How Out-of-Stock Products Impact Customer Behavior Online

The Online Inventory Impact Survey Q207

Webinar
Lauren Freedman, President, the e-tailing group
July 11, 2007 12p-1p EDT

Erik Huddleston, CTO & Founder, BetweenMarkets

Todays Webinar Program

Topline results: the Online Inventory Impact Survey Examples: Best-in-Class Sites Checklist: Customer Communication About Out-ofStock Products How Supply Chain Data Impacts Out-of-Stocks Q&A

How does out-of-stock product impact customer behavior online?

To find out we commissioned StartSampling in May 2007 to field
the e-tailing group/BetweenMarkets Online Inventory Impact Survey

Respondents
957 adults (61% female/39% male) who Shop online 4 or more times per year, Spend over $500 online annually, answered Closed-end questions and 1 open-ended question

Key findings are charted followed by best-in-class merchant examples

Customer commentary - the issues that matter based on the open ended question:
What is the most frustrating experience you have had with products being out-of-stock online?

1. 2. 3. 4.

Accurate and timely communication The order process - too little information about stock status too late Gifting and time sensitive purchases are even more critical Undue delays or non-delivery and commensurate customer service such as shipping charges and refunds 5. Frustration of substituted products without approval 6. Time wasted coordinating outfits 7. Products featured in promotions, as advertised, or catalogs but not available online 8. Availability of products on the web vs. in-store 9. Discontinued products 10. Desire for immediate gratification

Key Messages & Learning

Out-of-stocks occur frequently Consumers go to competitors when out-of-stocks are encountered The personal customer experience determines if a merchant loses a customer Greatest sensitivity in clothing/accessories and gift categories followed by music/DVDs/videos Consumers are surprisingly patient prior to abandonment; particularly women Post-order placement problems are limited though email and catalog promotions sometimes disappoint Accurate shopping cart data is essential Stock levels must be present at the product page through the shopping cart Beyond the final deal and price, ultimate loyalty can be impacted by out-of-stocks

More than of online shoppers (51%) find products to be out-of-stock 25% of the time or more
Men are more likely to almost always (75% of the time or more) find the products they are looking for out-of-stock than women (6% vs. 3%)
When you are shopping websites, how often do you find that the products you are searching for are out-of-stock?

46% 40%

4% 75%
Q3

7%

3% 25% - 49% 1% - 24% Never

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50% - 74%

Three times youre out when it comes to site abandonment due to out-of-stock products
68% of those surveyed would leave a site after 3 out-of-stock experiences
How many times would you have to experience out-of-stock products before you abandon a particular site?

Once 4% Four+ 32% Twice 26%

Three times 38%

Q9

Just under of respondents (48%) have received out-of-stock notifications after placing an order
How often have you completed an order only to receive a subsequent out-of-stock notification?

Never 12%

Almost always 1%

Frequently 6%

Rarely 40%

Once in a while 41%

Q11

62% of respondents found that clicking on promotional email led to out-of-stock products once in a while to always
How often have you clicked on a promotional email only to find the product being promoted is back ordered or sold out?

Never 15%

Almost always 3%

Frequently 17% Once in a while 42%

Rarely 23%

Q10

When encountering out-of-stock product, customers actions are split

57% want it now and are lost to a competitors website or retail location 30% buy something else on the initial site or check out the merchants retail location 56% wait checking back or signing up for an alert 17% buy nothing 3% other often stated that their actions depend on the product and situation

When you encounter an out-of-stock product, what is your typical course of action?
Go to a competitor's website for the same/similar product Go to a competitor's retail location to find the product

48% 9% 15% 15% 31% 25% 17% 3%

Buy an alternative/substitute product on that site Go to the merchant's retail location to see if they have it there

Check back later to see if it is in stock Sign up for an alert to be notified when a product is back in stock

Buy nothing Other

Q4

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Depending upon the experience, merchants risk losing customers if products are out-of-stock
When you find products are out-of-stock at a particular merchant, what impact does that have on your likelihood to shop that merchant in the future?

