Inventory the Damage from Sold Out Items

When preparing to consult with a retailing community, I visit the stores. I make it clear I’m there to discover, not to give advice. The advice comes later, after I’ve mastered enough to deserve credibility. Often, that credibility comes from exploring what the consumer psychology literature has to say.
     During a visit last week, I was asked about out-of-stocks. This store features jewelry, wood, and gourmet food items. The value of the items is that they are distinctive, not commonly encountered. When the stock of food items is depleted, the store proprietor can order more, but when a handcrafted jewelry piece is sold, it often can’t be replaced with an identical match. And even with the foods, a shop of limited size can’t afford unlimited inventory.
     Well, a while ago, a man came into the store, fell in love with a particular jewelry item, then left without buying it. When he came in again some days later, he inquired after the item. “It was sold,” said the store owner. “Why did you sell it?,” he asked. “Well, that’s what I do for a living,” she answered. He seemed irritated.
     The owner doesn’t like to irritate shoppers. What’s the risk of losing the customer?, she asked me. What should she do? My first reaction was, “I’d think that shopper would’ve learned how when he comes into your store and sees something he loves, now’s the time to purchase it.”
     Whoops, I caught myself violating my principles. “I’m here to discover,” I said. “I’ll think about it and dig into the research.”
     It turns out that researchers at Georgia Institute of Technology and Emory University had part of the answer. In the short term, encountering a stockout causes someone who is already a regular customer to buy more on the next few store visits, all right. However, repeated stockouts sharply decrease customer loyalty and consequently, the total dollar amount of purchases over the customer’s lifetime with the store.
     In the type of retailing where such out-of-stocks are inevitable, here’s the research-based procedure:

• Briefly empathize with the disappointed shopper.
• Ascertain what the customer liked about the item.
• Propose an item that has the desired functions, but is in a different category.

     The third step does sound odd. Researchers at American University in Washington, D.C. and University of Arizona find it works because it gives the shopper more of a sense of control.

Click below for more:
Control Out-of-Stock Irritation
Replace Exclusivity with Substitutability
Shoo Away Negative Customer Feelings