Retail Technology
| Log in | Subscribe



Subscribe | Log in
Retail Technology
Subscribe

Stock-outs to cost £1.87bn in lost opportunities this Christmas, according to new research from CEBR

Stock-outs to cost £1.87bn in lost opportunities this Christmas, according to new research from CEBR

 

Retail and consumer research has found limited supply and poor demand planning is driving out-of-stock situations for retailers in vital Christmas period.

 

The report, sponsored by cloud-based enterprise resource planning (ERP) software suite vendor NetSuite, today revealed that UK retailers could lose an estimated £147 million of revenue this Christmas due to missed sales opportunities through out-of-stock products, and an additional £1.7 billion to their competitors, as consumers shop elsewhere for their Christmas gifts.

 

The research is based on economic models provided by the Centre for Economics and Business Research (CEBR) and primary research with 100 UK retail IT decision makers and 2,000 UK consumers conducted by Vanson Bourne.

 

It discovered that the average retailer is losing 10% of its Christmas revenue to out-of-stock situations, where more than half of retailers (66%) were out-of-stock on particular products last Christmas, with clothing (52%), food and drink (44%) and electrical goods (44%) most commonly out-of-stock. With 41% of consumers stating that they planned to go to a competing website or retailer to get the Christmas gift they want, retailers are set to lose £1.7 billion to competitors this Christmas.

 

On average, these retailers also could not fulfil 21% of Christmas orders last Christmas due to a lack of product availability – leading to a potential overall revenue loss of £147 million through missed sales opportunities.

 

Availability hampers multichannel Christmas

 

The UK consumers surveyed were now looking for a true, multichannel experience this Christmas season, with the average conducting 43% of their shopping instore and 57% online. Shopping via mobile devices looked set to play a key role in driving sales this festive season, with almost 20% of consumers saying they planned to shop through a mobile device this Christmas, and almost one in 10 of consumers under 35 said that their mobile device is their primary shopping tool. A quarter of consumers also plan to spend more on their Christmas shopping this year, with 68% expecting to spend more online compared to in-tore.

 

Andy Lloyd, general manager of commerce products for NetSuite, said: “Delivering an omnichannel retail experience is a key challenge for retailers as consumer shopping habits continue to shift, both instore and online. Stock-outs in particular cost more than lost revenue; they can tarnish a brand, especially over the highly emotionally charged festive season. Retailers need to take steps to avoid stock-outs wherever possible, and ensure their commerce systems allow them to quickly recover from misallocated inventory by helping customers to purchase products from alternate store locations or channels, such as e-commerce, when the store is out of stock.”

 

The causes of stock-outs

 

When exploring reasons for stock-outs over the Christmas period, 52% of retailers put this down to inaccurate demand planning; 42% said that they did not have the right products available in the right place (online or instore) at the right time; while 34% said that they lacked a holistic view of the business.

 

In preparation for this Christmas almost 20% of retailers have not ordered additional stock ahead of Christmas, with 10% of these retailers claiming financial constraints as the reason for of lack of stock. But over half of retailers ordered additional stock across their entire product range. And 30% of these retailers have ordered additional stock across items that were popular last Christmas.

 

Lloyd continued: “While it’s great to see that a large proportion of retailers are prepared for Christmas this year, our research shows that many of the reasons behind out-of-stock products comes down to factors which are within retailers’ control, with inaccurate demand planning affecting more than half of retailers alone.”

 

Aligning sales with inventory

 

He added: “The figures from the CEBR demonstrate the cost of taking a gamble this Christmas when it comes to demand planning. To remain competitive, retailers must invest in their systems and processes to ensure that they have full business information transparency, greater customer insight and better demand planning capabilities. Being able to tightly align sales forecasts with inventory replenishment plans can eliminate stock-outs, improve customer satisfaction, whilst ultimately ensuring a retailer can remain competitive during such an important shopping period”.

 

Colin Edwards, economist at CEBR, added: “The Christmas period represents the most lucrative revenue opportunity of the year for retailers, comprising one fifth of annual revenues on average. This means at this time of year it is more important than ever for retailers to manage their stock levels effectively, allowing them to successfully compete with their peers and capitalise on the potential revenues offered by Christmas.”

 

The findings of NetSuite’s latest retail report The Christmas Gamble is available at www.thechristmasgamble.co.uk.