It depends on the experience and how frequently it happens with a particular merchant

41%

Does not impact my interest in shopping from this merchant

36%

Might shop with them if they are the only ones that have the product I want or need

22%

Will never buy from this merchant again

1%

Q5

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Shopper sensitivity to out-of-stocks is most prevalent in clothing/accessories (51%) and gifts (45%)
Please select the top 5 categories where you would be most sensitive to an out-of-stock item and would likely result in you shopping at another site
Clothing/Accessories Gifts/Collectibles Music/DVD/Videos Computer Hardware/Software Consumer Electronics Books/Magazines Toys/Video Games Health/Beauty Items Tickets (movies, concerts, theatre) Furniture/Home/Garden Pet Supplies Food Sporting Goods Jewelry/Watches

51% 45% 42% 41% 39% 37% 30% 30% 29% 19% 18% 14% 12% 11%

Q6

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The categories where women/men are most sensitive to out-of-stocks differ greatly
Women follow the norm more closely with clothing/accessories (59%) and gifts (53%) foremost
Men are more apt to go elsewhere for computers (61%) and consumer electronics (58%)
Top 5 categories where an out-of-stock item would likely result in shopping at another site (women/men)
Clothing/Accessories Gifts/Collectibles Music/DVD/Videos Books/Magazines Health/Beauty Items Toys/Video Games Tickets (movies, concerts, theatre) Computer Hardware/Software Consumer Electronics Furniture/Home/Garden Pet Supplies Food Jewelry/Watches Sporting Goods
9% 8% 20% 16% 20% 15% 15% 12% 13% 17% 22% 31% 30% 30% 28% 28% 26% 61% 58% 33% 39% 38% 35% 35% 46% 59% 38% 53% women men

Q6

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Beyond the deal loyalty is impacted by products being in stock (40%) and customer service issues, such as timely shipping (36%) or overall service (35%)*
Rank the following 7 factors as they impact your loyalty to any particular merchant from 1-7 where 1 is the most important and 7 is the least important
78% 69%

40%

36%

35% 22% 21%

Competitive pricing

Free or flat rate shipping

Products in stock

Timely shipping

Overall customer service

Brand assortment

Onsite shopping experience

* Based on summary of top-3 responses

Q7

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1/3 of respondents expect items to be saved in the shopping cart until their next visit
Providing updated stock availability in the cart is critical to ensure ultimate satisfaction
How long do you expect that items added to your cart on a particular website will be saved? 30%

18%

18%

17%

7% 4%

6%

Until the next time I visit

1 day

2 days

3 - 7 days

8 - 14 days 15 - 30 days Indefinitely

Q8

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The Shopping Cart is an evolving opportunity

the e-tailing group 6th Annual Merchant Survey 2Q 2007
More sophisticated tactics are essential to boost conversion rates, the best of which fluctuate between 1% and 5% depending upon category and site evolution Shopping cart abandonment rates are still too high or are not being tracked
29% over 50% 27% between 31%-50% 18% under 30% 26% dont know

A shopping cart policy standard has not yet been established 29% currently do not hold merchandise in carts 27% hold it for 1-3 months the balance range from 30 minutes to indefinitely 75% of these merchants may be losing sales by not communicating with shoppers who have abandoned their shopping carts; they need to establish a policy to communicate

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Customers expect in-stock status

the e-tailing group 9th Annual Mystery Shopping Study, 4Q 2006
2006 2005

Inventory/Backorders
Real Time Inventory On Product Page In Shopping Cart Online Shipping Status
Source: the e-tailing group 9th Annual Mystery Shopping Study, 4Q 2006

% penetration among the e-tailing 100 sites

83% 83%* 75%* 97%

76% 80%* 72%* 97%

* Based on a subset of sites

The presence of real-time inventory on both product pages and in shopping carts continues to increase Providing online shipping status has become a feature that customers expect to find and is now offered on 97% of the sites surveyed

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Real-time inventory should be in place

Only available sizes are shown in drop-down menu Recommended products are relevant Product enhancements include alternate views, zoom and color change

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It should be intuitive

Availability guide graphically shows RTI by size and color Estimated delivery date can be viewed by entering zip code Buy more and save messaging is included with product description

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Alert when quantities become limited

Limited Quantities Buy now! Limited Quantity messaging imparts urgency to buy Items in shopping bag can be saved for later purchase Live help is readily available from shopping cart Page is merchandised with recently viewed items

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Supply customer service messaging

Dont see this item in your color or size? Link to in-depth explanation of availability See details links for shipping and guarantee Order tracking included with customer service options on top of page

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Foster stock alert advisory

Onlineshoes.com Dont see your size? Well be happy to let you know as soon as your size is available. Sephora Enter your email address below and well gladly let you know as soon as this item is back in stock.

