Strategically Managing Product Availability and Assortment Online
Director, Marketing Insights
The one constant between off-line and online stores is ensuring that there is an adequate supply of products available to meet consumer demand. But many online stores carry far less inventory than their traditional brick-and-mortar counterparts increasing the likelihood of lost revenue due to products not being in stock. With the growing importance of the ecommerce channel for consumer goods manufacturers, understanding and improving product availability in online stores is critical.
Watch the on-demand version of Strategically Managing Product Availability and Assortment in Online Stores and learn:
- Why brands must consistently track the availability of their products across online retailers
- How out-of-stock items are listed in major online retail stores
- How the numerous fulfillment options across online retailers effect inventory considerations for manufacturers and retailers
Brands can no longer take a passive approach to the ecommerce channel. Learn the critical factors which enable brands to enhance availability in online stores and reduce the risk of lost revenue.
About the Speaker:
Katherine Wilson is Director, Marketing Insights at Clavis Insight. Prior to joining Clavis Insight, Katherine was part of the Innovation Analytics group at Nielsen. There Katherine specialized in new product evaluation and forecasting to minimize innovation risk and maximize volume potential and chances of success, acting as the global single point of contact for P&G’s Female Grooming and Personal Power portfolios. She also worked in the Nielsen Pricing & Portfolio group, working with top North American CPG clients to test and optimize current and future product line-ups.
Katherine Wilson: Today we’re focused on the importance of availability management, specifically in the United States. A report from the Boston Consulting Group and the Grocery Manufacturers Association puts U.S. consumer packaged goods (CPG) online penetration in the digital channel at just about 1% of overall sales. Which initially might not sound very big, but it’s forecasted to grow to 5% by 2018 and then 10% shortly after that. So U.S. online grocery sales are poised to grow at a staggering rate. Beyond sales alone moving online, digital’s influence on in-store purchases is also growing.
Deloitte is predicting that by the end of 2015, 64% of online sales will be digitally influenced with consumers researching ratings and reviews, product information, prices, and creating shopping lists in advance of those in-store purchases. So with the current and projected growth of online CPG sales in the U.S. and digital growing influence over those offline sales, it’s critical to manage your online category just as you do your offline. With that in mind, today we’re going to focus on the importance of proactive availability and inventory management today.
When we think about availability and category management in general in the offline world, it’s really a stack ’em high and let ’em fly model. The manufacturer sales team sells in as much product and new items as they possibly can to the retailers. Then the retailers are really helping to push those items. They’re placing them on the shelves, in additional displays, running promotions–all to attract the shopper who is going be making their consideration and their purchases in the store during that shopping journey. A lot of our category management practices are built on this very developed push model, but as we turn to the online channel, ecommerce is really flipping this on its head and it becomes a pull model. In this model, the most critical task for manufacturers is getting that item set up correctly on the retailer sites.
Consumers are using ecommerce to research and seek out products. They’re looking for pricing, product information, and product ratings and reviews. If an item isn’t set up correctly or well, the shopper isn’t going to be able to find the prodcut to ever consider it in the first place. Or if they do find the product, they might be underwhelmed by the product content. When a manufacturer is able to convince consumers to make purchases, the retailer then decides how much inventory to purchase and replenish from the manufacture.
So again, ecommerce is very much a pull model, where you need the consumer to be attracted to your item, making purchases of your item, and that’s going to really trigger those retailer purchases from the manufacturer. In this model the burden is on the manufacturer to drive that pull through. They have to attract the shopper with really rich product pages, and items that are in stock and popping on search. And this is all done with active and smart category management. At Clavis we pioneered the key performance indicators that have become the industry standard as the key online metrics for success, which align very closely to those offline metrics that we all know and love and everyone is going to understand.
In this chart on the left, in the left hand column, you see the traditional offline metrics: in-stock, distribution, packaging and digital, planogram, pricing, ratings and reviews. What you see in the next column in orange is the online equivalent: availability, portfolio, content, search, price and ratings and reviews. And then the business questions that these metrics are designed to answer.
