The Supply Side: Demand outpacing supply still a problem for retailers, suppliers

Retailers have struggled to keep store shelves stocked during the pandemic. In November, Fayetteville-based Field Agent looked at 203 U.S. big-box retail stores to gain insights into the depth of the supply chain problem.

Field Agent examined products in 13 categories, including canned vegetables, bottled juices, crackers, toilet paper, pet food, laundry detergent, action figures and dolls. The research found that 57% of the 1,316 aisles examined contained less stock than usual at Walmart, Kroger, Target and Best Buy. And 16% of the aisles had much less inventory than expected.

Given the holiday season, Field Agent was not surprised that 86% of the stores had limited video game consoles, but staples like toilet paper were also top of the shortage list, with 84% of stores having low stocks.

Action figures, another popular holiday item, were in short supply in 65% of stores, but everyday grocery items like crackers and bottled juices were also in short supply at 63% and 60%, respectively. Pet food was harder to find in 54% of the stores, as was canned vegetables in nearly half the stores (47%). According to the Field Agent report, more than a third of the stores (36%) were also short on laundry detergent. Smart locks were hard to find, with 59% of stores having low inventory, and the same was true for smart security systems, with 52% of stores having low stock.

The three categories with the least inventory were video game consoles, with half the stores having far less product than usual. Smart locks were also hard to find, with 41% of the stores having significantly reduced stocks and still, a third of the stores ran low on toilet paper during the survey in early November.

Rick West, co-founder and CEO of Field Agent, said that consumers are now more likely to switch brands with out-of-stocks being so prevalent. A shopper in Sheboygan, Wis., was quoted in the report as saying, “Stock levels, in general, are extremely low. It’s often difficult to find some of the brands that I like, so I find that I’m buying different brands from normal.”

West said these should be dreaded words to any brand that invests heavily to win loyal customers. He said shoppers are changing brands when they can’t find their favorite. He said Field Agent also surveyed more than 1,200 U.S. shoppers to assess their sentiment on in-stock levels of groceries and consumables. The results indicate that 59% of in-store shoppers report lower than average inventory, and 17% reported much lower inventory levels. Nearly half (48%) of the online shoppers reported fewer products available than usual, and 10% said inventory was much less than normal.

West said inventory shortages are changing shopping behaviors for grocery and consumables. Field Agent found that 45% of survey respondents shopping inside stores were stocking up, and 42% were changing retailers to get what they needed. A third were trying competing brands when they could not find their favorite. West said the supply chain disruption could have lasting implications for brands and retailers as consumer loyalty is harder to find.

“We also found 29% were shopping more online and 25% were buying more private-label products and 21% said they were buying less because of out-of-stocks and 19% are using substitutes when cooking. It was interesting to see that 37% of the online shopper behaviors included shopping more in stores and 36% said they are shopping more and at different retailers,” West said.

One-third of the online shoppers said they were stocking up on consumables and groceries, and 31% said they were also trying competing brands. More than a quarter (26%) were buying more private-label products online, and 26% said they were buying less grocery and consumables online.

Field Agent said the research points to three kinds of consumers who have emerged from the supply chain problem: The shrugger, the observer and the hoarder. West said brands and retailers should look at the three distinct shopping behaviors when planning inventory.

Field Agent found that 40% of shoppers didn’t notice lower stock levels. Three in 10 consumers are observers, and while they see lower stocks, they have not yet begun stocking up. The other 30% are hoarders. They are witnessing low stock levels and over-buy when they see what they want. West said it’s been hard for brands to anticipate the level of irrational buying that has been far more common throughout the pandemic.

“These are chaotic times for sure, but there are still ways brands can grow amid the supply chain disruption, labor shortage, inflation, pent-up demand and the global pandemic,” West said.

West said brands need to take charge of the situation by communicating with customers, whether it be via social media, product pages, email or through a mobile app. He said brands must try and control the narrative and provide alternatives when inventory is low. He said the Amazon effect is real, and customers do expect it “now.” The stakes are high, with brand-switching becoming far more common.

West said Best Buy did a great job with messaging in a television commercial that showed how a customer signed up for text alerts when the product became available, then purchased it via the app and picked it up in-store, so he had it home in time for a Christmas gift. West said the messaging was subtle but showed how customers purchased one of the most sought-after gifts because they were proactive and signed up for the alerts. He said Best Buy didn’t say one word about short supply or hard-to-get. The company opted to control the narrative and highlight how loyal persistence pays off.

With the ongoing labor shortage in retail, West said brands should consider using their employees to manage the last 100 feet of the supply chain. He said that with limited store labor, brands could be helping retail partners ensure products are on the shelf with correct pricing. He said light merchandising is not nearly as expensive as losing customers because products were misplaced or priced wrong.

West also reminds brands that retailers also are sweating it. He said this is a time to build fruitful and mutually beneficial relationships between brands and retail partners.

“I believe lasting relationships can be forged during chaotic times; brands should look for ways to support their buyer merchants. Maybe that’s through sharing data and understanding that can help drive category insights and general sales to benefit buyer and seller,” West said.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.