Influence of store characteristics on product availability in retail business

Abstract

© 2018, Technical University of Liberec. All rights reserved. Stock-out event in retail business represents a situation in which demanded item cannot be found by customer in the expected location or is not in a saleable condition. Frequent stock-outs remain one of the biggest issues in the retail business because they directly contribute to lost sales and reduced profits, and indirectly contribute to reduced loyalty and potential loss of customers. Although the stock-outs can occur anywhere in the entire supply chain, literature confirmed that the most of most of stock-outs occur at the store level. A number of researchers have tried to reveal the product and store related drivers and the factors that contribute to lower product availability. Identification of stock-outs was usually performed using the point-of-sale (POS) estimation method or manual audit method, so the results and conclusions were mostly based on a small number stores and products, and they were observed in a shorter period of time. In this research, probit regression was used to examine the relationship between various store-related drivers and product availability. The data sample included 115 SKUs and 98 stores and the data was provided by a large grocery retailer in Serbia. To identify stock-outs on a large data sample, a perpetual inventory (PI) aggregation method was selected. The store related variables that were determined to be the drivers of stockout performance include distance from distribution center, average store sale and stock-keeping-unit density as the most the most prominent driver. Especially high probability of stock-out can be expected when stock-keeping-unit density and average store sale are high at the same time. On the other hand, it was observed that the income level of the population living in the store area does not have a significant influence on stock-out performance at store level.