The Importance of On-Shelf Availability in Retail: Why Keeping Items Stocked is Critical for Competitiveness

Due to the influence of online retail, today’s consumers expect to be able to find the products they are looking for quickly and easily. In order for physical retail stores to meet these heightened consumer expectations, it is imperative that shoppers rarely, if ever, encounter an out-of-stock. 

It’s been shown that on-shelf availability directly impacts customer satisfaction and loyalty, sales revenue, and the long-term competitiveness of the business, but keeping shelves stocked day after day is not as easy as it may seem. 

Volatile shifts in consumer demand levels, fluctuations in manufacturers’ production capacities, and unforeseen disruptions to the supply chain are just a few of the notable pitfalls standing in the way of consistently great on-shelf availability.

But don’t worry, there are a number of strategies retailers and Consumer Packaged Goods (CPG) companies can use to mitigate out-of-stocks in stores.

What Exactly is "On-Shelf Availability" (OSA)? 

On-shelf availability (OSA) is a store’s ability to keep products adequately stocked on shelves at all times. When customers walk into a store, they have certain expectations about the items that should be available, expecting to find their favorite brands or a particular type of product. If a store doesn't meet those expectations, customers may leave empty-handed or shop elsewhere. 

On-shelf availability is also directly linked to sales revenue and maintaining competitiveness in the market. In today's retail landscape, customers have more options than ever before regarding where they shop. When products are out of stock, customers cannot purchase them and are forced to shop elsewhere. This means that not only is the store missing out on potential sales, but stores are sending customers directly to the competition. 

Even a slight decrease in on-shelf availability can significantly impact the bottom line. By maintaining high levels of OSA, stores can differentiate themselves from their competitors, providing a reason for customers to choose them over other options.

What Qualifies an "Out-of-Stock"?

In retail, "out-of-stock" refers to a situation where a product is unavailable for purchase at a given time. Even if you have more product in storage, if shelves are empty, it qualifies as out-of-stock. This is because customers may not be willing to wait for the product to be restocked or may not be aware that the item is available in storage.

Retailers must manage their stock effectively to prevent losing customers to their competition. Customers perceive empty shelves as a sign that the store is poorly managed or not adequately stocked, damaging a store's reputation and leading to a loss of customers. 

Having empty shelves may be due to insufficient inventory, unexpected demand, or restocking issues due to imprecise item management. Retailers must manage their inventory effectively to ensure that products are readily available for purchase and that customers can find what they need on the shelves to provide a positive shopping experience, increase sales and revenue, and build a loyal customer base.

How to Maximize On-Shelf Availability (Four Tips)

Maximizing on-shelf availability is a critical component to the success of both retailers and consumer packaged goods (CPG) companies. Since on-shelf availability significantly impacts sales opportunities and brand perception, retailers, suppliers, and field teams must work together to implement effective strategies and processes to prevent out-of-stock scenarios.  

1) Improve Inventory Accuracy 

One of the most common causes of out-of-stocks is inaccurate inventory data. Stores need an effective inventory management system in place to ensure that they know the exact products they have in stock and when they need to reorder. 

Optimizing and implementing automated ordering systems ensures that products are delivered to stores promptly and efficiently and can increase sales by up to 89%. Retailers and CPG companies with real-time inventory tracking and at-shelf ordering ensure that products are always in stock and available for purchase. 

2) Streamline Supply Chain Processes

Retailers and their suppliers are inextricably linked. Communication is vital to ensuring that products are delivered on time, every time, and to reducing the likelihood of supply chain-related out-of-stock issues. 

Shipping data is critical information that suppliers need to communicate with their stores. This includes providing accurate schedules and delivery timelines to help suppliers plan their logistics and ensure that products are always fresh and delivered on time. 

When retailers fail to communicate effectively with their suppliers, it can lead to significant supply chain disruptions and out-of-stock issues. During the COVID-19 pandemic, we saw these issues play out globally. Lockdowns and supply chain disruptions led to shortages of essential products like toilet paper, disinfectant wipes, and face masks. These shortages were exacerbated by panic buying and hoarding, but they highlighted the importance of effective communication between retailers and suppliers.

3) Implement Data-Driven Forecasting

Suppliers are responsible for ensuring that retailers have the inventory they need to meet customer demand, and they rely on communication from retailers to do so effectively. 

Demand forecast data is one of the most critical pieces of information that retailers need to communicate with their suppliers. Accurate forecasting is essential to maintaining on-shelf availability, leading to increased sales opportunities and positive brand perception. 

Retailers and CPG companies can predict product demand, allowing them to adjust inventory levels and order quantities. Retailers can help suppliers plan production schedules and allocate inventory by sharing their expected sales volumes and product mix. This data can also inform pricing decisions, promotions, and other marketing efforts.

4) Monitor Store-Level Forecasting

It's important to monitor store-level execution to ensure products are stocked correctly and promptly. Retailers can maximize their on-shelf availability by leveraging technology to better control their inventory and minimize out-of-stock risk.

When a product is at risk of being out of stock, automated alert notifications for frontline employees are one of the most important things retailers can do to prevent out-of-stock situations. When an alert is triggered, frontline employees can quickly take action to restock the shelves, ensuring that customers always have access to the products they need.

Another key strategy for maximizing on-shelf availability is to allow frontline employees to place orders or flag out-of-stock items on the shelf for faster replenishment. This empowers employees to take immediate action when they notice a product running low or out of stock without waiting for a manager or other team member to get involved.

By streamlining the ordering and restocking process, retailers can minimize the risk of customers leaving the store empty-handed.

Efficient tasking and coordination of frontline work are also essential for maximizing on-shelf availability. By using technology such as task management software, retailers can more effectively assign tasks to employees and track their progress in real-time. This can help ensure that critical tasks such as restocking or inventory checks are completed on time, minimizing the risk of out-of-stocks and keeping customers happy.

On-shelf availability is a critical factor in the success of any retail business. By ensuring that the right products are adequately stocked on shelves at all times and streamlining the supply chain process, stores can provide a positive shopping experience for their customers, increase their sales revenue, and maintain their competitiveness in the market.