Today we’re focusing specifically on product availability. Are my products in stock in the online channel? The importance of the metric doesn’t change from offline to online. It’s really imperative to ensure that you have enough SKUs in stock to satisfy consumer demand in both spaces. Consumers cannot buy your product if you’re not available for purchase. That’s clear and very much present in both online and offline. However, there are some key differences between those on and offline spaces when we think about availability that brands and manufacturers should be aware of.
First of all, online retailers tend to carry far less inventory with little or no back room inventory, which increases the likelihood of out of stock from even a small, unexpected surge in demand. However, a nice thing about online–and a key advantage–is that manufacturers contract that store-level availability more readily and adjust accordingly and more quickly than they can offline. Brands who are proactive in monitoring online retailer inventory and sales are really going to gain a quick advantage over those who are taking a more passive approach.
So as we dig into availability today, here are the key topics that we’re going to cover. First, we’re going to look at the implications of being unavailable, then we’re also going to take a look at what out of stock looks like online than on offline retailers as well. We really want to take a deep dive into how out of stock manifests differently across online retailers. We’re also going to look at some additional strain on the online fulfillment channel. We’ve got evolving pickup and delivery options, we’ve got geographic variation, and lastly we’re going to talk about how to manage that.
So starting up with the risks of out of stock. The first and most obvious is lost sales. At an item level, it’s safe to assume that your lost sales are relatively linear to your out-of-stock rates. So if you’re out of stock for, say, day three days online, what you should do is roughly take your average daily sales rate, multiply that by three, and there’s your lost revenue. Of course you’re going to have some very item loyal buyers who are going to seek you out at other online retailers, maybe in physical stores or who might check back at that original online retailer to see if you’re in stock later.
However, it’s going to be a relatively small portion of your buyers who do that and it’s really not in a brand’s interest to put their buyer loyalty to the test like that. If one item is out of stock, the impact on the total brand sales really varies. It really depends on how brand-loyal your buyers are, how important is it that they’re buying your brand.
For example, if I’m looking for an Aveeno Baby Sunscreen and it’s out of stock, I’m not going to replace it with an adult sunscreen, but I might switch SPF. I wanted a 30, but there’s only a 50 available, or I might switch pack sizes. There’s a 24 pack of my favorite allergy medication that’s out of stock, I’ll switch up to 48, or I might switch forms. I’m looking for ibuprofen or a pain reliever, I might switch from a tablet to a liquid gel if my tablet is out of stock.
So again, it depends on the breadth and “substitutability” of your portfolio and the loyalty of your buyers. It is critical to know if your brand has a lot of item-loyal and brand-loyal buyers?” Another risk of being out of stock, is that you’re really testing your brand-buyer loyalty. When you’re out-of-stock, you’re forcing your brand buyers to ask themselves a few questions that you really don’t want them to ask themselves. One is, “Are they willing to track down this item somewhere else or are they willing to try a competitive brand or a store brand?”
The other thing is, if you’re habitually out of stock, are your consumers going to stop bothering with your brand altogether because it’s just not as convenient as the others are? It’s really not as ready for purchase as those other options are. A less obvious risk to some that being out of stock can impact your search results. Many retailers are taking that availability status and the length of time that you’re out of stock into account when they calculate their search results.
You’re going to get dinged and pushed farther down the search or menu results list if you’re out of stock, and especially if you’re out of stock for a long time. Consumers really only look at the first page or two of search results. So if you’re getting pushed down beyond that you’re really not going to be in the consumer’s consideration shop via search.
Finally, being out of stock is really bad for everyone in the ecosystem. For brands, you’re risking lost sales, consumer loyalty, and consideration. For retailers it also means lost sales and really the risk that consumers are going to find online grocery shopping inconvenient. We have a lot of consumers who are trialing this. Normally they’re going out shopping to physical stores, giving ecommerce a try. It’s really on all of us to manage availability well to make this a great experience for consumers.
Taking a look at what in stock looks like, or out of stock looks like in store. Here at the local CVS in Davis Square Somerville, we’re kicking off summer, so pretty the sunscreen category is under a lot of pressure right now, so certainly going to be a lot of out of stock. We see these empty sections of the shelf online. We would see maybe these items. A lot of them are Neutrogena, and it might have a little note that it’s out of stock on search returns or many results.
