Over the past several years, we’ve been working diligently to educate the CPG market on the shortcomings of traditional approaches to identifying, understanding, and acting upon poor on-shelf availability (OSA) to drive profitable revenue growth.
Although we’ve been successful in implementing innovative solutions with many leading brands and retailers, most recently related to using highly accurate shelf data to optimize facings, decades of traditional approaches and legacy perspectives related to shelf inventory management remain.
That’s why we were delighted to read the new book from retail experts Tom Gruen and Daniel Corsten that presents a thoughtful, data-driven perspective on the importance of reducing out-of-stocks with some very practical advice on achieving this reduction “in the wild”. (Disclosure: we are fortunate to have Tom as one of Pensa Systems’ advisors).
Aptly named Shelf Confidence – A Practical Guide to Reducing Out-of-Stocks and Improving Product Availability in Retail, the book is available for sale here.
The book is based on a series of primary research studies and collective knowledge gained from studying out-of-stock issues for over twenty years. It does a great job of organizing a large amount of information and conveying insights simply and effectively.
As its subtitle conveys, the book is a practical handbook for reducing out-of-stocks.
Here is a small sample of the key findings presented in the book that we found compelling:
- Out-of-stocks remain a major issue for CPG brands. The overall average worldwide out-of-stock rate is estimated at 8.3%, regularly exceeding 10% for faster selling or promoted products.
- 70-75% of out-of-stocks are a direct result of store-level practice (e.g., underestimating demand, lengthy ordering cycles and ineffective shelf-restocking practices).
- The cost of out-of stocks is greater than previously reported. A typical retailer loses about 4% of sales due to out-of-stocks.
- Out-of-stocks can be reduced on a sustained basis.
- Measurement is key to identifying out-of-stock root causes and focusing resources on improvements that will have the most significant business impact.
In addition to deep insights regarding traditional retail, the book also provides a provocative, research-based perspective on the business impact of online product availability.
One particularly compelling section of the book discusses the impact of demand-based planograms on reducing out-of-stocks (versus traditional packout-based planograms). This topic is interesting enough to warrant its own future blog post.
Across the board, Shelf Confidence is a highly usable, practical guide to improving out-of-stocks. It presents research-based insights and a framework and recommendations to turn these insights into action across your business.
Pensa has developed computer vision and machine learning solutions purpose-built to address out-of-stock issues, but we agree with the authors that “technology alone is never the panacea.”
Shelf Confidence will give you the confidence to harness the power of technology to reduce out-of-stocks, improve product availability and, in turn, profitably grow your business. You can order your copy here.
If you are a CPG brand or retailer interested in reducing out-of-stocks, Pensa can help. We provide a continuous, real-time understanding of actual on-shelf inventory across all channels and SKUs. We capture an entire grocery aisle in seconds and provide a highly accurate, full-store view of shelf inventory conditions. Contact us to learn more.