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Uncovering the power of data: the end of out-of-shelf in retail

The words "Out of Stock" are depressing to customers. As retailers, we are tasked with ensuring that customers do not encounter "Out of Stock" at all.

Arye Houminer

The words "out of stock" are depressing to customers.

When a customer arrives at a store and isn't able to find what she is looking for, she has three choices: go home emptyhanded, buy an alternative product, or look for the product at a rival store.

The end result is thus often a reduction in sales or loss of customers to rival retailers. This is a primary issue faced by stores managed the old-fashioned way.

The key to overcoming this problem is data: data is the starting point, the end point and the best way to avoid inventory shortages.

Effective management using available technology reduces if not eliminates the problem of inventory shortage.

The extent of the issue

Retailers suffer a great deal from "out of stock" situations since they result in lower sales, unhappy customers, and weakened brand loyalty. Research indicates that 7.4% of retail chains worldwide experience shortages on the shelf. Customers' responses to the absence of a shelf are typically distributed as follows:

Nine percent of buyers will carry through with the transaction and abandon the product altogether.

15% of the clients plan to purchase the item at a later time.
19% of consumers plan to purchase the same item again.
25% of buyers will purchase an item from a different brand.
31% of consumers plan to purchase the item from a different retailer.

The literal meaning of these data is that almost half of the customers left the store without buying what they were looking for, while a third of them went to look for it at the competitors.

The loss in sales will reach up to 4% of the retailer's annual income.

The reasons behind the shelf shortages

Demand outpaces supply because inventory planning does not take into account the interest of local buyers in the product.

One of the supply chain's challenges is being able to plan inventory such that it fits local needs.

Logistical challenges: The inventory on the shelf is directly impacted by logistics and transportation.

Obstacles in production: Occasionally, output cannot keep up with demands from the field.

inaccurate projections of consumption.

Inadequate inventory control: Precise tracking of sales information is necessary to maintain a balance between supply and demand. Data with inadequate or nonexistent utilization has a short shelf life.

Insufficient storage space: a chain of stores has two places for storing goods. both the shelf and the store's storage. Inadequate inventory planning will lead to shortages on the shelf and a lack of storage space.

Data, data, and some more data

Most issues causing shortage of shelf space can be eliminated with dynamic shelf management and flexible planograms. We shall consider every factor influencing the absence of a shelf when designing the planogram.

A dynamic planogram will show the demand from each location in the chain, broken down by consumer segment. We shall consider the fact that demand varies and is influenced by numerous elements in each store. Seasonal variations in demand, recently introduced products that impact the entire shelf, evolving fashion trends, and more..

Supply and sales cycles: A dynamic, data-driven planogram considers the customer's sales cycle as well as delivery schedules. The quantity of space allotted to a product with a three-day sales cycle is different from that of a product with a three-week sales cycle, and so on. Additionally, monitoring shortages on the shelf enables the identification of suppliers experiencing supply delays, necessitating an increase in shelf space for their desired products..

Inventory management is made feasible with the use of a dynamic planogram. The data quickly reveals a decline in sales and points to a possible shortage. It is possible to anticipate complex inventory events in advance and create better plans by gathering and organizing data.

The quantity of storage space that is available in the store is the central reference point of the dynamic planogram. For the best possible management of location resources, a flexible planogram is used.

What then should we do with it?

We must take multiple cyclic actions in order to prevent stock shortages.

Real-time data, sometimes known as the "heartbeat of shelf management," allows us to be informed if a show is on the verge of running out of stock. As soon as we find out, we will gather all the information and make a picture of our shortcomings so that we may take appropriate action.

Permanent management: based on precise demand, we will modify our planogram for each store. This correction is ongoing. We will take into account any modifications made to the shelf, allowing us to keep modifying the planogram to meet the evolving needs of the particular store.

Logistics will be included in our planogram, taking into account shop demand and supplier limitations.

Planogram in motion

A process is a dynamic planogram.

Create a preliminary planogram using sales data gathered over an extended period of time. Sales, profit, inventory limits, logistics, and, of course, available shelf space are all taken into consideration while creating the planogram.

Verify if the planogram is operational by taking it to the field.

Keep a close eye on the store's performance on a regular basis, paying particular attention to instances of stock shortages that impact sales. Make the necessary changes to the planogram.

The cycle continues as we monitor the data and make updates to the planogram.

The dynamic planogram of Arigo

All of the aforementioned procedures are made possible by Arigo’s dynamic shelf management system. Arigo keeps an eye on the chain's and the store's sales data:

builds the planogram for each store nearly independently, accounting for the impact of demand and logistical factors as well as the sales cycle (we'll leave the final artwork to you...).

keeps an eye on cases of expired goods, performance dips and spikes, and the introduction of new products.

suggests modifying the planogram on a regular basis in response to changes.

corresponds to the planogram's absorption into the branches.