But there are some key differences between online and offline. One is that in store there’s usually about four to six weeks of inventory, whereas there’s only two to three weeks of inventory held at online retailers. Again, sunscreen during this kickoff to summer, very much a peak season for the sunscreen category, under a lot of pressure. Some spike in demand and there’s a little less room to accommodate that spike in demand, some unforeseen spikes online than there is offline.
The other thing is offline in stores. Substitutable brands are typically shelved right next to or right near the out of stock item, allowing the brand the greatest chance to recapture the sale. Again on the bottom shelf, those out of stock items are Neutrogena, but you can see a lot of substitutable Neutrogena items right there. Online, it really depends on the retailer. If your item is out of stock, it might be a store brand item, it might be another of your own brand or it could be a competitive item that might be a suggested substitution.
Turning now to what out of stock looks like online. When we look at Walmart, here’s an example of an out of stock item. Again, allergy, very much another category under pressure right now. We’ve got a particularly challenging allergy season right now, so a lot of out of stock issues in that category. Walmart does give item-loyal consumers alerts when their preferred item is out of stock. What you can see here is that you can request an in-stock alert to be sent to you, which, incidentally I did for this item and for two others weeks ago.
I still have not received an in-stock alert and I went back to check and these three items are indeed still out of stock. It could be a few things happening here. It could be that the manufacturers aren’t aware of and so aren’t reacting to the out of stock, or that they don’t have an early enough warning system so they’re not able to react quickly. Maybe they found out after a few days of out of stock and just were able to set the wheels in motion a little bit late, and it does take time to rectify these issues.
The other thing is that manufacturers could be having a really hard time keeping up with the demand, especially challenging critical spring allergy season. So maybe they had a missed forecast and really they’re just not going to be able to restock these items any time this season. What should happen in that case is that these product pages should really be taken down. You shouldn’t have several Claritin or allergy items that are out of stock when you know that they’re not coming in stock anytime soon.
Omnichannel retailers, and what we mean by that is retailers with both a physical store and online presence, typically offer consumers a chance to look for an out of stock item in their physical stores. We see this here in these examples that target CVS and Walgreens, where we have out of stock sunscreen items and the option to check availability at a local store. Again, sunscreen is very much under pressure, but if you really want your Coppertone baby sunscreen, Water Babies, or one of these other brands, you can check to see if they’re at your local store. Well, Walmart also gives this opportunity.
While this gives consumers the opportunity to track down their item of choice and it is absolutely the right option for brands and retailers, it’s really unlikely to recapture many lost sales of an item that’s out of stock online for a couple of reasons. Really, if the rest of a consumer’s basket is available for shipping, it’s unlikely that they’re going to either abandon that entire basket and restart their shopping trip either in a physical store or at a different online retailer where your product is in stock or that they’re going to make their purchase with everything else that’s available in their basket but make a second trip to either a virtual or physical store to hunt down your specific item.
They really want that all of their items grouped into one convenient purchase, so being out of stock, making consumers track you down somewhere else isn’t very convenient for them. Additionally, some of these retailers like CVS only give you the option to check in-store availability but not to make that purchase online and pick it up later in store. As always, Amazon is the beast apart from the rest. In this case when it comes to availability, that’s also the case. So we’re going to spend a little bit more time digging into what availability issues we might see and how to manage that on Amazon.
Here’s an example of an in-stock item. It’s shipped and it’s sold by Amazon.com, which means that the sales benefit the manufacturer. We do see alternative sellers on the lower right but the brand is winning the buy box here. So we have the brands at the top with the “Add to Cart” option that is going to benefit our brand, our manufacturer. On Amazon you won’t find items noted as out of stock.
Now Amazon doesn’t hold more inventory than other retailers, they haven’t unlocked the secret to perfect forecasting and perfect availability. Items absolutely do go out of stock on Amazon, but there are two ways that out of stock plays out at this retailer. If you’re out of stock on Amazon, one of two things will happen to your product page. In this case the item is out of stock and there’s no third party seller listed on the page or perhaps a third party seller items are also out of stock. So the product page is hidden from view. This is what we at Clavis call void. A search for the out of stock item is going to bring up close in items, maybe substitutable items within the brand or competitive item but it’s not going to bring back this particular item.
