High-Tech Ways to Keep Cupboards Full

What good is keeping your brand stocked on retailers’ shelves if the shelves that really count—the ones in customers’ refrigerators, pantries, and medicine cabinets—are bare? The supply chain only ends at the retailer if your product is consumed at the point where it is purchased. Once most products leave the store, though, they enter a disjointed supply chain, managed (or, far more often, mismanaged) by the consumer, whose out-of-stock levels at home are frighteningly high. Our research shows that on average at any given time, consumers have completely run out of nearly 10% of the products they normally purchase. The situation is far worse at the end of the replenishment cycle (just before the weekly grocery run, for instance). We estimate that fast-moving consumer-goods manufacturers in the UK alone are losing $9 billion a year, owing to the poor job consumers are doing in keeping their cupboards filled. The problem is particularly acute for marketers who rely, at least partly, on impulse consumption rather than routine or planned consumption. We found household stock control to be relatively good for basics such as milk and toothpaste—less than 2% of consumers run out of these unexpectedly. By contrast, 20% of households that normally stock beer are out of it, 18% are unintentionally out of carbonated drinks, and 14% have run out of snack foods they normally buy. What’s more, scarcity theory suggests that consumption is curbed when supply is low, so the impulse to drink the last Coke or beer is more likely to be suppressed. Even worse, when they run out, consumers seek alternatives, breaking the loyalty patterns that retailers and manufacturers have so carefully and expensively nurtured. How do you keep those household fridges and pantries full? First, make in-home availability a primary strategic objective—one that influences marketing, pricing, product packaging, and distribution strategies. Second, work with partners who play a key role. Retailers influence many of the mechanisms needed to facilitate better stock control by consumers, and they share your interests. Germany’s largest retailer, Metro, for example, provides personal shopping assistants (PSAs) in its “Future Store” in Rheinberg. These resemble small laptops that clip to the trolley, greeting customers by name after their loyalty cards are swiped in. The PSAs permit self-scanning, offer personalized shopping lists, and draw attention to promotional displays that complement shoppers’ transaction profiles. Third, exploit the opportunities that Internet retailing already offers. Conventionally, shoppers decide how much to buy of each item at the store, far from the point of storage and consumption, using incomplete lists or none at all. The world’s largest Internet grocer, Tesco.com, offers customers shopping lists and promotions based on their most recent orders and their longer-term buying patterns. Fourth, look ahead: As RFID tags get cheaper, technology providers will soon offer options for capturing product data at home. Electrolux has taken a leading role in the development of intelligent household appliances. One of its concept refrigerators already includes a scanner that lets consumers keep track of products as they use them. Another contains remotely accessible webcams, allowing consumers to check in-home stocks from the store. The home of the future could well feature intelligent trash cans that may automatically reorder or prompt consumers to restock items carrying RFID tags; this technology is already used for recycling control. In the nearer term, simple bar code scanners, such as IntelliScanner’s Kitchen Companion, enable consumers to keep track of items they may want to repurchase. So, where is the end of the supply chain? Much closer to home than you might have thought. Extending the concept of the supply chain offers rewards not only for brand marketers, distributors, data providers, and technology companies, but also, of course, for customers.

High-Tech Ways to Keep Cupboards Full

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