As we wrap up Q2, the home category has shown no signs of slowing down. That’s the good news.
The bit of bad news is that the furnishings industry—among many others—continues to experience major outages around product availability. When the world shut down in 2020, supply came to a halt while demand continued to rise, putting manufacturers instantly behind.
The New York Times recently covered the “confluence of forces” that have continued to rip through the supply chain across industries, from lean inventories to upended distribution to weather. For home furnishings in particular, issues like slowed factory operations, global shipping chaos and rising material and freight costs have snowballed.
Not only are out-of-stock (OOS) rates high among furniture manufacturers, many of the affected products are also best-selling SKUs, making the weighted OOS rate even higher. Retailers, ever protective of the end-customer experience, generally handle these manufacturer outages in a few different ways:
Process as backorders. This means the product is still shown online for consumers to order with a note that it will be shipped at a later date. While this is the best-case scenario for a manufacturer, it does have an effect on product rankings and still adds the risk of losing the sale if the customer sees a “related item” that is in stock. It also requires manufacturers to be able to provide a backorder date to the retailer—and during times of unpredictability like we are in now, that backorder date is likely semi-concrete at best.
Most retailers shy away from backorders, since promise dates can be unreliable. But given the number of outages, some are accepting backorders as part of a pilot program for certain manufacturers with strong operations that can provide dependable back-in-stock dates.
Notify when available. Some retailers will keep the product online but instead of ordering it, a customer can request to be notified when the item is back in stock. Because this typically doesn’t offer a date of expected restock, the customer usually moves on and the sale is lost.
Remove from the site. The worst-case scenario for a manufacturer with OOS products is a retailer removing the product from the site all together until there is a stock quantity available in the inventory feed. Obviously, this takes away all visibility of the product online and makes a sale impossible.
Many of the issues over the last 15 months have been completely unavoidable, and we know manufacturers are anxiously awaiting the situation to gradually right itself. But it’s critical to remain active in your ecommerce channel along the way.
To maximize sales and minimize disruption as best as possible and be ready to bounce back when stock is replenished, manufacturers must consider these five key steps:
1. Know your process for updating promise dates. Manufacturers must be clear on how ETAs are calculated and what is needed to change them.
Ideally, backorder dates are included in the inventory feed and updated automatically. Make sure it’s accurate and updated daily—and specific to the varying data needs of your retail partners. If you don’t have an inventory feed, this is a hard lesson in how important this is to manage your ecommerce business.
2. Communicate quickly and proactively. When unpredictable and unavoidable changes happen, make sure your retail partners are aware as soon as possible and have the most up-to-date status for every product. In turn, retailers can inform the customer, mitigate frustration and have a better chance of avoiding a canceled order.
3. Think about buffering your backorder dates. We know the idea of pushing a date out even further sounds impossible. But as we know from the last year, things continue to change quickly and dates continue to come and go. If you can project a further-out date with more confidence, this can help cut down and back-and-forth with the retailer and avoid the disappointment that comes with a promise date that is a moving target.
4.. Focus on key retailers. Volatile stock situations highlight the importance of selecting the right retailers to work with and the importance of quality over quantity. Choose the partners who bring the most value—those that are best aligned with your brand, offer the best site presentation and deliver on customer experience, traffic and technology. Consider eliminating those retailers that are not adding value (or damaging your brand) so that you can focus your limited inventory levels on those that have earned it and are your best partners for success.
5. Consider consignment. As the supply chain recovers and your own stock has been replenished, think about working with key ecommerce partners with fulfillment programs and tools that can forecast demand, such as Wayfair’s Castlegate program. This will mitigate the manufacturer’s purchasing risk, plus allow for better inventory accuracy and speedier delivery (two days in many cases) to the customer.
In the very near term, inventory outages are expected to persist worldwide. Being diligent about processes and communicative with critical partners will help make sure your business is ready to transition back to healthy stock levels when the time comes.