If you happen to have captured the product page URL back when the item was in stock, or if as I do here you have a product code for an item you know is out of stock, you can search for it, but as you can see the product just won’t show up. It has been voided, or in other words hidden from view, and it will remain that way until it’s back in stock. Here’s the other option. If your product page also lists third party sellers and their items are in stock, something different is going to happen.
The third party seller is going to win the buy box until you’re back in stock and they can have you back and put you in the buy box slot. Here’s an example of Claritin, in this case Claritin 24-hour allergy tablets. It’s out of stock, but there are third party retailers listed on the product page. In this case, the buy boxes have been won by OTC Outlet, the third party supplier. They’ve won the buy box and hence they’ll get credit for the sale.
We call adding third party suppliers to the primary product page, twisting or ASIN merging. It seems counter intuitive to want these third party items twisted onto your product page. It is actually preferable for a number of reasons.
First and foremost, it protects brand content integrity, letting you control your content. If you’re the manufacturer you’re going to be in control of the content that shows up on your product page, images, nutritional information. If there are row of product pages out there, they could have incorrect, often incomplete or out of date images or information. So you really can protect your brand’s integrity, so making sure all the information out there that’s searchable on Amazon.com is what you would approve and it’s the latest and greatest from you.
Another benefit is that you can combine the ratings and reviews of your own fulfilled items along with those that are fulfilled by third party sellers. Additionally, if you are out of stock, consumers can still get your item. They don’t have to look for a replacement. They don’t have to look to a competitive product. At least they’re still getting your item. Ideally you’re going to be back in stock as soon as possible, but in the meantime they’re getting your item, you’re not losing them as a buyer.
And finally you can optimize your search. Search algorithms at Amazon rely on sales, ratings and reviews, and availability. Combining those third party sellers product pages with your own is going to work in your favor. Here’s an example we see on the page of a Johnson and Johnson seven-ounce baby shampoo item, where the third party item, which is sold here in the picture above by Ocean Marketing, it’s winning on searches for Johnson’s Baby Shampoo and Johnson’s Baby Shampoo seven-ounce, with ounce shortened to just oz.
It’s a six-pack that’s again fulfilled by a third party seller, but I also find that in those search results we had third party, three, four, 24 packs all showing up in the search results, but I did not see Johnson & Johnson’s owned item. One we see below, this seven-fluid ounce, that was not showing up in any of the search results for these pretty critical search terms for this product. Again, Johnson’s Baby Shampoo, Johnson’s Baby Shampoo seven-ounce.
So only a search very specifically for Johnson’s Baby Shampoo seven-ounce, with ounce spelled out, brought back the brand’s own item. Johnson & Johnson, in this case, were to twist their pack, they can be different pack sizes all twisted together, a one, a six, a three, a four, a 26, whatever the case may be, all twisted because it’s all variations on that same seven-ounce bottle. If they had twisted, the Johnson & Johnson branded item would be listed under the search term results, in the second place, for Johnson’s Baby Shampoo instead of not showing up in those search returns at all.
The other thing we would see here again is an example of where it looks like clearly an Ocean Marketing…their product page. It’s kind of outdated image, so not the latest and greatest, not what Johnson & Johnson wants out there in front of their consumers. If they had twisted they’d be able to control that product image. It’s well within a brand’s control to twist on Amazon. Amazon only wants to have one single product page for each item. There aren’t supposed to be duplicate product pages for the same product, but the onus is really on the manufacturers to report duplicates to Amazon and then to follow up to make sure Amazon removes the duplicates and does twist third party options onto your product page.
Now, that said, there are a couple of “watch-outs” to twisting on Amazon that are worth calling out. First is that you can lose the buy box even if you’re in stock. We have an example of this on the left hand side of the screen. Typically the reason you would lose a buy box, even if you’re in stock, is that you are not the cheapest option. It’s relatively rare for brands not to be the least expensive when you include the additional cost of shipping a third party item, but it does occasionally happen as we can see in this example where Frank deals this Garnier item.
