10 Best Tips to Handle Out of Stock Situations for eCommerce Businesses in 2022

Stockouts frequently appear on retailers’ lists of worst nightmares and for good reason. Out-of-stocks not only result in lost sales but also in poorer levels of consumer satisfaction and loyalty. When you don’t have what a customer wants, they frequently feel let down, and that can have a negative impact on your business. Although you can take many precautions to avoid out of stock situations, stockouts are unavoidable in a few circumstances.
This article will give you a few tips to handle out of stock situations as & when they occur.

What are Stockouts?

Stockouts are the absence of specific items or products at the point of sale when the customer is ready to buy. Stockouts cost retailers an estimated $1 trillion annually; in some industries, stockouts occur as frequently as every third shopping trip.

A stockout can occur for a variety of reasons, including:

  • Undercounting inventory and ending up with less than you expected
  • Increasing demand for a specific item
  • Supplying delays caused by manufacturers
  • Lacking the necessary funding to purchase fresh stock

In a physical store, this usually leaves prominent gaps in the shelves. Stockouts are even more aggravating for online customers because there is often no way to tell whether the stockout is due to a temporary technical issue or a major disruption in the retailer’s supply chain.

Out-of-stocks and generalized product unavailability are distinct but important to avoid.

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Why is it Important to Handle Out of Stock Situations Before They Occur?

Customers May Get a Negative Impression of Your Business

While running an eCommerce business, if an out-of-stock situation is not handled properly, customers may get a bad impression. Additionally, if you consistently ignore customer complaints and negative feedback, it can negatively impact your business in the following ways:

  • Lost profits
  • Lack of repeat customers
  • Existing customer dissatisfaction 
  • Negative feedback and reviews
  • Damage to the company’s reputation

Backorder Costs Can Increase

When your company accepts orders for out-of-stock products, there will be an increase in the frequency and amount of backorders. This can increase the costs and the duration of the supply of products and by the time the order reaches the customer, they may be dissatisfied with the duration and service. The biggest problem is handling out-of-stock in all companies.

Revenue Will be Lost

When your company receives orders for out-of-stock items and doesn’t make an effort to prevent stockouts, potential sales and revenue generation can be lost perpetually. This can have a drastic impact on all businesses, especially smaller and medium-sized companies that rely on every sale they can get.

Your Business May Get Negative Reviews

When a company provides a poor customer experience, it risks receiving negative feedback on selling platforms and other online websites. Customers get a bad taste in their mouths when they run out of stock and some may end up writing negative reviews online, which can prevent other customers from giving your business a chance.

Causes of Products Going Out of Stock

Although there are only a few likely outcomes of stockouts, such as customer frustration and lost sales, there are numerous scenarios that can lead to stockouts in the first place.

Disparities in Product Counts

A discrepancy between item counts and the record of how many units of a particular item a retailer has in stock is a common cause of stockouts (also known as phantom inventory).

There are four major causes of discrepancies in item counts:

  • Errors caused by humans
  • Technical difficulties
  • Shrinkage as a result of damage or theft.
  • Inaccurate Forecasting

Although it is difficult to quantify, human error is frequently to blame for inventory management errors. During busy shopping periods, especially in retail stores, it is all too easy to miscount items.

Disparities in item counts can also be caused by technical issues. Computerized inventory management systems are used in the majority of warehouses and distribution centers. However, when these systems experience technical issues, such as data center downtime or when synchronization between two computerized systems is delayed, discrepancies in item counts can occur.

Inventory mismatches are sometimes caused by a combination of these two factors. It’s all too easy for busy warehouse workers to miscount items by hand and it’s just as simple to enter incorrect data into an inventory management system.

Transportation Issues

While many inventory management issues are well within retailers’ control, logistical issues are not always.

Retailers have recently faced numerous supply chain challenges, including hundreds of thousands of unloaded containers with merchandise on ships waiting to dock at ports around the world. Beyond shipping, the Covid-19 pandemic has disrupted the global supply chain, from manufacturing to transportation and logistics.

It is just as easy for goods to be misplaced by warehouse staff as it is for the wrong shipment to be delivered to the correct location.

Similarly, a logistics provider’s shipping tracker may indicate that a shipment is on its way for delivery when, in fact, the shipment is still being processed in a distribution center.

When you multiply these issues by the millions of products that must be shipped to thousands of retailers, it becomes clear how critical accurate logistics information is.

Inadequate Management of Cash Flow

Stockouts can also be caused by cash flow issues. You may know how much inventory is required but without sufficient funds, you cannot purchase it. If a lack of cash flow is causing stockouts, better planning and funding can help handle out of stock situations better. 

Cash is one of the most important aspects of a business as it is responsible for paying for all of the services and machinery that is used in the manufacturing and fulfillment process so if there is not an adequate amount available to pay for essential services like ordering enough goods to prevent stockouts, it can have a negative impact on the supply chain processes of the business.

Poor Inventory Replenishment

Stock replenishment entails ensuring that you always have enough products to sell at the appropriate time. According to research, poor shelf replenishment practices account for 70 to 90% of stockouts, with supplier shortages accounting for only 10 to 30%. Stock replenishment is becoming increasingly important in the omnichannel retail environment, where you must provide the best product selection possible, whether online or in-store.

Today, many automated stock management systems are available to track inventory and order items based on your specifications. It is critical not only to keep items in stock but also to forecast future demand, reduce markdowns and keep customers happy.

