Retailers around the world lose an estimated $1.1 trillion annually to overstocks and out-of-stocks. E-tailers also feel the pinch of overstocks and out-of-stocks in a ripple effect that brings the revenue loss right back to the manufacturer.
Inefficient inventory management is the primary reason for stockouts and the consequent loss of revenue, as sales cannot happen unless your products are assorted and in stock at a selection of e-commerce sites. As a brand, failing to optimize your product assortment sets the stage for stock issues and revenue loss. In this article, we’ll look at 14 essential online assortment optimization actions under five key categories.

SKU presence

E-Commerce offers a variety of distribution options, most of which are not as organized as brick-and-mortar retailers. Sales and e-commerce teams are responsible for crafting a distribution network, as well as defining and negotiating lists of SKUs. As e-commerce stores aren’t subject to the limits of physical in-store shelves, they tend to assort proportionally more SKUs than their offline counterparts. As a result, e-tailers often do not run as tight a ship as traditional retail partners, so they need more management.

Check SKU presence against the negotiated assortment

It would help if you had a plan of where your SKU should be, and the reality must be in line with your plan.
Benefits: brand image, market share, e-tailer relations.

Set up a selective distribution strategy for e-tailers

Determine specific needs for your brands. Certain e-tailers will more likely suit your brand’s requirements and better enhance your brand image.
Benefits: brand image, e-tailer relations, margins.

Increase the number of references listed by your e-tail partners

Having more product references at your e-tailers’ partners means your brand is expanding, which translates to market share growth and increased sales.
Benefits: revenue, market share.

Out-of-stocks

According to a 2018 study by the Grocery Manufacturers Association (GMA), online out-of-stocks result in an estimated $17 billion loss in annual sales globally. The study further states that e-tailers bear 31 percent of that loss, while brands bear 33 percent worldwide. In the US, e-tailers suffer 25 percent of the losses, while brands carry 35 percent.

Customers today have high expectations of product availability and, thanks to e-commerce, can easily buy from a competitor. With an annual e-commerce growth rate of 17.9 percent, the impact of out-of-stocks on manufacturers’ and e-tailers’ bottom lines will only get worse.

Remedy critical out-of-stocks (manual ordering systems)

For e-tailers that rely on manually issued POs to order additional stock, monitoring shortages is vital. As buyers might be too busy to react quickly, a product can stay out of stock for several days, causing lost sales and decreased market share.
Benefits: revenue, market share, brand image.

Remedy critical out-of-stocks (automated ordering systems)

Large e-tailers automate their ordering system to avoid an out-of-stock scenario. Vendors should familiarize themselves with their e-tailers’ ordering parameters to always stay in-stock. The vendor can also take initiatives to prevent critical issues such as supply-chain gaps or even rejected POs.
Benefits: revenue, market share, brand image.

Spotcheck the root cause of critical out-of-stocks

Out-of-stock turns brutal during high-strung periods, like new product launches or promotions. Identifying the e-tailers that go out-of-stock and being able to systematically identify the cause will save the brands from intangible damage and improve their relationship with e-tailers.
Benefits: revenue, brand image, bargaining power.

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Analyze recurring out-of-stock issues to improve ordering habits

E-tailers often run out of stock and yet don’t reach out to re-order. When this happens, brands should reach out to them first and offer merchandise. This action will establish ordering habits and strengthen distribution networking.
Benefits: business relationships, optimize sales.

Buy box

82% of Amazon sales made on desktop happen through the buy box. The percentage is even higher for purchases made on mobile. As a vendor, regaining the buy box as often as possible is an essential driver of “free” growth. Whenever you lose the buy box, sales are diverted to third-party vendors and become an opportunity loss. Bringing up buy box losses with your Amazon contact as they happen yields far better results than waiting until it’s too late.

Routinely measure your lost buy box (LBB) ratio

Since the buy box can change owners every few hours, brands should ideally check it at least three or four times per day. It’s also useful to measure your LBB ratio every week to keep track of the bigger picture.
Benefits: revenue, market share.

Win back the buy box as a vendor

Your brand losing the buy box to third-party sellers means you’re losing sales. Winning it back can be a question of availability, pricing, or negotiation with your key contact at Amazon.
Benefits: revenue, market share.

Identify the most aggressive third-party sellers

Keep track of which third-party sellers most often take the buy box from you. Look into repeat offenders and see if you can shut down their supply channels.
Benefits: brand image, revenue.

Competition assortment

Competitive analysis is the key to outperforming your competition. Tracking a competitor’s assortment helps brands look at their business from the outside and identify gaps in their product catalog. They are then in a position to create data-driven changes to their product assortments and stock product varieties that customers want to buy.

Identify new distribution opportunities based on competitive assortments

By monitoring the assortment of competitors on a large variety of websites, brands can uncover e-tailers that they had not considered before. Competitive intelligence is one of the keys to expanding market share and total sales volume.
Benefits: competitive advantage, revenue, market share.

Benchmark competitive availability metrics to support e-tailer negotiations

To reinforce your bargaining power, you will need to gain insight into your competitors’ performance (price evolution, reviews, shares of shelf) site by site.
Benefits: bargaining power, competitive advantage, market share.

Grey market

Manufacturers lose an estimated annual revenue of $63 billion to grey markets in the US alone. Grey markets not only rob manufacturers of income, but they also promote unfair competition against official distributors. Manufacturers have no control in the grey markets, making it impossible for them to guarantee the quality of grey market goods. If counterfeit or substandard products are sold under a manufacturer’s brand, it might irreparably damage the brand image.

Identify unknown online sellers and bring them into your official distribution

Your brand’s products might sell very well to some unofficial resellers that you are unaware of. Being able to identify them can help you extend your e-distribution channels and boost your brand’s growth. Adding high-potential resellers to your official distribution channel eliminates the chances of them using unofficial distribution channels and costing you revenue in lost sales.
Benefits: sales, market share, brand image.

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Identify unknown online sellers and shut them down

Cross-imports, unauthorized transactions, or even inventory thefts can lead to unknown websites selling your products. These sellers can be a threat to your online reputation and unfair competition to official resellers. The sooner you identify them and shut them down, the better.
Benefits: brand image, retailer relations.

Check out the recap of 14 actions and its benefits:

Optimize e-commerce assortment actions and benefits

Since these assortment optimization actions are strongly linked to each other. The final goals are:

  • Increase sales
  • Optimize revenue
  • Extend market share
  • Reinforce bargaining power
  • Strengthen relationship with e-tailers

As e-commerce becomes more data-driven and customer-oriented, assortment optimization is taking up more time and effort than ever before. Effective assortment optimization isn’t a one-time event; it’s a continuous process. This process is often time-consuming and tedious, especially when done manually, but it can be more efficient and effective when automated.

BlueBoard offers e-tail software that monitors assortment, prices, and competition distribution to help you make profitable data-driven decisions. Request BlueBoard’s free trial to find out if we’re a good fit for your assortment monitoring needs.