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Keep customers informed throughout the process

Your selection is available for shipment the week of 6/29/07. If you still wish to purchase this item, click Add to bag. Clearly states the situation, details the purchase, and lets the customer cancel or continue with one click Shows relevant alternative selections to substitute

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Educate shoppers with established procedures

The items in your shopping bag will be saved for 14 days, but merchandise availability is not guaranteed. Straight-forward messaging could be softened up grid layout makes it easy to remove items Product options presented Free exchanges/Easy returns prominently featured Link to gift box or note with icon
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Optimize cross-channel advantages

RTI messaging is clear; user can choose to receive e-mail when item is back in stock Item can be added to registry or wish list Gift certificate messaging encourages online redemption

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Discourage shopping cart abandonment but make the best of it by securing email addresses
Save your cart: Enter your email so that you can retrieve your cart from anywhere! RTI messaging is highlighted in contrasting text Satisfaction guarantee messaging is bold and prominently placed on page Shopping cart can be saved for later purchase

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Alert shoppers via email

The Land Of Nod: 12/19/06 Subject Line: Just in the St. Nick of Time Back in stock notice promotes item with guaranteed holiday delivery and free shipping upgrades Email is merchandised with anniversary prize drawing, link to outlet, and gift card Links to retail locator and online catalog encourage cross-channel shopping

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the e-tailing group checklist Customer Communication about Out-of-Stock Products

It is best to avoid being out-of-stock but when the situation arises, it is imperative to communicate the stock status with your customers throughout the shopping process.

1. 2. 3. 4. 5.

Product page should provide accurate and intuitive inventory status Communicate with customers about inventory at the cart and post-order levels Educate shoppers to your abandoned cart strategy with clear and accessible messaging Enable onsite alerts that foster future communication to garner the sale Leverage email to highlight products that are back in stock as well as to serve as a customer service tool

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The Link Between Dirty Data & Out-of-Stocks:

How Upstream Supply Chain Errors Impact Inventory

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About BetweenMarkets
On-demand software for retailers & vendors A collaborative approach to finding & fixing supply chain data errors Solutions for Vendor Deductions & Vendor Compliance

Key Clients

Key Partners

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The Link Between Dirty Data & Out-of-Stocks:

How 20% error rates continually impact the retail supply chain
Example: ASN arrives after the truck Example: PO changes dont get processed

1. Purchase Order 2. Advance

Example: ShortShip Notification shipment

(ASN)
Vendor

Merchant

3. Physical Shipment 4. Invoice

Late ASN Impacts Cant scan and receive shipment Truck and inventory is parked to the side Additional staff is required to manually receive shipment Fulfillment is delayed

Overall Merchant Impacts Increased Out-of-Stocks Increased Supply Chain Costs Slower Time-to-Market

Late ASN Impacts Higher logistics expenses due to trucks getting parked on yard or turned away Reduced revenue due to product reaching shelves slower Longer DSO due to reschedule time
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Best Practices: Improving Supply Chain Data to Lower Out-of-Stocks

Orchestrate 4 Collaborate Manage partners as a portfolio

3 Carrots, not Sticks, approach to Vendor Deductions 2 Problem-solve with trading partners Find & fix supply-chain data errors

Anticipate 1 React

AMRs Demand Driven Supply Network Maturity Model

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Q&A
Lauren Freedman the e-tailing group, inc. 1444 West Altgeld Street Chicago, IL 60614
lf@e-tailing.com p. 773-975-7280 f. 773-871-3528 www.e-tailing.com

Erik Huddleston BetweenMarkets 1250 Cap. Tx. Hwy South Austin, TX 78746
ehuddleston@betweenmarkets.com p. 512-328-2200 f. 512-334-5567 www.betweenmarkets.com

Download webinar slides:

www.betweenmarkets.com/outofstocks.html
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