Stock-outs Create Customer Attrition Risk for Mid-Size Retailers

 

Anyone who’s ever had a bag of popcorn at the movies knows how maddening it is to eat the last 5 percent of the bag. The unpopped kernels typically drop to the bottom and become a mix of delight (the ones you can crunch without much trouble) and misery (the ones that nearly crack your back molar and ruin your dental work). For those of us who annoy our fellow movie goers by powering through that last 5 percent of the bag, that pressure filled moment when you are deciding to eat the last few kernels and risk interrupting movie dialog has recently been solved. Halfpops are partially popped popcorn, like the name implies. They come in 7 great flavors and can be enjoyed in the comfort of your own home.

I found HalfPops for the first time at a local health food grocery store six months ago and my snacking life was changed forever. Whether for good or bad remains to be seen, but soon after finding HalfPops I became addicted. I didn’t need to toil at the bottom of the popcorn bag at the movies. I could grab a bag of HalfPops and consume at home knowing that my wife and daughter would be the only ones I annoy. I needed a bag every Sunday as I watched my Denver Broncos march through to Super Bowl 50 and there were other rationalizations during the week, too.

The product wasn’t always well distributed here in NYC and I’m clearly not the only one addicted to HalfPops, so the store where I buy them had trouble keeping them in-stock. There were times when I would go to the store for groceries with HalfPops on the list and was a bit relieved when they were sold out.

Now, to anyone who thinks they should call Dr. Drew for me I say, “no, hold on.” This isn’t a self-help article about how I weened myself off of my addiction … because I haven’t weened myself off of my addiction.

You see this is where things got a little confusing as a customer. The store would burn through their HalfPops inventory but never had more than two flavors and seemed content showing slower velocity SKUs, like crunchy flavored chickpeas and attractively packaged lupini beans, to crowd out what could have been a best seller.

And then they were just gone.

It took a couple of weeks to figure it out but I would learn that my favorite grocery store lost my favorite snack product to a bigger grocery chain across the street. Big deal, right? You may be thinking , “Who cares? Overall it’s a small thing … a one-off.” But, if we look at this as a consumer, my buying behavior has to change. I now have to make the decision to buy the product online or spend extra time to visit the store across the street and deal with the longer lines and the less friendly staff. Friction only a true addict can overcome.

But just focusing on the customer experience impacts ignores the root cause of the issue. After some qualitative research, it’s clear the smaller grocer isn’t doing enough SKU-level analysis to maximize sell through and keep other grocers from poaching their brands.

So while half of the Twitterverse is going on and on about how the Internet of Things is transforming business through automated inventory management, there’s obviously some basic blocking and tackling that many physical retailers need to do to protect their turf and keep the impending “death of retail” from coming true.

Retailers need to conduct basic SKU level trending and category forecasting for three reasons:

  • To optimize inventory investments
  • To help build the right relationships with your most important suppliers
  • To meet demand (e.g. help your customers maintain their addictions)

Building an information-based platform that collects and displays real-time SKU-level details about inventory on-order, received, on-hand and sold and then relates to CRM data collected at Point of Sale is a critical building block to managing a viable retail business. Once in place, more sophisticated forecasting and inventory optimization models can be created to drive even greater benefits for your retail operation.

It’s early but clear my addiction will be tested with this extra step of having to visit the larger grocery store and that’s good, because addictions typically aren’t a good thing. Let’s hope the R&D team at Amazon doesn’t read this. The last thing I need at this point is a HalfPops Dash Button.

 

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