Customer reactions to Out of Stock in food retail E-Book

Timo Handermann

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Serie: Schriftenreihe Handelsmanagement
• Sprache: Englisch

Seitenzahl: 147

Veröffentlichungsjahr: 2023

Beschreibung

Due to various events, the availability of goods in retail is currently increasingly being restricted with the result that customers cannot find in food retail (FR) the products they wish to purchase because those products are sold out or not availa-ble for delivery. This situation is also termed Out of Stock (OoS). The reasons for the unavailability of products are often problems in connection with orders for goods, as well as the shelf-filling process within a store. According to literature, in those cases where a customer faces an OoS situation, the customer may postpone the purchase, purchase an alternate product, purchase the product in another store or not purchase at all. Depending on the customers reaction, this will result in a sales decline affecting the retailer and /or manufacturer differently. In these cases, customer reactions are influenced by various factors, such as brand loyalty, availa-bility of offered substitute products and many other factors. Within the scope of a survey, it was found that 36% of the customers predominantly reacted with the purchase of an alternate product of another brand to OoS. Also, 29% of the surveyed were willing to visit another store due to OoS.

Leseprobe

Preface of the publishers

The Publication Series “Retail Management” of the Baden-Wuerttemberg Cooperative State University (DHBW) Heilbronn provides contributions to current trade topics, as well as to innovation and excellence approaches in this field. The dynamic development in retail continuously generates new challenges and solution approaches for retail management, which are discussed in both, in practice and in science. The primary objective of this publication series is the combination of theoretical concepts with practical applications through a mutual transfer of solution approaches from theory and practice. This series makes the claim to become an important source for discussion, impulse, and information for studies, teaching and practice.

Due to various events, the availability of goods in retail is currently increasingly being restricted with the result that customers cannot find in food retail (FR) the products they wish to purchase because those products are sold out or not available for delivery. This situation is also termed Out of Stock (OoS). The reasons for the unavailability of products are often problems in connection with orders for goods, as well as the shelf-filling process within a store. According to literature, in those cases where a customer faces an OoS situation, the customer may postpone the purchase, purchase an alternate product, purchase the product in another store or not purchase at all. Depending on the customers’ reaction, this will result in a sales decline affecting the retailer and/or manufacturer differently. In these cases, customer reactions are influenced by various factors, such as brand loyalty, availability of offered substitute products and many other factors. Within the scope of a survey, it was found that 36 % of the customers predominantly reacted with the purchase of an alternate product of another brand to OoS. Also, 29 % of the surveyed were willing to visit another store due to OoS.

The publishers Prof. Dr. Ludwig Hierl, Prof. Dr. Oliver Janz, Prof. Dr. Stephan Rüschen

Table of Contents

List of Abbreviations

List of Symbols

List of Charts

List of Tables

Introduction

Out of Stock in food retail

2.1 Definitions and Scope

2.2 Causes for Out of Stock

2.3 Empirical studies on customer reactions to Out of Stock

2.4 Influencing factors on customer reactions

2.5 Consequences for retailers and producers

Survey design

3.1 Survey methodology

3.2 Approach to evaluate the data

Empirical results

4.1 Context and characterization of study participants

4.2 Customer reactions to Out of Stock

4.3 Customer reactions at the various retail formats

4.4 Influencing factors on customer reactions

Conclusion and outlook

List of Appendices

List of references

List of Abbreviations

H

hypothesis

FR

food retail

Logit

logistic probability unit

OoS

Out of Stock

List of Symbols

i

running index for the dependent variable

LL

log-likelihood-function

LRT

likelihood-ratio-test

m

number of dependent variables

P

probability

Σ

total

y

dependent variable

z

aggregated influence

List of Charts

Chart 1: Causes for OoS.

Chart 2: The influencing factors are classified into product and brand related, store related, customer related, and situation related factors.

Chart 3: Potential customer reactions to OoS.

