by Rob Shaw, SVP International Sales at Fluent Commerce
Early on in the pandemic, the unprecedented surge in online shopping left retailers overwhelmed. From exercise equipment to hand sanitiser, game consoles to gazebos – locked down consumers searched online for the latest distraction, clearing warehouses of their stock in the process. This shopping frenzy caused supply chains to buckle. Shortages were experienced for weeks, even months, leaving customers disappointed.
Fast forward to today and the pendulum has swung the other way. Many retailers now have an excess of stock they are struggling to sell, causing ‘inventory bloat’. Wander into most UK stores at the moment and Christmas sale rails remain full, with more sale stock undoubtedly sitting out back. This has left retailers under a huge amount of pressure to clear stock, release capital and reduce spend on warehouse storage.
While many would assume that more stock equates to more sales, only retailers who have an accurate view of where and how much stock they have in each location, are in a position where they’re able to sell it. And, more crucially, ensure they’re not selling too much and leaving customers disappointed. But what exactly is overselling and how can retailers avoid it?
The problem of overselling
Overselling doesn’t mean simply running out of stock – it’s when online consumers are able to complete purchases once stock has sold out. This might be because it sold out on a marketplace, stock levels were miscalculated, there wasn’t enough safety stock, or because retailers were too slow to update their inventory.
However, when a customer completes their purchase and then is emailed later to be told it’s no longer available, it can seriously damage the brand’s image. Not only is the customer less likely to use that retailer in the future, but if they leave a negative review this could also deter many more potential customers. Indeed, according to Fluent Commerce’s Top Holiday Shopper Trends 2022 survey, 68% of consumers said it would damage their view of the retailer if they purchased an item and it wasn’t actually in stock.
Worse than selling out of a product is when retailers don’t have a complete view of inventory, and leave stock sitting in a location where online customers can’t access it. This is a triple blow – customers are disappointed at not being able to purchase their desired product and the retailer misses out on potential sales and customers, while not actually selling out of the items they do in fact have.
Four steps to prevent overselling
With so many negative impacts of overselling, there are a number of precautions that retailers can take to prevent this. Here are four elements to consider:
Regular stock checks
To prevent overselling, regular stock checks ensure figures are correct and sales channel(s) are accurate. Having one view of inventory across stock in stores, distribution centres and warehouses, is fundamental for having an accurate understanding of how much stock retailers have at any given time. More importantly, it ensures that retailers know exactly where that stock is located.
Updated sales channels
For multichannel retailers that list stock in full on each channel, being on the ball where stock is concerned is even more important. When stock drops on one channel, all other channels need to be quickly updated. For example, changing the figures on the retailers website, as well as Amazon and eBay, will help ensure they don’t oversell.
It’s challenging for all retailers to successfully forecast demand, especially in today’s tumultuous market. Knowing where items are ordered from helps retailers to replenish orders quickly and in the right place, ensuring less ‘out of stock’ occurrences.
As an example, if a store is running low on stock of an item, they’ll receive a replenishment order to increase stock. However, what if half of that stock was used to fulfill online orders because there was no stock located nearby? An optimal replenishment strategy would be to send more stock to the stores closer to the source of demand, and less to the store that is further away. This would also lower the cost of delivery due to the shorter distance the goods need to travel.
A sophisticated Distributed Order Management System (OMS) automatically updates sales channel(s) with stock levels in real-time. It can assign buffers for popular items which prevents overstocking. By automatically reporting stock, retailers can use an OMS to identify peaks in demand, seeing what’s available across all locations and then allocating stock accordingly. They’re also able to flag damaged items, so unsaleable inventory won’t be shown in online channels.
The problems of overselling are duplicitous, but they don’t have to be. With regular stock checks, up-to-date sale channels, improved planning and a quality OMS, retailers can have a real time view of inventory which helps them sell stock in the most efficient way. This will help retailers respond and adapt much faster to their customers buying behaviour in the future – readily prepared for another exercise or home improvements frenzy.