Even in this digital age when everything is just a button-click away, nothing compares to the experience of going to a store, scanning the shelves and selecting the products you want. Although e-commerce has become a huge success worldwide, consumers still prefer to shop in-store to get a better experience of the purchase. But very often it happens that low on-shelf availability (OSA) and a high number of out-of-stock (OOS) events disrupt their retail experience.
The whole purpose of shopping at a physical store is to get the real feel of the product. If the product that they are looking for is not present on the shelf, they are very likely to switch to a competitor. In a study, it was found that in case of low on-shelf availability, as much as 50% will choose a substitute product, 40% will most likely leave empty-handed, and 10% will head to a competitor to meet their needs.
Why On-Shelf Availability is Important?
On-Shelf Availability is the availability of products for sale to a consumer, in the place they expect it to be and at the time they want to buy it. Today, ensuring high on-shelf availability is crucial for retailers. Apart from switching to other brands, some consumers might not even return to that particular shop at all.
Unfortunately, OSA is an area where many retail outlets struggle even today. But OSA is not just the retailers’ problem. It is also a critical growth lever for manufacturers, opening opportunities for increased sales.
The cause of OSA has been widely researched and the major reasons are listed below.
1. Bad Retail Execution
Store execution procedures fail to recognize pending out-of-stock conditions and task associates with replenishing shelves on a timely basis. Often it happens that a product is present in the backroom but is not available on the shelf when the customer wants to buy it. OSA suffers heavily due to out-of-stocks, poor product placement, etc.
2. Improper Planning and Mismanagement
According to a study, over one-fifth out-of-stock cases are the result of poor planning and management techniques. Stores often fall short of SKUs as the shipped inventory is not enough. This leaves empty spaces on the shelf and also affects planogram compliance.
3. Inaccurate Forecasting and Ordering Problems
Inaccurate forecasting is the case when stores wrongly anticipate the demand for products which leads to insufficient supply. Another case that arises is sometimes retailers too little or too late because of which SKUs run out on the shelf before the inventory arrives. The problem worsens during promotions when demand for a product exceeds its supply.
A study found out that, if not kept in-check, low on-shelf availability could cause both manufacturers and retailers to lose up to 4 percent in sales.
Challenges In The Present Execution Methods
The major reason why brands suffer at the store is because of the lack of visibility into what is happening at the shelf. Present retail methods fall short of providing accurate information in real-time for better decision-making.
Manual Audits: Manual store audits have been the most opted method by retailers for keeping a check on compliance. But this method is expensive and non-scalable. It is also prone to human biases and error of judgment.
Using POS Data: This method is almost as accurate as collecting data manually. In this method, out-of-stocks are estimated based on historical sales data. This method is unreliable since the sales patterns are subject to SKU type. Some SKUs might sell really quickly while some might take a longer time to sell. POS data is usually available only at an aggregated level and not at the store-level. This means that brands cannot access granular insights.
Image Recognition For Improving The On-Shelf Availability
Image recognition solutions provide dedicated on-shelf information by giving brands digital eyes in the stores. The solutions capture images of retail shelves, which are then processed and analyzed to offer insights around out-of-stocks and planogram compliance. Auditing shelf management using Image Recognition digitizes store checks. It plays an essential role in understanding the shelf conditions and how they affect the sales of their core SKUs.
The following workflow below demonstrates how an Image Recognition solution like ShelfWatch works.
Shelfwatch eliminates all the bottlenecks in the traditional retail audit process that are currently eating into the time of the sales rep or merchandisers during their store visit. Using Image recognition, Shelfwatch empowers reps to collect photos with a click of a button and generate actionable, real-time store insights. It is reliable, free of human biases, and fast. The algorithm controls the data quality at the collection level to bring out the standard and objective analysis.
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