By Daniel Hunter

A research report sponsored by NetSuite Inc. reveals that UK retailers can lose an estimated £147 million of revenue this Christmas due to missed sales opportunities through out-of-stock products, and an additional £1.7 billion to their competitors, as consumers shop elsewhere for their Christmas gifts.

The research is based on economic models provided by the Centre for Economics and Business Research (CEBR) and primary research with UK retail businesses, and a nationally representative study of 2,000 UK consumers conducted by Vanson Bourne.

The research found that the average retailer is losing 10 percent of its Christmas revenue to out-of-stock situations:

· More than half of retailers (66 percent) were out-of-stock on particular products last Christmas, with clothing (52 percent), food and drink (44 percent) and electrical goods (44 percent) most commonly out-of-stock. With 41 percent of consumers stating that they plan to go to a competing website or retailer to get the Christmas gift they want, retailers are set to lose £1.7 billion to competitors this Christmas.

· On average, these retailers could not fulfil 21 percent of Christmas orders last Christmas due to a lack of product availability — leading to a potential overall revenue loss of £147 million through missed sales opportunities.

UK consumers are now looking for a true, multi-channel experience this Christmas season, with the average consumer conducting 43 percent of their shopping in-store and 57 percent online. Shopping via mobile devices can play a key role in driving sales this festive season; almost 20 percent of consumers say they plan to shop through a mobile device this Christmas, and almost one in 10 of consumers under 35 said that their mobile device is their primary shopping tool. A quarter of consumers also plan to spend more on their Christmas shopping this year, with 68 percent expecting to spend more online compared to in-store.

“Delivering an omnichannel retail experience is a key challenge for retailers as consumer shopping habits continue to shift, both in-store and online," Andy Lloyd, General Manager of Commerce Products for NetSuite said.

"Stock-outs in particular cost more than lost revenue; they can tarnish a brand, especially over the highly emotionally charged festive season. Retailers need to take steps to avoid stock-outs wherever possible, and ensure their commerce systems allow them to quickly recover from misallocated inventory by helping customers to purchase products from alternate store locations or channels, such as eCommerce, when the store is out of stock.”

When exploring reasons for stock-outs over the Christmas period, 52 percent of retailers put this down to inaccurate demand planning; 42 percent said that they did not have the right products available in the right place (online or in-store) at the right time; while 34 percent said that they lacked a holistic view of the business. In preparation for this Christmas:

- Almost 20 percent of retailers have not ordered additional stock ahead of Christmas.
- 10 percent of these retailers claim financial constraints to be the cause of lack of stock.
- Over half of retailers have ordered additional stock across their entire product range.
- 30 percent of these retailers have ordered additional stock across items that were popular last Christmas.

Andy Lloyd continued: “While it’s great to see that a large proportion of retailers are prepared for Christmas this year, our research shows that many of the reasons behind out-of-stock products comes down to factors which are within retailers’ control, with inaccurate demand planning affecting more than half of retailers alone.”

“The figures from the CEBR demonstrate the cost of taking a gamble this Christmas when it comes to demand planning. To remain competitive, retailers must invest in their systems and processes to ensure that they have full business information transparency, greater customer insight and better demand planning capabilities. Being able to tightly align sales forecasts with inventory replenishment plans can eliminate stock-outs, improve customer satisfaction, whilst ultimately ensuring a retailer can remain competitive during such an important shopping period”.

Colin Edwards, economist at CEBR, added: “The Christmas period represents the most lucrative revenue opportunity of the year for retailers, comprising one fifth of annual revenues on average. This means at this time of year it is more important than ever for retailers to manage their stock levels effectively, allowing them to successfully compete with their peers and capitalise on the potential revenues offered by Christmas.”

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