Tuesday, 5 April 2011

Failure to Restock Supermarket Shelves Costs the FMCG Industry 4 Billion Euros Each Year

Symphony IRI Group Highlights the Cost of Out of Stock Levels in its New Report “Improving On-Shelf Availability”

Research experts the SymphonyIRI Group, has just launched its latest report for fast moving consumer goods (FMCG) retailers and manufacturers “Improving On-Shelf Availability”. The report reveals ‘out of stock’ levels for FMCG products across Europe average at 8.3% and cost the industry at least 4 billion Euros every year. Measuring on-shelf availability tends to happen at the point of distribution or store warehouse which does not provide sufficient information on what the consumer is seeing on the shelf, claims SymphonyIRI Group.

A research study by Gruen and Corsten in 2008 observed that studies conducted as far back as 1992 showed out of stocks on average across developed markets as being around 9%. “The issue of products not being available on-shelf has changed little in the last twenty years, despite the billons that have been invested in state of the art distribution centres and the ability to track stock by the second and minute until it reaches its final destination,” claims Andrew Mitchell, International Sales Director for Technology Services, SymphonyIRI Group.

“Although the issue hasn’t changed, the impact has,” he continues. “While manufacturers bear the most risk, the stakes are also high for retailers. Both face the risk of substitution, postponed purchases and reduced customer loyalty. Savvy shoppers faced with their favourite brands not being available on the supermarket shelf will not just switch to competitive brands, they may talk about it to other customers, potentially extending the impact on both the brand and retailer from one to thousands of consumers around the world. In today’s economic climate where both manufacturers and retailers want to maximise sales revenue and improve brand loyalty, now is the time to address the real cost of on-shelf availability.”

SymphonyIRI warns that repeated out of stocks at the same store could force consumers to migrate permanently from that store, making the issue one for retailers as well as individual brands. Research by the company in Europe shows that the level of substitution between brands can be as high as 75% in cases where the desired brand is not available on the shelf. This figure can vary among categories. For instance, product/brand substitution is lower on home care products (42%) than it is on fresh or frozen products (63%). This is typically due to the urgency of the purchase and the shelf life of the products. Substitution of private label products is higher than that of branded items – 65% compared to 53% for branded items.

SymphonyIRI Group, in association with ECR Europe, the membership organisation for European FMCG manufacturers and retailers, has developed an On Shelf Availability Assessment Tool to help retailers and manufacturers address the challenges of optimising on-shelf availability. The tool provides them with an instant analysis of their situation along with best practice guidelines (based on the experiences of other FMCG organisations) to move them closer to improving the situation. The tool is available free to ECR Members from http://ecr-all.org

“Numerous research studies and pilot projects have shown us that management commitment alongside collaboration between retailers and manufacturers and the right tools to support a joint process, reduce out of stocks most effectively,” says Xavier Hua, Managing Director at ECR Europe. “Defining the extent of collaboration can be a significant challenge for out of stock initiatives due to the limited amount of time that retailers have to devote to the issue. However the impact of investment is clear and there is no reason why on-shelf availability should remain a challenge for the industry. Successful management can improve stock performance by as much as 62% and just a three percent increase in OSA can equal a one percent increase in sales for manufacturers.”

The full report includes practical guidance on removing the barriers to improving on-shelf availability and can be downloaded from www.symphonyiri.eu or on request to anne.lefranc@symphonyiri.com.

(EDITOR: It doesn't matter what systems are in place, if they are not operated properly. For example, just before Christmas I visited a well-known national "high end" supermarket branch to buy something that the store was heavily promoting. I could not find it. Upon asking a floor manager I was told: "Oh, in our branch we rarely get the stuff they are promoting in the advertising campaigns for, oh... sometimes two or three months after they are supposed to have been launched." Clearly, something is not working and her cheerful acceptance of that failure might indicate why shelves in supermarkets can be empty when there's no need for them to be.) 

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