Frank deals with third party sellers, selling it for less than $9 for the item that is…so sales would go back to the Garnier brand, it’s being sold for over $12. So relatively large difference there. This Garnier item lost the buy box there. Occasionally, you can lose the buy box because you’re in a disagreement with Amazon. Amazon has been known to use strong arm tactics, so a brand could lose the buy box to a third party seller even if their items are in stock and the least expensive if they happen to fall out of Amazon good graces. It’s relatively rare, but worth being aware of. Another risk, as we can see on the right hand side of screen, is that there could be issues with the third party items, such as counterfeit items or the wrong path count sent. When issues are reported by consumers back to Amazon, Amazon puts the warning on the product page like the one you see here.
This is what they call pulling the “Andon” cord. This is a manufacturing term from the Toyota production system that refers to the system where people can notify management and maintenance or other workers of a quality or process problem, and sometimes this is literally a physical button on the assembly line that a worker can pull to grind everything to a halt. Here it’s manifesting as a warning that obviously could be off-putting to your consumers.
Again, you’re not in control of what the third party sellers are doing or shipping so you just want to stay on top of the fact that if you are out of stock and an item is being fulfilled by a third party seller that there are not going to be any big issues that could impact your product page. So as we can see, out of stock really manifests itself differently across retailers. I wanted to give just a handful of other examples from some other grocery retailers.
Peapod. I used to find when I ordered from Peapod that everything looks like it was in stock but could actually be out of stock at the time that somebody was fulfilling my order, picking through the stores, to put my order together. If something was out of stock, it just didn’t show up, and so I didn’t find out until I was literally unpacking my groceries and I thought, “Where are the bananas or where is the pepper that I needed for tonight’s dinner?”
But my colleagues have have had the experience where the service item was out of stock. So when they come to deliver, drop off, they’ll give you the list of what they weren’t able to fulfill because it’s out of stock at the time of picking. Instacart really has the best system going based on kind of the model. This is a concierge grocery service, where like Uber you have independent people going out, picking up your groceries for you. If something’s out of stock or say the peppers look terrible, they’ll call you on the phone and ask what you want as a substitution.
Safeway, on the other hand, will and it’s in that kind of hidden user agreement that if something is out of stock, they can replace it with another item. More often than not, that’s an own label store brand, a Safeway product. It can lead to some disappointed consumers who were hoping for a certain branded item but instead get the store brand. Varying models, some of which may cause frustration as retailers think of different ways to deal with out of stock in store.
So turning now to some of the strains of fulfillment. Availability, again, out of stock is manifesting very differently across retailers. Retailers have some different solutions, but we also want to focus on some of the strains on fulfillment in these developing models that we’re looking at. So we have our traditional demand point, the physical store being obviously the largest, most well-established. We also have catalog and phone order, and then we have a few new entrants in terms of demand points. We have desktop commerce. We have the Buy Now button, so on brand’s own websites, direct to consumer sales, you can buy it straight off of, say, the Venus or Gillette website, buy that product.
We also have mobile commerce that is now booming and it’s probably on everybody’s radar right now. We also have some rapidly evolving models. We have new home shipping models Amazon Dash, that option where you can just have a button to press when you want to replenish your baby diapers or your laundry detergent. You also have Subscribe and Save. A lot of different retailers are experimenting with this. Both of these should encourage frequent and very regular purchases.
With Subscribe and Save, maybe I want to get my multivitamins on a monthly basis, so it should be relatively easy to forecast and predict once it’s fully adopted. Right now adoption is in its infancy so it’s going to be really challenging to forecast volume and to try to stand top of demand and availability. We also have expanding grocery delivery and the “click and collect” model. So, again, Amazon Fresh, Peapod, Fresh Direct, and Instacart, and then we also have Walmart and other big retailers experimenting with click and collect. These new models are going to appeal to a wider base of consumers and they also facilitate a variety of shopping mission.
