5 ways to handle stockout in retail stores

Out-of-stock situations lead to disappointed customers and cost retailers thousands of dollars a year. To reduce stockout costs, you’ll need an accurate inventory system as well as options to deal with product unavailability scenarios.

In this article, we’ll explore the costs of stockout and how to handle inventory stockout in your retail stores.

Stockout definition

Stockout means a product is unavailable to the customer who wants to purchase it.

In retail stores, this usually means you don’t have enough items, or a specific product variant such as size or color, that the customer needs on your shelves.

According to a study by IHL Group, retailers are missing out on nearly $1 trillion in sales because of stockouts. Out-of-stock situations have many negative impacts on retailers.

The costs of stockout

Stockouts reduce sales. When you don’t have the items they need, your customer may need to buy the item in a smaller size or choose a cheaper alternative you have in-store. They can even leave without a purchase.

Product unavailability leads to poor customer satisfaction. You’re not meeting customer expectations when the customer can’t buy the items or has to wait for a long time to receive the products.

Stockout costs retailers sales, customer loyalty, and other operational expenses

Out-of-stock lowers customer loyalty. Your customers can switch brands or find other channels to buy from. Repeated out-of-stock cases also damage your reputation, decreasing traffic to your store and website.

Stockouts lead to higher operational costs. To deal with stockouts, retailers have to either reorder items or transfer inventory from another warehouse. Due to the urgency, you might have to pay more for procurement, extradited shipping, and storage.

Your staff needs to spend more time on inventory activities. Stockouts mean your employees need to spend more time looking for stock across your system, processing inventory transfer from another warehouse, or handling unplanned restocking. They will have less time to consult the customers in your stores.

To prevent out-of-stock scenarios, retailers need to optimize their inventory planning, ordering, and replenishing. A centralized inventory solution can help you keep your stock accurate at all times, forecast future demands, and collaborate with your suppliers closely.

Accurate inventory helps retailers reduce not-in-stock situation in stores

How to handle in-store stockouts

Even the most diligent retailers run out of popular products to sell at times. Let’s look at 5 ways your staff can handle this situation and create a better shopping experience.

Offer related or replacement item

Sometimes the customer is willing to buy a substitution product if there’s a stockout. For example, if the dress they want doesn’t have the correct size, your sales staff can recommend another item in a similar color or style.

For this method to be successful, your employees need to know the customer and why they want to buy the original item. Effective consultation makes the customer feel your staff genuinely care about them instead of just trying to sell products.

A retail POS system that provides customer information — address, purchase history, preferences — can help your employees understand the customer and deliver more personalized consultation.

Store activities

Request an inventory transfer for later pickup

If your staff can get the items transferred quickly from a nearby store or warehouse, they can suggest the customer return later to pick up their order.

This solution to stockout has 6 key steps:

  1. The customer requests an item that’s out of stock in the store.
  2. Your staff checks the inventory of nearby stores or warehouses to see if the item’s available.
  3. If there’s stock for the item, the staff informs the customer when they can pick up their purchase. Your cashier can create an order in the POS system immediately or wait until the customer picks up the product.
  4. Your staff makes an inventory transfer request to get the item delivered to the store. Alternatively, they can also go to the other store to get the product directly.
  5. Your staff contacts the customer to let them know the product is ready for pickup.
  6. The customer returns to pick up the item and complete the sales.

Your POS should make this process easy and accurate for your staff. Your retail system should have features such as product lookup, inventory transfer and adjustment, and creating shipment.

Manage retail inventory with POS system

Create the order for another store and ship to the customer

Retailers can use this option when the items are in stock in another store and the customer isn’t in a hurry to receive the products.

  1. Your cashier checks your inventory system to identify the store with enough stock.
  2. The staff creates an order for the other store with the customer’s shipping address.
  3. The employee from the other store checks the order on the POS system and ships the items to the customer.
  4. The customer receives the product from the other store.

For this process to work, your retail system needs to support creating orders for another location. A centralized POS system will help connect all the registers and keep sales and inventory data correct.

Create and ship the order from multiple stores

Another way to handle stockout situations is to ship from multiple locations at the same time. Here’s the process:

  1. Your cashier selects the locations and quantity to ship from each store.
  2. The staff chooses the shipping method for each shop and completes the checkout.
  3. Your POS system creates multiple orders corresponding to the selected stores.
  4. The employees from these locations prepare for fulfillment based on the sales order details.

For more details, check out our customized solution for endless aisle.

Retailers can use customized endless aisle solution to tackle stockout

Create backorder and restock items

Sometimes the customer can wait until you restock items from the suppliers. If this is the case, you can create a backorder for the out-of-stock items, then purchase more from the suppliers to fulfill the order.

Learn more about this method in our article on backorder management.

Conclusion

Stockout is an unpleasant experience for both retailers and customers. By having different in-store options to handle product unavailability, you can reduce stockout costs and make the shopping experience more pleasant for your customers.

If you’re a Magento merchant looking for a customized POS workflow to address stockout, you can get started with a free consultation with our experts. Together let’s design the best solution for your inventory management needs.