The dangers of overselling

Rob Shaw at Fluent Commerce explains how to manage stock to avoid overselling and to maximise profit

Over the last couple of years, one of the biggest issues for retailers has been disruption to the supply chain, leading to stock shortages and gaps on the shelves.

Now though, the picture has completely changed. Instead, many retailers are now suffering from ‘inventory bloat’, with too much stock that they are struggling to sell. With soaring rents and energy costs, storing this excess stock in warehouses or in stores is not a long-term solution. As such, retailers are under a huge amount of pressure to clear stock and release capital.

Higher amounts of stock might seem like a positive, leading to increased sales. However, with stocks high across the board, it’s hard for any one retailer to gain an advantage.

It’s the retailers, who know exactly where their stock is and how much of it they have in each location, that are best placed to sell it all without frustrating customers by selling out.

The risks of overselling

Overselling is when a retailer runs out of stock but still allows consumers to complete purchases. This can occur when the retailer has an inaccurate stock count, when they’ve sold out on a marketplace, or when there isn’t a sufficient level of safety stock, or when they haven’t updated inventory fast enough. 

Allowing a customer to proceed to check out, only to later email them to let them know their order cannot be fulfilled can destroy a customer relationship.

Furthermore, if that customer then leaves negative feedback, it could damage the brand’s reputation for many more potential customers to come. Recent Fluent Commerce research revealed that 68% of consumers would have a more negative view of a retailer if they went to purchase an item that said it was in stock and it actually was not.

Retailers are unlikely to get a second chance after customers are turned off by these disappointments, with competitors waiting in the wings ready to fulfil the order. 

Overselling also often leaves the retailer with a cost they can’t recoup, having spent money on acquiring that customer, online advertising spend, ecommerce platform fees, payment capture fees and the cost of managing the refund. 

How to prevent overselling

There are a number of actions retailers can take to avoid overselling. These include:

Check stock regularly. Perhaps obvious advice, it’s no less important because of it. Conducting regular and spot-check stock checks is a necessity to ensure that stock level figures are correct on your sales channel(s). This will help to prevent overselling.

Furthermore, for multichannel sellers who list stock in full on each channel, it’s important that any changes in stock levels are recorded and updated across all channels as close to in real time as possible. That will then enable accurate product availability at all times on the retailer’s own website, as well as marketplaces, and other channels.

Planning is imperative. No one can predict the future, but attempting to successfully forecast demand is a challenge all retailers must undertake. If businesses can map out where items are ordered from most regularly, as well as planning for spikes in demand, they will be able to replenish orders more quickly to ensure less ’out of stock’ instances.

In particular, understanding where items are fulfilled from, versus where they are ordered from, can offer important insights. For example, typically, if a store is running low on stock of an item, that store will receive a replenishment order to increase stock.

However, it could be that much of this stock was used to fulfil online orders for areas where there was no stock nearby. In this instance, it would be more efficient to send more stock to the stores closer to the source of demand, and less to the store that is further away. This would allow the stores closer to the customer to sell more and save on delivery costs. 

Pairing a clear and complete view of inventory and fulfilment across locations with strategic planning can reduce overselling and deliver savings.

Invest in a modern OMS with real-time inventory data processing. For retailers who truly want to avoid overselling, it’s worth investing in the right tools. A modern Distributed Order Management System (OMS) will offer a clear view of all sales channel(s), automatically updated as stock levels change, in real-time. The system can assign buffers for popular items, which prevents overstocking and means that overselling (or underselling) is never a problem again. 

Automatic reporting can help identify peaks in demand and record what is available across all locations, in order to then allocate stock according to where and when it is needed. This takes all of the work out of planning ahead. Retailers can even flag damaged items, so unsaleable inventory won’t be shown in online channels.

A quality Order Management System with real-time inventory enables retailers to sell the stock they have in the most efficient way, preventing overselling and enabling them to respond and adapt much more quickly to their customer’s buying behaviour in the future.  

Rob Shaw is SVP Global Sales at Fluent Commerce

Main image courtesy of iStockPhoto.com