You have heavy items that may have been too expensive to ship previously. That can be fulfilled pretty easily via click and collect, for example, milk and sodas. In relation to milk, more perishable items that need certain temperatures that would have been challenging to deliver via home shipping or anything like that, click and collect offers a nice new model for that. Membership models and lower delivery fees are also going to encourage smaller and more frequent shopping trips.
All of these rapidly evolving models, that’s excellent news for brands and retailers, but it really is going to require extremely tight inventory management. These are all of merging models and they’re going to be challenging to forecast. An additional strain on fulfillment is the need for speed, the race for same-day delivery. We have a lot of different retailers moving to go for faster and faster delivery. We’ve got our pure plays, the online-only Amazon and Google, offering same day delivery.
Amazon is working on 13 cities with PrimeNow giving one-hour delivery in seven cities. Google Express is offering same day delivery in a handful of cities as well. We’ve got all the online grocery: AmazonFresh, Peapod, Walmart To Go, also working on same-day delivery. And then you also have the multi-channel, the omnichannel retailers like Walmart, Target, and Walgreens working on click and collect models, where you can order online, pick up in or out of store at the same day. And then again, those concierge services: Instacart, eBay Now, all working on very fast delivery.
This is again all very good news for consumers who are thirsting for convenience and speed and for brand retailers who want to give it to them, but it again puts additional strain on availability and makes addressing availability outages even more critical to do quickly. It’s worth noting here that availability takes time. When an item is out of stock, there’s generally not an immediate way to replenish that inventory. It may take days for brands and retailers with very tight supply chains. It might take longer for others.
Each day, out of stocks means more lost sales and more frustration among your loyal buyers. So time is really of the essence. You really want to make sure you are aware of these out of stock issues as soon as possible so you can set the wheels in motion to address any issue. Additional strain on fulfillment is geographic variation. We have some key retailers where the availability status, the portfolio, it’s going to look different across geographies.
And the example, Amazon Prime, has three different distribution centers. We call them east, central, and west: New Jersey, Kentucky and California. Availability is going to be different across these three regions. You’re probably going to have some regional variation in terms of your product portfolio. I’m from the Northeast, Poland Spring water is really big here. It’s not really big in other areas of the country, so you’re going to have a larger brand presence and portfolio in your east coast region, probably more out of stock issues there as well.
Some other retailers that are going to have geographic variation, we have Amazon PrimePantry, Fresh, Peapod, Walmart Grocery, and Safeway. So, to add an additional wrench and challenge into the work that we do have geographic variation across some of these key retailers, that’s really going to be important to manage when we do think about availability. A final fulfillment strain that we’re going to talk about is the anticipated spikes in demand. We already know that they’re going to be certain spikes in demand that brands do their very best to forecast, but demand can and often does exceed expectations. That’s definitely the case in the seasonal items.
We’ve talked about some of these here. We have in January, in the dead of winter, dry skin lotions, coughs, cold and flu remedies. In spring we have allergy, some summer sunscreen, and then we get into the fall with Halloween candy, and then the holiday season, huge spikes for batteries, toy, candy, etc. In some cases 50% of a brand’s annual volume can move over just the course of a few months, so tracking availability during these extremely critical time frame becomes even more important so brands can react quickly.
Again, issues can’t be fixed immediately. There’s time needed to replenish inventory, so very fast real time awareness of out of stock is key. Another anticipated spike in demand is promotion, when your items are on promotion. Brands may forecast to double or even quadruple sales rate when an item is on promotion, but it’s really important to track actual promotion effectiveness and as close to real time as possible to deal with any unexpected demand very, very quickly.
How to manage all of this? How to manage availability online? The first is a lot of what we touched on today, understand how availability issues are manifesting differently across different retailers. What does out of stock look like? Are you going to show up as out of stock as you might on Walmart or Target are going to be completely hidden from view? How do those risks differ across retailers? On Amazon it can be pretty bad. If you’re out of stock (and you don’t have a third party seller twisted on your product page), your products are voided so you’re essentially invisible on Amazon until you get yourself back on track.
