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My Introspective

by Laurus Nobilis
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Sales Force

CATEGORY MANAGEMENT

Stock Out ( Out of Stock ) Effects (E)

Retail Category Management

 


What is the role of Category management in contemporary market? What is the relation of range and space management and product availability? Learn about space allocation and layout setting tactics.

 

Posted: Sep 2011


 

 

 

 

 

 

 

 

The stock out is unwanted situation for every stakeholder in commercial process: supplier, retailer and consumer. The stock out occurs in different situations: low inventory, unpredicted sales increase, order taking frequency change, late delivery, administrative problems, merchandising/shelving frequency etc.

Category management is a retail and supply management concept where the range of products is grouped into specific groups of products of similar characteristics. Category management concept was developed at the end of 80s of 20th century in the developed retail markets. Category management is among the most advanced business tools for business results improvement.

 

Stock Out

Stock out ( out of stock ) is creating a whole range of effects. At the bottom line everybody loose. Supplier looses the sales. Retailer looses the sales and potentially the customer.

Customer is dissatisfied and is placed in situation to choose between leaving his needs unsatisfied, switching of product or retailer.

The consumer places no stock out among the top keys of shopping satisfaction:

Stock Out Effect

The ECR/Roland Berger data shows what would be reaction of average shopper in case of stock out. In case of stock out the customers would do one of the following:

Stock Out Effect

The stock out affect a different categories in a different way. The impulse purchase products are more frequently the subject of product change than the products that are previously planned:

Stock Out Effect

But if the out of stock continues, than consumer may switch the store as well.

Stock Out Effect

Stock Out Effect

According the ECR/Roland Berger data the stock out in Europe is between 7 and 10%. Typically, the stock out is higher on promotional than on regular products. The root of the problem is in the stock out problem itself. All, supplier, retailer and consumer looses from out of stock situation.

Space to Sales is a key tool to improve availability of the product. This means that space share should be balanced between volume and value share. Space to Sales balancing is designed to fight lost sales through balanced stocks. Therefore a balance between volume (how quickly an SKU will sell out) and Value (cost to the business of a lost sale) is required.

The additional layout benefit of space-to-sales is that it provides a larger block on shelf of the products which are most relevant to the consumer - the best-sellers. This makes planned purchase as easy as possible and can also trigger additional (unplanned) purchases.

 
Continue Reading:

Category Management
Range and Space Management
Stock out Effects
6 Steps of Range Assortment
Space Allocation and Layout Setting
Space Allocation Case Study

 

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