(This post was last published on May 4th, 2016. It’s been updated for accuracy and completeness.)
Retailers are missing out on nearly $1 trillion in in-store sales because they don’t have on hand what their customers want to buy. When customers can’t find what they want on your shelves, they’re quick to shop online or with one of your competitors.
There’s a lot of reasons why your shelves might be empty like miscalculating labor costs, customer satisfaction, and poor communication between vendors and retailers. To combat this problem, retailers of all sizes are turning to technology to ensure their shelves stay stocked, or appear to have an endless aisle of products consumers are looking for.
Implementing this retail strategy isn’t easy though. This article discusses some of the common challenges of deploying an endless aisle program.
What is Endless Aisle?
You may have heard a few different terms regarding endless aisle such as drop shipping and virtual merchandising. All these terms refer to a retailer’s ability to sell out-of-stock items to in-store customers or sell online items that are not kept in local inventory.
To sell out-of-stock items to in-store customers, retailers instead place a order for inventory kept by external suppliers. The supplier then ships the product directly to the customer from their own inventory. To the customer though, it appears as if you sold the item. The supplier is completely invisible in this process. It appears then you have an endless or aisle, of products and are never truly out-of-stock.
Endless aisle strategy through external suppliers is a processes called drop shipping. Learn in-depth about this fulfillment strategy through this introductory drop shipping guide.
Retailers can also provide virtual shelves in-store by adding interactive kiosks, tablets, or other mobile devices that give in-store shoppers the ability to buy unlimited product selections. This allows customers to search for products not kept in-store and ship to their home or back to the store. Interactive kiosks allow retailers to offer a much broader product assortment, without worrying about shelving or storage costs.
Either way, retailers are using endless aisle strategies to combat many different negative effects from out-of-stock (OOS) items.
Endless Aisle Combats Otherwise Lost Sales, High Costs and Lost Loyalty
Retailers much choose to invest in technology for endless aisle or face the reality of empty shelves. As A.T. Kearney details below, out-of-stock items impact four key areas of your business: loss of sales, customer loyalty, online order fulfillment from the store and shipping costs that lead to smaller margins.
Today’s shoppers encounter out-of-stocks in as often as one in three shopping trips. An endless aisle strategy helps retailers avoid these situations and secure the otherwise lost sale and following issues.
But, it’s not easy for retailers to make this type of strategy a reality. You must be committed to investing in the technology, hardware, and the people needed to give shoppers options when you don’t have inventory on hand.
Challenges of a Retail Endless Aisle Strategy
Here are some of the common challenges you need to be aware of when considering an endless aisle retail strategy:
Keeping Inventory Updated in Real-Time
First and foremost, retailers must know when stock is available and where. Otherwise, you won’t be able to offer different options for customers. For many, this means inventory levels across your sales channels must be updated in real-time or very closely. If you sell in-store and multiple places online, your inventory will constantly change.
Real-time inventory updates require system integration and inventory management technology to ensure visibility into your products.
It’s not enough to just make sure that inventory levels are correct. Staff also must have easy access to be able to see inventory levels and communicate it with individual customers.
This means that the present inventory availability must be within an employee’s order screen, a cashier’s point-of-sale screen, or an inside-sales rep’s ERP order. You must have a system with these capabilities.
To track and update inventory quantities across all sales channels, all orders should be managed in a centralized location. This gives you visibility into inventory regardless of its locations and channel for delivery. This ensures you’re optimizing fulfillment practices.
Working With Suppliers
The biggest challenge of endless aisle is managing order processes with the suppliers you drop ship with.
Retailers must have a three-way match process in place. If not put in place, it’s usually the downfall of any endless aisle strategy.
Three-way match involves the vendor’s invoice for the order, the purchase order by the retailer, and the receiving report by the retailer. This process helps avoid paying any incorrect or fraudulent invoices.
When working with a drop shippers, you must ensure that vendors are accurately invoiced for items ordered, at the cost you expected, and track that the items were actually shipped to the customer.
This is a lot to handle and track when you don’t have physical possession of the product. This process will have to be thoroughly developed before thinking about selling products via drop shipping.
Communicating Order Status with Customer
Placing an order for a seemingly out-of-stock item in-store for a customer is just the first part of the customer experience. The second step is keeping the customer informed about that the status of their order.
Unlike when an item is purchased in-store, the customer isn’t going to be able to walk out with their product in-hand as they originally planned. They must trust you to deliver as promised.
Retailers must keep customers informed of when they can expect to receive their item and when it’s shipped. You don’t want to keep your customers in the dark throughout the process.
When shipping status notifications comes from the supplier, it can be hard to track and communicate it with the customer. Your software must be able to do it to keep your customer informed.
What to Do Next
An endless aisle strategy is important for retailers of all sizes to keep and increase in-store sales. However, it’s not an easy program for any retailer to pull off. It takes the implementation of the right technology, processes, and people to ensure its success. Considering these challenges upfront will help you put in a program that works for your business and customers.
Keep learning more about endless aisle and drop shipping strategies for retailers.