Retail media management (RMM): How to measure and optimize your digital shelf success
You Can’t Sell What You Don’t Have: The Importance of Avoiding Out-of-Stock and Product Unavailable Situations
One of the most common – and costly – problems our customers have on Amazon is going out of stock or having products made unavailable, even if there is inventory on hand. We have found that these two issues alone can cost you between 3.5% and 7% of your Amazon revenue – in other words, a big deal!
Clearly, these are problems worth addressing. However, solving them with with conventional analytics supported by manual processes fails in the face of the volume and pace of selling on Amazon. How many of your ASINs can your team check each day? Our studies have shown that addressing these problems without automation requires one person for every five to ten ASINs to be effective (and it’s usually closer to five) – and that’s just not economically viable. For those of you using analytics – either those provided by Amazon or those from other vendor – how do you know which of the out-of-stock or unavailable ASINs listed in your reports to try to deal with first, in terms of their importance to your business and impact on your bottom line?
There are two steps to minimizing out-of-stock and unavailable products and clawing back the hefty chunk of lost revenue they represent:
- Detecting the problem
- Addressing the problem
Let’s look at each in turn.
Detecting the Problem: You Can’t Solve What You Can’t See (Or See Coming)
How do you know when you are out of stock of an important ASIN, or your product has otherwise been removed from sale? You can even have a product removed when you have inventory on hand, if enough customers have left it in their shopping carts but haven’t yet pulled the trigger on purchase (please see my colleague Kate’s excellent blog on Inventory Encumbrance to see how that works). In the case of Andon Cord pulls, where a product has been pulled from sale by Amazon for any of a number of reasons (customer complaint or packaging issues, for example), Amazon does not typically inform you that this has happened, and, until you discover that it has, you are leaking revenue.
One of our customers experienced this first hand, when they discovered that Amazon had made a fast-selling ASIN unavailable without informing them and they had unknowingly been losing revenue on it for days. And in the case of out-of-stock ASINs, another of our customers noted,
“We used to have someone working full time just manually checking for out-of-stock SKUs, which was slow, error-prone, and horrible for the person having to do it.”
If you are relying on reporting solutions to identify out-of-stock ASINs, how do you figure out which ones to deal with first? How much time and manual effort from an analyst (or from yourself) is required to analyze and prioritize this list? And how up-to-date is the information? We have been hearing from customers that the latency in many popular solutions is a week or more. How much revenue might you lose in a week?
Of course, the other problem with these approaches is that they are backward-looking, flagging problems that have already occurred, rather than alerting you to ASINs that are in danger of going out-of-stock, but where taking quick action can avert that outcome. Ideally, a solution to the out-of-stock problem would identify out-of-stock and unavailable ASINs, ranked by revenue impact so you know where to focus your attention, and would be able to predict which ASINs are in danger of going out-of-stock so that you can take the steps necessary to preventing the out-of-stock from even happening in the first place.
Well, There’s Your Problem – Now What?
There is a lament we frequently hear from our prospects –
“How can you get Amazon to do anything? Even if you can identify an out-of-stock product, you ask your Amazon Vendor Manager to cut a PO, and he/she tells you that the algorithm runs everything, and he/she is powerless – it’s like, ‘talk to the robot hand!’”
Here’s the thing about Amazon, though: it’s an extremely data-driven company. If you can present data showing that an ASIN will go out-of-stock in twenty days without an additional order, or that a key ASIN that is already out-of-stock means a loss of hundreds of thousands of dollars a week, Amazon will respond. While it’s not at all the kind of conversation many of our customers were used to having with retail buyers in their brick and mortar channels, armed with the right data, you can work with Amazon to do what you jointly need to do to keep the Amazon flywheel flying. Some of our customers are even automating this process, countering the Amazon robot with their own robot.