Results Count ... everything else is conversation.: The conundrum of Long Tail vs. Retail

OOS - The critical metric in times of $4/gal gasoline

You've made your list and headed out the door to shop. You are even driving your small car instead of the SUV to save gas on your Saturday shopping journey. After searching all the big box and local retailers, you return hours later with groceries, but no Fancy Feast chicken for the cat, no photo cyan cartridge to print your vacation photos, nor any of the Chilean special reserve wine you specially planned for dinner!

The store clerk even had the gall to suggest a cheap Australian wine, and substituting fish instead of chicken for the cat! He obviously doesn't know how finicky cats are or how important the right wine is on a Saturday night after wasting hours on shopping!

So what happened to the "joys of retail" shopping?

Retail is the same today as it has been for the last couple of centuries ... stores stock the most popular items for immediate purchase. And, today's big box retailers are stocking more items than ever before.

Consider the following benchmarks:

1. A WalMart or Target supercenter may stock upwards of 150,000 grocery and household items
2. A modern grocery oriented supermarket maxs out at stocking half of that - 75,000 items
3. The largest Costco or Sam's probably stocks just 7,500 grocery items

The first retail conundrum is that the more item variations you stock, the more likely you will experience OOS-Out of Stocks, especially in the flavor the consumer wants to buy today at this moment. The corollary is that the more popular the item is, the more likely OOS are on the retail shelf.

Even as good as WalMart logistics are, Costco (or Sam's) is more likely to be in-stock at any given hour on the more narrowly focused items in their plan-o-gram.

The second retail conundrum is that a narrow assortment is "deep" in inventory, but it is less likely to have the more interesting wine or variation items you are searching for. With too little variety and choice, consumers are not as likely to come back to shop.

Today's retail Oxymoron - Proliferation of the "long tail"

Chris Anderson's book: The LongTail captures the essence of what is happening to critical segments of today's retailing, as well as consumer expectations. With the advent of the internet, search, and e-commerce ... today's consumers are "spoiled" by being able to find and purchase a huge variety of items not stocked in any retail store. Anderson's book does an excellent job of documenting how the "longtail" of choices beyond the "hit titles" are commanding and increasing % sales, and in fact increasing sales, especially in categories like books, music, videos, etc.

So if you, the consumer, are searching for a more obscure book or music title, are you more likely to go to Amazon with millions of titles than the super bookstore at the mall, which can maybe stock 150,000? With upwards of 90% internet penetration, today's consumers are becoming much more savvy and selective about when and where they shop for item categories.

What does this mean for today's retailers and vendors? Both must take a stronger stand on marketing their competitive strengths. It is not always a good thing to expand SKUs or shelf space if the result is unacceptable out of stocks rates. Al Ries' recent article illustrates how today's retailers must be more strategic and "tailor your tactics to your distribution channel". (The Long Tail vs. the Re-tail, Ad Age November 5, 2007)

OOS - How many Out-of-Stocks are you willing to tolerate as a consumer?

OOS may indeed be the metric for retailing in these times. Not only consumers more "time starved" than ever, gasoline prices are certainly a factor affecting both shopping activity and purchases.

While the internet will never replace the social aspects of shopping, consumers go to retail stores for availability - immediacy of purchase. When the item is not in stock, will the customer come back, just go to the competitor to search ... or just search on line and purchase there?

While I might make the cat sacrifice and eat fish instead of chicken ... I'm going online to buy the ink and check the wine supply before I sit down to print photos!!

To receive more information and sound bites from IMS follow IMS Results Count on Twitter, Facebook, and Google+.

Sources: