New Industry Study Explores Root Causes of Global Out-Of-Stock Dilemma

WASHINGTON, DC, October 14, 2002 – Approximately 47 percent of out-of-stocks are caused by inadequate store ordering and forecasting and 25 percent by poor shelf management, according to a new study by Food Marketing Institute (FMI), Grocery Manufacturers of America (GMA) and CIES–The Food Business Forum, that examines the issue globally. This means that 70-75 percent of worldwide out-of-stock products are triggered – and must be fixed – at the retail level.

The study gathered data from 52 previously published reports to develop an overall picture of the out-of-stocks situation on a global scale. The out-of-stock rate has not declined from earlier reports, although there have been advances in supply chain management, category management and inventory-tracking technology. The study found that the world average rate for out-of-stocks is 8.3 percent, with Southeastern Europe showing the highest out-of-stock rate at nearly 11 percent on average and Northwestern Europe with the lowest out-of-stock rate at an average of more than 7 percent.

Other key findings include:

• When faced with an out-of-stock situation, an average of 31 percent of consumers worldwide said they go to another store and 26 percent said they substitute a different brand. Nine percent said they do not purchase any items at all.

• Although the retailer, manufacturer and industry as a whole are impacted by the consumer’s reaction to an out-of-stock product, the study revealed the implications for a typical retailer are greater than originally thought with an average loss of four percent of sales when consumers cannot find the product they are shopping for because it is out-of-stock.

The study, funded by a grant from The Procter & Gamble Company and conducted by researchers at Emory University, the University of St. Gallen and the University of Colorado, examined 661 retail outlets, 32 consumer goods categories and surveyed 71,000 consumers in 29 countries.