Journal of Retailing

Consumer Responses to Retail Stock-outs Successful retail operations depend upon a store's ability to meet consumers' needs. Stock-out conditions in a retail setting were manipulated to answer three research questions: (1) what actions do consumers take when a desired item is out of stock? (2) What product and situational factors influence this action? (3) What is the impact of out-of stock behavior on retailers? During a four-day summer period, out-of-stock behavior was examined at a major discount grocery store. Five items were selected and an out-ofstock condition for a specific brand, variety, and size of the item (one stock-keeping unit) was created by removing the item from the shelf prior to the store's opening on each of the four days of data collection. A questionnaire designed to be answered verbally by consumers within three to four minutes was developed. Trained interviewers were stationed at the regular check-out lines, excluding express lanes, and questioned consumers as they waited in the check-out line. Over the four-day period, 2,858 consumers were asked to participate, representing 53.8 percent of the 5,310 consumers who passed through a regular check-out line. Of the 2,858 asked to participate, 2,810 (98 percent) agreed. From the survey, it was found that, 24 percent of the consumers intended to purchase at least one of the five test-product categories in which the researchers had removed items from the grocery shelves. Of those intending to buy the product, between 7.9 percent and 11.8 percent could not find the specific brand, size, and variety they wanted. The three most common actions taken when an item was not available were to (1) substitute a different brand, keeping size and variety the same (20.5 percent); (2) substitute a different variety, keeping size and brand the same (17.5 percent); or (3) not substitute at all, with plans to go to a different store (13.7 percent). Over 96 percent of the 375 consumers who experienced an out-of-stock stated that they were buying the item for regular usage rather than for a special occasion. Half of the consumers stated that they needed the item the day of the shopping trip and could not delay the purchase, with an additional 34 percent needing the item prior to their next regularly scheduled shopping trip. There were no statistically significant differences between products on usage or urgency of purchase. Of those consumers who found an item out of stock, 74.6 percent substituted if the item was intended for regular usage, while only 40 percent substituted if the item was for a special occasion. For those consumers who did substitute within the brand, the specific product type influenced whether the size or the variety was substituted. For coffee and tomato sauce, consumers remaining brand-loyal were equally likely to switch variety or size; however, for the other products they were not. For orange juice and peanut butter, the consumer was more likely to switch size and keep variety the same. For toothpaste, the consumer was more likely to switch variety and to keep the size the same. Of those 99 consumers (26.8 percent of all who experienced an out-of-stock) who did not substitute, 51 percent stated that they intended to go to another store to purchase the item. Forty-

six percent indicated that they would defer the purchase until a later trip back to the same store. Only three percent were planning to make a special trip back to the same store to purchase the out-of-stock item. The decision to go to another store versus delaying the purchase appeared to be influenced by the degree of store loyalty. Store loyalty was high among consumers, with over 88 percent purchasing at least 50 percent of all of their grocery needs at the test store. While store-loyal customers were equally as likely to substitute as were non-store-loyal customers. This research found that at least fifteen different stock-out behaviours are taken by consumers when provided with brand, size, and variety alternatives. Further, the results suggest that retailers may suffer a relatively large percentage of lost sales if an item is out of stock. Based upon the five products in this study, 13.7 percent of the consumer would go to another store to purchase an out-of-stock item. However, an additional 26.8 percent of consumers delay the purchase when an item is out of stock. Although nearly half of these consumers intend to retun to the same store for the item at a later time, there is a chance that some of these consumers may go elsewhere for the item. As a result, the actual percentage of lost sales realized by the retailer could be much higher than 13.7 percent. In addition, when faced with repeated stock-out conditions, Consumer may permanently switch stores. Even though most consumers do not go to another store for out-of-stock items, for those likely to do so, retailers can take a number of actions to minimize lost sales. First, lost sales can be reduced by careful product substitution at the retail level when an item is out of stock. Depending upon product category, between 61% and 78% of the substitutions made by consumers involved a switch in only one of the three product characteristics (brand, size, variety). Second, a retailer can reduce lost sales through careful ordering and stocking policies. The research indicates that, at a minimum, a retailer should carry at least two different brands of the same variety and size; as well as two different varieties of the same size and brand. Retailers can also pressure manufacturers and distributors for more timely and frequent deliveries of products where consumers are more likely to substitute. While these actions may, in some cases, add to the number of products stocked, this policy may actually reduce store inventory. Because retailers can be more confident that the consumer will substitute, the retailer may be able to stock lower quantities of each of the size-brand-variety combinations that they offer. The results of the research indicate that stock-out behaviours are more varied and more numerous than previously indicated. Most previous research suggests five or six actions taken by consumers when they experience an out-of-stock condition. This research identified at least fifteen different actions that are taken by consumers. The research further indicates that the specific action taken is influenced by a number of factors, including product-related attributes and situational factors.