Customer Expectation of Out-of-Stocks in an Omni-Channel Context: A Call for Supply Chain Management Research

Abstract

The increased use of e-commerce has caused the distinctions between the physical and digital retail environments to continually diminish, giving rise to omni-channel strategies and retail experiences for consumers (Brynjolfsson et al. 2013; Rigby 2011). Shoppers are increasingly accessing retail websites from smartphones while in retail stores and buying product online when faced with the physical unavailability of desired products on-shelf. This current shift provides interesting new research opportunities for supply chain management (SCM) scholars, as such switching behavior has significant implications for demand forecasting, inventory visibility, and product distribution in the retail supply chain. Hence, a better understanding of how customers are impacted by retail out-of-stocks in an omni-channel setting is necessary, particularly since inventory availability is a key retail supply chain management performance measure.

A thorough review of the extant literature that addresses customer responses to out-of -stocks shows that only little advancement in knowledge has been made in exploring retail channel settings beyond the traditional brick-and-mortar format, such as online. More importantly, no research to-date has considered customer responses to stockouts in a multi- or even omni-channel context. Thus, the focus of this paper is to start dialogue on such responses and suggest a conceptual framework and research agenda for future exploratory consideration. Using expectation-disconfirmation theory (Oliver 1980) as a theoretical lens, we argue that together with the shift in the retail environment, customer behavior in response to supply chain failures, such as stockouts, will change. Our primary contention is that the omni-channel experience will directly influence customer expectations of inventory availability and access, causing interesting differences in the type and magnitude of behavioral responses. Our conceptual model illustrates that in an omni-channel retail environment customer expectations of product availability and potential negative responses to supply chain failures, such as stockouts, should be seen as integrated processes across different channels rather than individual instances related to only one channel.

We identified three key retail supply chain management research areas that are likely to be impacted by this change: demand forecasting, inventory management and replenishment, and out-of-stocks root causes. In terms of demand forecasting, we suggest that future research is needed to enhance the understanding of “true” primary channel demand vs. demand due to a stockout in the primary channel, as well as research on aggregate forecasting across all channels. Supply chain management scholars should also rethink inventory allocation and replenishment processes since customers have the opportunity to purchase the same SKU through different channels. Scholars might also reconsider the definition of a “stockout” in an omni-channel retail environment because of the ability to instantaneously switch channels. Furthermore, root causes of stockouts in an omni-channel environment may differ from root causes in a traditional retail setting and requires further research.