Chart 4: Preferred providers of the study participants.

Chart 5: Postponement of buying (groceries).

Chart 6: Selection of another brand (groceries).

Chart 7: Selection of same brand (groceries).

Chart 8: Postponement of buying (hygiene products).

Chart 9: Selection of another brand (hygiene products).

Chart 10: Selection of same brand (hygiene products).

Chart 11: Postponement of buying (pasta).

Chart 12: Selection of another brand (pasta).

Chart 13: Selection of same brand (pasta).

Chart 14: Postponement of buying (edible oils).

Chart 15: Selection of another brand (edible oils).

Chart 16: Selection of same brand (edible oils).

Chart 17: Postponement of buying (fruit and vegetables).

Chart 18: Buying of an alternate product (fruit and vegetables).

Chart 19: Postponement of buying (fresh baked goods).

Chart 20: Customer reactions to OoS for various product groups.

Chart 21: Customer reactions to OoS according to product group and retail format.

List of Tables

Table 1: Empirical studies regarding customer reactions to OoS.

Table 2: Influence of consumer cost on customer reaction.

Table 3: Sales effects of customer reactions.

Table 4: Demographic data of the study participants.

Table 5: Shopping behavior of the study participants.

Table 6: Customer reactions to OoS for groceries.

Table 7: Preferred alternate providers according to product groups.

Table 8: Customer reaction to OoS for hygiene products.

Table 9: Customer reactions to OoS for pasta.

Table 10: Customer reactions to OoS for edible oils.

Table 11: Customer reactions to OoS for fruit and vegetables.

Table 12: Customer reactions to OoS for fresh baked goods.

Table 13: Comparison of the preferred retail format for the selection of the alternate provider.

Table 14: Influencing factors on customer reactions in OoS situations.

Availability of goods in retail is currently increasingly being restricted. The objective of this work is to analyze customer behavior when confronted with OoS situations in FR and to identify differences in the consumer behavior of customers at different retail formats.

1. Introduction

Over the past few years, three primary events affected the food retail (FR) supply chains. The predominant event in this context was the Corona Pandemic, which began in 2019. The Corona Pandemic caused for FR the problem of very volatile demand for various products, primarily for hygiene products such as toilet paper and soaps, but also for food such as flour or pasta.1 This situation resulted increasingly in a consumer demand2 that exceeded the supply of the retailers and certain products were temporarily not available.3 In addition, time delayed deliveries and reduced delivery quantities could be observed during the Corona Crisis, which intensified the problem and further restricted goods availability. This was also caused by an increased level of sick leave in trade logistics, as well as cross-border traffic disruptions.4

Furthermore, the congestion caused by the blockade of the Suez Canal in 2021 had a major influence on goods availability in German trade. This mainly affected promotional products in the non-food area that were not available at the announced promotion date.5

Currently, in the year 2022, with the war between Russia and Ukraine, this is the third event within three years that affects supply chains and goods availability in retail.6 And again, an increased demand for numerous food items such as e.g. flour and edible oil was observed during this period, which resulted in increased Out of Stock situations (OoS).7 Moreover, the supply of e.g. edible oils is further limited by the war and the imposed sanctions due to the high import share from Ukraine and Russia.8 Also the absence of many Ukrainian employees in trade logistics due to the draft by the Ukrainian military causes delays and outages on the supply side.9Trade is currently one of the sectors that is most negatively affected by supply issues.10 For this reason, the question arises especially, how do FR customers handle OoS situations? When trying to answer these questions based on already available secondary data, it is striking that research works dealing with direct customer reactions to OoS situations predominantly date back to the period between the years 2000–2005 and therefore give little information on the current events. For this reason, this research work deals with the issue, that OoS situations currently occur at an increased frequency, which result in loss of sales in FR11, whereby current studies about the consumer behavior when confronted with such a situation are not available.

