Reducing the Out-of-Stock Costs in a Developing Retailing Sector

Abstract

Because of the unavailability of sufficient distribution systems and technology in many developing nations, retailers must often solve the out-of-stock (OOS) problem alone within their stores, rather than relying on their suppliers. However, many OOS studies have shown that OOS costs are determined by consumer responses, which are mainly stimulated by brand and store loyalty, to the OOS item. In this study's context, the influences of in-store merchandising and store attractiveness factors on consumers' brand and store loyalties in OOS situations were explored in Turkey's developing retailing sector. The Ordered Logit Model was determined to be the most appropriate for testing influences on 544 consumers' responses to OOS item in three different size stores. The results showed that in-store pricing generally influences store loyal consumers' brand-switching decisions in three stores for a specific soft drink in addition to the influence of in-store advertisement in larger size stores. Also, consumers' store-searching decisions may be influenced by the assortment richness of alternative stores in the OOS situation. Therefore, in order to avoid OOS costs, retailers should work to improve store loyalty by helping with in-store merchandising support while manufacturers should take brand loyalty into consideration in their distribution decisions.

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