No product - no loss? ..
“What is the level of out-of-stock items in your chain?”
We have noticed that chains often focus too much on combating product losses. One of the consequences of this struggle is the lack of the necessary goods in the store (Out Of Stock). If there is no product on the shelf, then there is no loss - everything is simple. Of course, this is not the only reason for the lack of goods. There are quite a lot of them, but in any case, about 75 percent. The reasons for the lack of goods are related to the internal processes of the network, and about 25% are due to non-modifications of suppliers.
How much does it cost for a network lack of goods? The average out-of-stock figure in FMCG retail in developed countries is about 8%, and the loss of sales due to this is about 4%. It is not difficult to calculate, if the chain's sales are 100 million euros, then the loss of sales per year will be about 4 million euros, and, accordingly, the loss of EBITDA will be more than 1 million euros. In addition to this, we have a lot of dissatisfied customers, and the low level of lack of goods is one of the most important parameters for choosing a store. We often see empty shelves of fresh and promotional products, especially in the morning and evening.
Why don't networks pay due attention to this parameter, and some networks don't even measure and don't know their indicator? Rather, because these are not direct costs, such as the write-off of expired or naturally damaged goods, and lost sales are just “virtual” profit not received.
For those who are planning to systematically reduce the level of lack of goods in their stores, we suggest starting with the old, but relevant to this day, literature, which can be found at the link below. Or contact us for a detailed consultation.
Don't be surprised if the out-of-stock rate is around 15 percent at the beginning. Working systematically, reduce it twice during the year.