A new report from the Grocery Manufacturers Association (GMA) shows that out-of-stock rates for online purchases are nearly twice what they are in-store, potentially leading to losses of up to a whopping $17 billion a year globally.
The report, A Worldwide Study of Extent, Shopper Reactions, and Implications for Non-Food Online Retail Categories, reviewed online availability of baby care, fabric care, hair care, oral care, skin care and shave care products at retailers in China, France, Germany, Japan, United Kingdom and the United States.
GMA Director of Industry Affairs and Collaboration Keith Olscamp said the study is the first that looked at online availability. “The findings should encourage retailers and brands to collaborate and enhance online availability in the fast-growing area of online retail," he said.
According to the study, the global top 100 publicly listed consumer goods manufacturers had sales of $1.7 trillion (wholesale) in 2016. If 5% of these sales are online and what is available online is 80%, then online sales are $85 billion industrywide, and the online lost sales opportunity is $17 billion.
“Greater on-shelf availability of products is already a top priority for our industry, and this report shows the critical importance of reducing out-of-stocks for online sales as well,” said Olscamp. GMA companies are working to cut out-of-stocks through the GMA Supply Chain Committee, as well as a separate joint task force with retailers, he said.
Additional insights from the study:
- The number of items that are available online (OLA) is 80% worldwide and 85% in the U.S. The 15% out-of-stock rate online in the U.S. is nearly double the out-of-stock rate of 8.3% for physical stores.
- Consumer reaction to out-of-stocks is different when shopping online vs. in-store. Consumers in the U.S. are more likely to remain on the e-commerce site and switch a brand or substitute an item within the brand, which the researchers dubbed “the Amazon effect.” However, if a physical store is out of a product, the consumers are more likely to switch to another store to find the product.
- Worldwide, brands and retailers both suffer the adverse consequences equally when consumers do not find products available online. The report found that worldwide, 31% of the total loss is to retailers and 33% is to brands. In the U.S., retailers on average suffer 25% of the adverse consequences, compared to 35% for brands when products are not available online.