10 Tips to Handle Out of Stock Situations and Prevent Them From Occurring

Stockouts occur when a retailer runs out of inventory as a result of increased customer demand or a breakdown in the supply chain, affecting retailers’ shelves and overall profits. It could be the most frustrating shopping experience for both online and in-store customers. Here are a few ways to prevent stockouts:

Specify if a Product is Currently Unavailable

Out-of-stock products should be divided into two categories – those that are not currently available and those that have been permanently discontinued. It should be clearly stated which category applies to the product in question. It also ensures that customers know whether or not they can expect it to return. Some websites allow customers to out-of-stock items in wishlists or receive notifications when the item becomes available later. A weekly stock audit is essential to prevent stockouts. Choosing a strategy that encourages greater user engagement can work wonders for retailers.

Provide Similar Product Recommendations

It is the retailers’ responsibility to use product pages to provide alternatives to users based on their preferences and customer behaviours. It is possible when retailers understand the categories in which their customers are interested, segment them and display relevant products in an appealing manner. When a product is unavailable, it aids in the recommendation of alternative product groups. These groups can assist retailers in avoiding a sale and keeping users interested in the brand. It aids in redirecting users from the product page to the home page.

Mention the Restock Date

If a product is out of stock, it is the duty of the retailer to mention if and when the product will be restocked to prevent further dissatisfaction from customers and give them reliable and transparent information, instead of accepting their order, only to disappoint them later. The restocking date can either be mentioned on the product listing page directly or you can encourage the user to fill out their contact information and send them a reminder when it is back in stock.

Remove the Out-of-Stock Product Listing

One solution to handle out of stock items is to move the product listing to the bottom of the search results or remove it together. If you reduce its visibility, fewer people will click on the listing, resulting in fewer unhappy customers. It’s a straightforward “out of sight, out of mind” strategy.

It can be difficult to keep track of your inventory in order to make these changes automatically. Inventory tracking and management software, which allows retailers to forecast product shortages, is commonly used by businesses with multiple product lines. If you have the funds and infrastructure to do so, this is a great way to get ahead of the game when a product appears to be running low on stock.

Encourage Customers to Pre-Order

You as a retailer can accept pre-orders for products that aren’t currently available but will be soon. It can be resolved by offering a longer shipping time or a pre-order option to secure the sale immediately. Customers value the retailer’s honesty and willingness to serve; as a result, customers may have to wait a little longer than usual for their preferred products. Encouraging customers to pre-order will help to anticipate the demand for particular products and prevent stockout situations.

Use an Inventory Management System

Out-of-stock items are more than just a nuisance. It may have long-term consequences for your Amazon FBA business as well as other sales channels. Algorithms can push your competitors ahead of you in the seller rankings. This can have a disastrous effect on your revenue. Because of too many stockouts, some companies have lost their coveted position in the buy box. 

This is yet another reason why inventory must be synced across all warehouses and sales channels. This is where using inventory management software can help to handle out of stock situations. You must have a consistent – and accurate – inventory count regardless of where your inventory is physically located or where you are selling it.

Forecast Demand for Various Products

Inadequate or inaccurate inventory forecasting is another common cause of out-of-stock situations.

Retailers face a significant challenge in forecasting demand for specific products. According to recent data, 73% of retailers struggle with inventory demand forecasting.

Performing an ABC analysis makes it easier for some retailers than others to predict how much inventory will be needed and when. Businesses that primarily sell seasonal items, such as winter sports equipment or beachwear, may find it much easier to forecast demand for specific products. However, there are ways for all types of retailers to anticipate demand and avoid stockouts.

When preparing inventory forecasts, retailers should consider lead time—the time between placing an order for new products and receiving them from a supplier. Examining previous purchase orders from specific suppliers is one way to estimate lead time. This is unlikely to be sufficient on its own, but it can be used as a starting point for calculating lead time from individual suppliers.

Have Constant Inventory Counts

Some retailers still physically count their inventory. While this may be an age-old technique, it’s probably time to upgrade to modern standards.

Using good inventory management software will allow for automated inventory counts at predetermined intervals so that you can always be aware of your inventory levels and have any changes updated in real-time.

Use Automatic Low-Stock Alerts

Low inventory alerts can be set for your entire store or customized per SKU. The frequency of alerts and the information you receive are also customizable. Some of the useful features of an inventory management system that will help prevent stockouts are:

  • Default Alert Configuration
  • Set a Safety Stock
  • Set Location or Warehouse Alerts
  • Set Individual Variant Alerts

Have Alternative Vendors

To handle out of stock situations or prevent stockouts from occurring, you need to partner with alternative vendors to recover yourself from a critical situation by not being entirely dependent on one vendor. By using multiple vendors, you can always place orders with the relevant one for different product types and can rely on another one in case an issue or delay arises. This way, customers will not be inconvenienced and you can make sure that all products are available in stock.

Conclusion: How Can WareIQ Help eCommerce Businesses Handle Out of Stock Occurrences?

Being able to handle out of stock situations is vital for every eCommerce business, not only to prevent lost sales and revenue but also to ensure that customers are satisfied and that costs are kept in check. While there are multiple ways to prevent stockouts from occurring, paying little attention to your inventory levels can be the most effective. If you need assistance to prevent or minimise out of stock occurrences, you can consider partnering with WareIQ.

handle out of stock_WareIQ inventory planner

WareIQ is one of India’s leading eCommerce fulfillment companies. Through our use of advanced technology such as our in-house WMS, we can help prevent stockouts from occurring by monitoring changes to your inventory levels in real-time and syncing order details and inventory management across fulfillment centers and more than 20 eCommerce selling platforms. Users can also set low-stock warnings to trigger an automatic order of the relevant products from the supplier.

Handle Out of Stock Situations: FAQs