So you’re not going to show up on search, no one can go to you to research your product, look at your ratings and reviews etc. until you’re back online. What visibility do my retail partners give to availability outages? Amazon does share availability data daily, but most retailers are sharing it weekly, some even monthly. All of the data with the brand is really not frequent enough for the brand to react and it’s also going to be retrospective so it’s not going to allow you to react quickly.
If you’re finding out about availability issues a week later, it’s just going to delay even further any chance you have to fix it. You also want to make sure you’re tracking availability closely across retailers and, again, across geographies where it’s necessary to allow you to react quickly. Again, availability issues can’t be fixed immediately, so the sooner you know the sooner you’re going to be able to set the wheels in motion to fix that. You want to monitor daily, you want to look across retailers and geographies where the availability is going to differ by location, and particularly during these foreseeable spikes in demand, again, the seasonal products, items on promotion.
And you can use the visibility to availability issues to better partner with retailers. Availability, if you’re monitoring it really closely, can be used in joint business planning between brands and retailers. Traditionally the brand sales teams can get availability commitments for physical stores, maybe availability has to be 90, 95%, and they can hold retailers to task there. Online retailers have really been in control since brands often don’t have that ability to what online availability looks like.
So if you are monitoring availability closely, it’s going to be putting the power back in your hands. To sum up, what we’ve talked about today, ecommerce is a pull model. We’re going from a traditional push model to a pull, where items need to be set up properly, they need to be in-stock and winning on search to be purchased by consumers and to drive those retailer orders. There are online-specific availability challenges but also opportunities, so really a different set of risks online versus off, and there’s a lot of variation across retailers. Retailers are handling out of stock issues extremely differently.
The evolving fulfillment model. They’re putting a new strain on availability. It’s all great news. It’s going to increase the penetration of this online channel, but again hard to predict for brands and for retailers, so it’s going to be some challenges in the coming years as this adoption gets a lot of traction. Then lastly, tracking availability online and reacting quickly is really going to differentiate the winning brands. A lot of brands are just stepping into ecommerce active management right now, but the ones who are really getting on top of this quickly, they’re going to be popping on search, products are going to be available for purchase, whereas competitive brands are going to be struggling, so setting them up for success.
So what we do at Clavis is we use technology to simulate online shoppers. Our automated harvesting tools look at virtually any online retailer. We have a small sample of the kind of retailers that we cover: Walmart, Amazon, Target, TESCO, Carrefour, and TMALL, but there’s really no limitation to the retailers we can cover. We can cover any retailer and do that globally and bring back that everything that a digital shopper would see and experience.
So we’re looking at the drivers to purchase: images, content, availability, search, rating, pricing, etc. It’s really a lot of data, a lot of brands. There are clients trying to manage this on their own manually, manually monitoring this, but it’s really too much to have to do that on your own, to go daily to look across all these retailers. Again, what our tools do is it goes and grabs all this data, brings it back, and we organize it to our fully automated SaaS (software as a service) platform that’s accessible from any device.
A lot of people use their tablets or even their smartphones to look at our dashboards daily, and our entire platform is configurable to your uniqueorganization and hierarchy so that those insights are actionable for you and your team and they are going to make sense across your organization.
Focusing in on availability, I’m going to show you a couple screenshots of our portfolio availability summary.
Clavis gives you the visibility to any availability gaps. Most of our clients look at availability on a daily basis. Here on the left you can see the summary of the brand availability, 90% of the products are available, ready for purchase. When we drill down on the right side to what actually that 10% looks like, 10% isn’t actually the out of stock. We have 5% of their products that are only available in stores, so the product information is still on the product page but you can actually make a purchase. But we do have 5% out of stock. We’ve got 1% out of stock and then 4% that are void because they’re out of stock. They’ve been taken down from the retailer site, they’re hidden from view.
This is at the brand level, but we can also look at that at the retailer level. Here we see now this broken down between our three different retailers: Walmart, Amazon, and Target. We see where we have some out of stock issues at Walmart. We also have voids across Walmart, Amazon, and Target. Amazon, as we discussed earlier, will void product pages, hide them from view. At Walmart and Target that’s not typical. They’ll typically instead have an out of stock data. So here’s something we’d want to investigate. What’s going on with those products that are void at Walmart and Target? Are they ones that have been de-listed there and we’re still tracking them and expecting them to to be online and live and ready for purchase?
