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What’s Happening With Out of Stocks?
Despite the ongoing microchip shortage and production disruptions to durable goods, we also see that many grocery brands have experienced steadily rising out of stocks since the start of the year to a greater degree than other categories. At its height in the summer, replenishable out of stocks for grocery brands were 116% higher than they were in January 2021. As a whole, grocery out of stocks are now 86% above January 2021. Extreme weather events have only made the situation worse.
A majority of general merchandise suppliers have seen their out-of-stock levels decrease over the past nine months. However, these decreases tend to be coupled with significant volatility as availability swings widely from month to month. Home décor suppliers are among those that have seen improvements since the start of the year, though any given month can be an outlier. For many suppliers of hardline items, today’s out-of-stock levels do not necessarily guarantee a better inventory position for the holidays. Brands must plan accordingly.
Many categories’ out-of-stock levels follow clear seasonal trends. Patio, Lawn, and Garden items saw a huge spike in the early summer but are back down to levels that are below those in January 2021. Pet care also saw a jump in out of stocks in the middle of the summer, yet these levels remain elevated today. Even though baby supplies out of stocks have fallen precipitously since the beginning of the year, they also saw a limited rise in the summer. On the other hand, out of stocks for beauty items are down from the start of the year on average, but levels have fluctuated enough from one month to another that no clear trend emerges for 2021.
What about the future?
Pre-COVID, it was common for out-of-stock levels to rise 50% during Cyber5 and remain elevated throughout the holidays. Since COVID-19, persistent out of stocks remain a larger problem. However, in 2021, some supply chain constraints have now existed for over a year. It’s possible that out of stocks in 2021 can be elevated over baseline historical standards while being comparable or even lower than levels in 2020, especially in non-grocery categories.
We expect that a few key general merchandise categories will fare well during the holidays. Toy suppliers continue to face supply chain difficulties, but many of those issues have been in place for over 12 months. While out of stocks will increase by about 30% over baseline, they will likely be slightly lower than 2020 Q4. Likewise, Home and Kitchen suppliers dealt with outsized supply chain issues in 2019 and 2020, but those have come mostly under control in 2021 and are unlikely to impact Home holiday sales significantly. However, for pet categories, heightened levels of pet ownership caused by the pandemic could now further strain inventory as new pet owners buy gifts and snacks for their pets. We have already seen pet supplies out of stocks trending in the wrong direction so far this year.
Aside from the direct effects of an unavailable product, dysfunctional supply chains also mean that shipping costs are at a premium. These costs could both eat into brand profitability or raise the overall price points of holiday items this year.
What can brands do to prepare for higher demand?
- Forecast demand: Create a consumer-demand-based long-term forecast model to set allocations. Plan for multiple inventory scenarios in advance and have contingency plans.
- Use born-to-run orders: Align with your forecasts by placing orders directly through Amazon to account for additional demand. Use the lull after Cyber5 to ship replacement inventory.
- Leverage direct imports: Work with Amazon to use direct imports. Take advantage of their long lead time to reserve space in fulfillment centers now and be in stock before Cyber5.
- Consult a single source of truth: Ensure you can access all relevant inventory, advertising, product, and fulfillment data quickly and simultaneously to make informed decisions.
At CommerceIQ, we can link your data sources and mitigate the fallout of online out-of-stock issues with our powerful scraping and automation tools. Learn how we can…
- Discover and resolve purchase order discrepancies
- Leverage a single source of truth to identify erroneous out of stocks on Amazon
- Automatically notify Amazon of these errors and correct issues as they arise
- Predict when and where you will be out of stock based on inventory positions and sales velocity
- Find and eliminate any advertising spend that’s directed toward products that are either currently or soon to be out of stock