Accordingly, the objective of this research work is to identify the current customer behavior in OoS situations. Within the course of this research work, the differences in the reactions of customers at the various retail formats are to be identified and the influencing factors on the consumer behavior in OoS situations such as for example brand loyalty are to be determined.

This results in the following primary research questions that create the frame of this research work:

How do customers react to OoS in FR as regards the various product groups?

How do the reactions of customers differ at the different retail formats?

What are customer reactions influenced by?

To answer these research questions, the approach of this work is such that at first previous empirical research is analyzed and consolidated. To answer these research questions, the approach of this work is such that at first previous empirical research is analyzed and consolidated. Thereafter, a panel survey is conducted with the objective to collect primary data regarding current customer reactions and analyze this data regarding differences in consumer behavior, as well as the influencing factors on customer reactions.

In this context, the study is also concerned with the differences in customer reactions at the various retail formats in FR. This work differentiates hereby in FR between the retail formats discounter (e.g., Lidl and Aldi), supermarkets (e.g., Edeka and Rewe) and superstores (e.g., Kaufland and Globus).12 The underlying reason for this is that these formats significantly differ in the number of listed products and why there is a different number of substitute products available from which a customer may chose in the case of an OoS situation.13 In this context, the objective of this study is to analyze to what extent the number of available alternatives influences customer reactions in OoS situations and, if so, contributed with that to an increase of the full-range suppliers’ sales share during the aforementioned crisis years.14

For this reason, this study is first concerned in the following chapter with the previous empirical studies on the subject OoS situations in FR to create a basis for the subsequent collection of primary data regarding customer reactions to OoS situations.

During the course of this research work, OoS situations are defined as the unavailability of products from a customer perspective. There are various options of how customers react to OoS of the preferred product.

1 cf. Lebensmittel Zeitung 2020, n. p.; cf. GfK 2020, p. 8 et seq.

2 In the interest of better readability, the male form is used for the designation of persons and person related substantives. Equivalent terms apply in terms of equal treatment to all genders.

3 cf. Bundesverband des Deutschen Lebensmittelhandels 2020, p. 5.

4 cf. EHI Retail Institute 2020, n.p.

5 cf. Lebensmittel Zeitung 2021, n.p.

6 cf. Lebensmittel Zeitung 2022c, n.p.

7 cf. Statistisches Bundesamt 2022, n.p.

8 cf. Lebensmittel Zeitung 2022b, n.p.

9 cf. Lebensmittel Zeitung 2022a, n.p.

10 cf. Deutscher Industrie- und Handelskammertag 2022, p. 7.

11 cf. Helm et al. 2013, p. 223; cf. Lebensmittel Zeitung 2022a, n.p. cf. Lebensmittel Zeitung 2022c, n.p.

12 cf. Appendix A, p. 86.

13 cf. Appendix A, p. 86; cf. IfH 2019, p. 28 f; cf. EHI Retail Institute 2017, n.p.

14 cf. GfK 2022, p. 2 f.

2. Out of Stock in food retail

As already mentioned in the introduction, OoS situations currently occur at an increased frequency in FR. For this reason, it is the objective of the following chapter to review and analyze empirical research on the causes of OoS, the already collected customer reactions to OoS situations, as well as their influencing factors and the monetary consequences of OoS. This allows for the subsequent collection of current primary data on the basis of these research works and to compare the current primary data with the previously collected data.

2.1 Definitions and Scope

During the further course of this research work, OoS situations are defined as a confrontation of the consumer with the unavailability of a desired product in the preferred size or variety.15 This does not imply, however, that the systemic inventory of the store is null because the product may be available, for example, at the store warehouse. For this reason, the focus is placed exclusively on the customer’s perspective, which is limited to the shop floor of the store.16

In this scenario, there are three different forms of OoS situations. The classic OoS situation defines in this case that a price label is available at the shelf, but the associated product is, however, not available. The secondary placement OoS on the other hand describes a situation, where in the case of multiple placements the product is not available at one of the shelf places where the customer is looking for the product. The third alternative relates to OoS due to delisting by the retailer.17 The focus of this research work is, however, on the classic OoS situations because they possess greater relevance due to currently increasing supply issues.18

In various prior studies, OoS rates of between 7 % and 10 % are identified globally for daily household products. The OoS rates vary, in part, for various product groups.19 The OoS rate is also dependent on the time of day. OoS situations increasingly occur later in the day, while at earlier times during the day a greater product availability could be identified. The reason given for this is that product replenishment takes place during the night or before store opening and that is why there are less often OoS situations in the morning.20 This is the case, primarily for perishable products, such as fresh bakery products, because priority is here often given to the avoidance of food waste versus a high product availability in the evening.21 During the course of a week, OoS situations increasingly occur, in particular, at the begin of the week. The reason given for this is increased sales on Saturdays, which must be offset at week’s begin by new product deliveries and replenishment of the shelfs before all products are completely available again.22 Caused by increased sales at week’s end, OoS situations also occur frequently, however, on Fridays and Saturdays.23 In those cases, OoS situations are often already remedied within one day. Still, 19 % of all OoS situations last three days or even longer.24

In summary, it must be noted that the majority of these studies, which examine the scope of OoS, are outdated. For this reason, it is likely that these figures do not reflect the current availability in the German FR and may possibly deviate to a large extent from the current, actual OoS rates. Nevertheless, these studies show that OoS situations occur in FR and in trade overall. For this reason, it must first be analyzed, which causes are responsible for the creation of OoS and which primary reference points can contribute to an optimization of product availability.

2.2 Causes for Out of Stock

As already mentioned in chapter 1, OoS situations are currently increasingly created by the mentioned crises such as the Corona Pandemic or also the war in Ukraine. Still, the question arises, which additional causes, beside the mentioned events, hamper product availability.

In this context it must be noted that the causes for OoS may vary to a significant extent.25 The causes for OoS may be directly in the store, in the logistics center, the retailer’s headquarters, but also at the supplier.26 The studies came unanimously to the conclusion that store processes are the predominant causes for OoS.27

Upon closer examination of the various processes, it is found that order issues and replenishment of shelfs are the predominant cause for OoS, which is illustrated in Chart 1.28

Chart 1: Causes for OoS.29

At store level, OoS situations primarily arise in connection with purchase orders for goods.30 Potential sources of errors are purchase orders for goods that are triggered too late or not at all31, too small order quantities due to misjudgment of demand32, incorrect inventory in IT systems33, noncompliance with minimum order quantities34, poor data quality in connection with sales forecasts due to volatile customer demand35 or also problems with the transmission of orders. Also, manual order errors such as e.g., transposed numbers36 or a changed demand due to promotions37may result in OoS within the scope of goods ordering. Another cause for OoS at the store level is goods supply.38 In this situation, there is often not sufficient staff available to notice the shortfall. The lack of a systemic data capture of products creates a situation where it is not clear whether the product is in stock in the warehouse or is in goods receipt due to quality controls or similar.39 Also, irregular, or too late product replenishment40 as well as poor warehouse management41 may result in OoS. Also, placing of products can influence their availability.42 Visual OoS situations can be created by secondary placements. Delays in the listing of products or the execution of planograms may result in a temporary unavailability of products.43 In addition, insufficient shelf space may result in OoS if sales are greater than the provided shelf capacity for the product.44 Among other reasons indicated for OoS at stores are the removal of products because the minimum durability date is exceeded45 and poor quality e.g., because of external damages46 or spoilage 47 as well as shrinkage of goods as a result of theft or defective deliveries. 48

At the level of logistics centers, primarily goods deliveries and purchase orders are of high relevance in connection with OoS.49 The causes for OoS at the level of logistics centers are almost identical to the causes that were already listed for OoS at the store level.50