Out-of-Stock is not the key barrier to purchase
Rajeev-sharma-1
Rajeev Sharma
February 1, 2022

Other factors cause walkaways, providing opportunities to improve conversions

The past two years has brought Out-of-Stock (OOS) issues to the forefront in the retail industry with the combination of supply chain disruptions and big swings in consumer demands during the pandemic. Obviously having an empty shelf is a serious issue and is justifiably getting a lot of attention. However, OOS is still not the main reason for poor in-store conversion for an overwhelming majority of categories in grocery stores!

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In fact, our Grocery Shopper Insights (GSI) Tracker has highlighted the striking fact that average “closure rate” for a center store category is only 54 %! That means, 46% of all shoppers who stopped to shop a category end up not buying anything from that category on that trip. In fact, for some categories the “walk away” rates is much worse, e.g. 73% for hard seltzers. This grim statistics is based on an analysis of data from billions of grocery store trips across a nationwide panel of stores from a spectrum of retailers so is representative of the grocery industry.

Closure rate is an important performance metric especially in today’s retailer environment when store trips are stretched thin across a multitude of omnichannel options. Losing sales after the shoppers engage with a category is a critical missed opportunity.

To reiterate, category closure rate is defined as the percentage of active shoppers who buy from that category. The complementary metric is in-store shopper leakage which is the percentage of people who leave without buying after stopping to engage with a category.

Identifying and reversing this “shopper leakage” is one of the lower hanging fruits in physical retail today.

The immediate financial incentives are obvious. Even a modest increase in closure rate of 2% to 4% can increase the category revenues by 4% to 8% providing a very significant revenue impact.

But the benefits of paying attention to closure rate goes beyond short term sales. It can help in improving shopper experience and reducing channel leakage. After all, how many times will shoppers visit a category and experience the frustration of not having their needs met, before taking their business elsewhere.

What causes shoppers to walk away after engaging in a category? How do you plug this leakage?

Analyzing the shopping behaviors of “non-buyers”, or those who browse then walk away without buying, provides the needed diagnostics. The detailed behaviors of these shoppers help in identifying the barriers to purchase. Lowering these barriers to improve the closure rates can really help both the category performance and overall shopper experience.

Walkaways can be caused by a number of reasons. Obviously OOS could be a potential reason especially for specific popular products in a category during promotions. But OOS is rarely the reason for poor closure rates for most categories.

The shopper leakage could be attributed to higher than expected prices. Pricing strategies need to incorporate the direct evidence of walkaways and the true cost of missed sales.

Many times it is simply a “shoppability” issue, where shoppers are not able to find the right product quickly enough. Shopper are impatient and if the planogram is mismatched to their decision process or the assortment does not appeal to them, they can simply leave. It may be matter of simply organizing the category better or tweaking the assortment to meet the changing demographics and trip missions.

Closure rate is particularly powerful because it only looks at relevant shoppers, those who have traveled to the category and are actively engaging with the products on the shelf. By measuring the rate at which those high-value shoppers ultimately convert into buyers, we can begin to understand how effectively the assortment and planogram are meeting the needs of shoppers.

In today’s hypercompetitive, omnichannel retail environment it is hard enough to attract and engage shoppers. Letting them go without meeting their needs and closing the sale is a huge miss!

So while continuing to solve OOS issues, let’s not neglect other factors that cause shoppers to walk away without buying.

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