reputation and customer loyalty. In this blog post, we will delve deeper into the importance of on-shelf availability in the fast-moving consumer goods (FMCG) industry and the impact it can have on both consumers and businesses. Retail space for groceries and daily staples is a heavily competitive arena, and there is a high risk that smaller stores fall into “Walmartization”, losing customers to larger retailers due to empty shelves and missing core items.
The Customer's Perspective
As consumers, we have all experienced the frustration of not finding the product we desire on store shelves. Whether it's toothpaste, a snack, or a household cleaning product, a brand's failure to ensure on-shelf availability can result in disappointment and inconvenience for customers. In today's hyper-connected world, consumers have more options than ever before. If a brand consistently fails to meet their expectations in terms of product availability, they won't hesitate to switch to a competitor's offering. This can lead to a loss of sales and, more importantly, a loss of trust in the brand. In the FMCG context, consumers will quickly vote with their wallets when their favourite item is not available. They might move to online retailers like Amazon or nearby superstores like Walmart. Imagine going to a local store looking for Tide detergent and a few other items. If the detergent is not available, you’re likely to leave the other items as well and head to larger retailers like Walmart or Target. You will likely find your favourite brand there, even though it might come in larger packaging and cost more, not to mention the effort to drive over. Next time around, you will ask yourself whether to drive straight to the larger store or shop locally.
Research from the National Retail Foundation found that missing items due to phantom inventory increases the shopping time of consumers by 21% and takes staff attention away from other tasks as they try to locate missing items.
Brand Image and Customer Loyalty
Maintaining a positive brand image is crucial in the FMCG industry. A strong brand image not only helps attract new customers but also fosters loyalty among existing ones. On-shelf availability plays a pivotal role in shaping this brand image. When customers find their desired products consistently available on store shelves, it creates a sense of reliability and trust in the brand. This positive association leads to increased customer loyalty and repeat purchases. On the other hand, a brand that struggles with on-shelf availability risks damaging its reputation, leading to a decline in customer loyalty and, ultimately, a loss in market share. Managing a brand becomes increasingly complicated with an omnichannel approach, as brands and items are available in a multitude of outlets, and there is no way for CPG companies and brands to manage the last-mile experience.
Some chains, such as dollar stores, tend to carry only one brand to optimize shelf space. If, for some reason, that item is not available, it becomes a challenge for both the brand and the retailer, which may lead to a future lack of loyalty and a decrease in the frequency of visits.
The responsibility for ensuring on-shelf availability does not solely rest with the brand. Collaboration between the brand and retailers is essential to optimize the supply chain and minimize out-of-stock situations. By sharing data and working together, brands and retailers can gain insights into demand patterns and adjust their operations, including promotions, to ensure stock availability for the distribution centres. This collaboration can help identify and address potential bottlenecks in the supply chain, ensuring adequate stock levels and enhancing on-shelf availability. Most FMCG retailers run perpetual inventory systems as it's too costly and time-consuming to run regular cycle counts. This leads to poor inventory data quality over time, as leakage occurs at various points in the supply chain (from brand to distribution centre, DC to stores, and in-store).
Recently, shoplifting has increased to become a major challenge for retail stores' inventory management and maintaining items on the shelves. Retailers need to find ways to identify items that are most likely to be stolen in order to improve asset protection. Retail stores also need to accurately forecast those items to increase fulfilment runs. These items are usually referred to as phantom or ghost inventory, as they are expected to be in the stores even though they are physically no longer available.
In conclusion, on-shelf availability is a critical aspect of the FMCG industry. Brands that prioritize ensuring their products are readily available on store shelves stand to benefit from increased customer loyalty, a positive brand image, and ultimately, a competitive edge. Retailers paying close attention to supply chain management can minimize out-of-stock situations and meet the ever-growing consumer demand. So, the next time you go shopping, remember the importance of on-shelf availability and how it impacts your buying experience.
A convenient approach for retailers to manage on-shelf availability is to enhance inventory data quality and leverage AI to predict which items are likely to be off-the-shelf, even if they shouldn't be. Kloud9 has developed a machine learning algorithm that can predict this with over 97% accuracy. Connect with us if you're interested in quantifying the opportunity and finding the best way to capture otherwise lost sales, identify and prioritize items for protection, and, last but not least, increase the customer experience at the store! Imagine what you could do with an extra 1-4% in revenue and an uplift in customer loyalty!