We can look at this at a brand level, at a retailer level. You can also look at an item level. Here what we do is we look at any products that are not in stock and looking at the reasons why. Our first two items, maybe they’re only available in stores, so not a worry. Our third item down, you can see a couple of green dots, so it’s in stock on January 13th, 14th and 15th. On the 16th, it went out of stock. Here you can really drill down what data to go out of stock, what data to come back online and was back and ready for purchase. And you can also see from that little link page, you can click to go straight to the product page at that retailer if you want to dig in a little more.
Clavis Insight also covers the key online KPIs across online platforms and across geographies. We look at desktop web, mobile web, mobile apps, smartphones and tablets across operating systems. It’s a lot to look at, so what we do is we periodically analyze differences between mobile web, mobile app, and desktop across retailers. We can identify which retailers really warrant monitoring across those different applications. Some of them really don’t. Some of them, your product is going to render exactly the same product information. It’s going to be the same across all same ratings and reviews.
Product images look good even on a smartphone, but we’re going to have other ones where it’s really going to look different. So we do consult with our clients around what’s worth monitoring, again, across these different platforms and what’s not. The Clavis geo functionality enables location monitoring. Availability is really going to look quite different depending on your location, your consumers’ location, and then we also again have absolutely global coverage, any retailer anywhere in the world.
Paul: Thanks, Katherine. And there’s a couple of questions that have come through. The first one is, “I’m still a little conflicted about this twisting third party items with my own on Amazon. Can you expand upon that a little bit or on the upside of it?”
Katherine: Yes, and this is certainly a concern some of our clients voice as well. I think the big here is why are we putting other options to buy our products page. But the fact is, I mean, really you’re only losing your buy box if you’re out of stock. That’s almost always the reason that you’re losing the buy box to a third party seller. If you’re out of stock you’re losing to fail anyway. So you’re out of stock, you’re not twisted, there’s no other third party sellers selling your item. The consumer is going to go elsewhere, so that’s a fact.
If you’re out of stock your main goal is to get back in stock. But to go back to your question, again, you’re controlling your content. You’re making sure that no one’s looking at images, at product information that’s out of date. I did use to work for Nielsen. We tested new products, we tested claims, benefits, all the different marketing language that was really going to resonate the most with consumers.
You want to make sure that you’re controlling that and you’re updating it as you’ve seen fit and your organization has approved. So control that content. Again, combine ratings and reviews, combine the sales of any third party sellers with yours, and that’s going to help you pop on search. A lot of really good reasons. And again, you’re putting all of these products, all of the sellers together on one. Consumers are always going to choose yours if you’re in stock because you’re typically the cheapest one anyway. So it’s definitely in your interest.
Paul: Thanks, Katherine. We have time for one more question, and it is, “How important is getting availability right compared with the other metrics you noted?”
Katherine: Sure. Again, this is another one client come to us. Getting into ecommerce, sometimes people don’t even have an organization set up within the manufacturing organization to deal with ecommerce. It’s a little overwhelming, kind of a, “Where do I start?” question. At Clavis we’re focusing on a number of metrics. We’re looking at portfolio, availability, search, content, price, and ratings and reviews. Portfolio and availability go really hand-in-hand. You’re getting your items into the right retailers, so a lot of my volume for the category is moving through Target, Amazon, Walmart, drugstore.com, whatever the case may be. You’re getting into those retailers with the right portfolio and then you’re in-stock there.
Distribution is really when you’re forecasting the biggest marketing lever you have in terms of increasing your volume. So you really want to make sure that your distribution is right on and that does and encompass being available and ready to purchase. It’s absolutely key to get availability right and that distribution right. I would say availability and then content. Again, consumers are going to your page to get information to really even decide if they want to buy you or to research you for a purchase in-store.
I’d say those two should really be worked on in parallel. That’s really a first step for brands getting into ecommerce: availability and content. Once those are in place, then you can focus on the next round: search, ratings and reviews, and other metrics, but that’s really your baseline to get right first.