How Fashion Retailers Reduce the Number of Lost Sales Due to Stockouts


A unique visitor comes to an online store just to find out that their size for the advertised clothing piece is sold out. They bounce off the store to search for the competitor that offers the preferred shopper's size. In other cases, the visitor decides to postpone the purchase or don't buy it at all.

According to the latest report by Brightpearl, the issue of stockouts has been a hassle for over 85% of retailers, skewing their advertising spend, budget, and sales data. The report also shares a deeper dive into eCommerce categories that currently experience the greatest difficulties due to stockouts. 92% of luxury goods sector's firms are experiencing difficulties getting stock. In DIY & gardening sector, 73% of companies experienced problems, sports and leisure (60%), electronics (53%), and 50% of fashion and footwear retailers facing issues impacted by stockouts.

So how can fashion retailers overcome a challenge that has been an arduous struggle since the pandemic, and how to leverage the current offerings that would help to at least partially cover the lost sales due to stockouts?


The Backstory of Retail Stockouts

Stockouts, in general, are often related to unexpected surges in consumer demand. However, poor demand forecasting or inaccurate reporting can also cause a product to display the ‘Out of Stock' label.

However, another major reason significantly impacts the global retail products shortage. According to Statista research, there has been a massive growth in online eCommerce sales around the globe — from $4280 billion in 2020 to $5424 billion in the first half of 2022. And most manufacturers simply cannot keep up with the rising order count, causing fashion retailers to face stockouts.

Other issues mentioned in the Brightpearl report were: increased shipping costs (64%), lengthier delivery times for products (54%), and increased prices of raw materials (40%) that are leading the industry to a crisis.

Reducing the Number of Lost Sales

Over the past six months, the share of lost sales due to stockouts has been growing, and fashion retailers are looking at the sales numbers that are drastically dropping without knowing how to best address this new challenge.

In the past, Prime AI registered missed sales due to stockouts of 3% to 10% compared to the total retailer's revenue. While now, the common trend of missed sales due to stock out amounts to around 20%, and for some retailers, even over 50%.

With the advanced technology of Prime AI, retailers like O'Neill can identify missed sales opportunities down to the SKU level and understand sizing demand for different products.

Retail manufacturers are facing difficulties in fulfilling retailers' orders. Retailers will end up with products being delayed during the high seasons or not delivered due to materials shortages or decreased headcount. All this will trigger chain reaction events that can negatively impact the retailer's cash flow.

The one way to reduce wasted advertising budget and the number of lost sales is to use AI-powered add-ons that greatly decrease visitors' bounce rate and help to mitigate the supply chain issues.

Solutions to Avoid Your Customers Looking into Competitors

37% of fashion retailer shoppers said they bought items from a new brand in the last year because an item was out-of-stock at their regular supplier. And when the industry is getting more crowded with new retailers every day, long-timers have to search for solutions to help customers stay loyal.

Product Assortment Optimization

Apparel and shoe retailers can optimize their sizing assortment and increase top line sales by utilizing integrations like Prime AI's Fit Finder. Because each retailer has a unique sizing demand that has to be tailored to the specific product category, sub-category, product ID, or even product color level, shoppers might need a helping hand to choose the product size that perfectly fits.

Fashion retailers use Prime AI statistics and sizing demand insights backed by accurate data to compensate for the loss of sales from reduced product range by offering customers more sizing options available for best-selling items. At the same time, minimizing returns costs and becoming more environmentally friendly, as the Fit Finder helps more shoppers order clothing or shoes in the size that fits on the first try.

Product Discoverability Optimization

Adding additional sizes to specific products might be a time-wasting and costly process for some fashion retailers. However, when retailers choose to leverage Prime AI's advanced image analysis technology, which processes whole product catalog images and matches data with the sizing recommendation technology data, it's rather a simple process.

Fit Finder by Prime AI understands the difference in every SKU, so when customers find that some clothing pieces are recommended in size M and others in XL, the information is taken into account when suggesting visually similar products or offering alternatives to ‘Out of Stock' products.

By integrating this advanced technology into their online retail store, businesses can see an increase in sellthrough of their products since product recommendations are not based on pre-chosen best sellers for a specific category but tailored to each shopper's size, visual similarity, and available stock options.

As a result, improvement in ROAS is instant. Fewer customers from paid advertising are bouncing when product sizing is fragmented, putting a brake on the depletion of cash flow influenced by paid marketing efforts. Remarketing via Back-In-Stock Alerts and Visually Similar Product Recommendations Visually similar product recommendations that consider what is currently in stock that would fit the customer's size together with Back-In-Stock alerts through email can help increase retailers' sales and minimize the abandoned cart rates.

Email notification can inform the shopper once their selected products are back in stock, bringing 5 to 10% of incremental sales to fashion retailers.

These alerts also help to retain loyal customers, as they opt-in for notifications through email about their selected products.

With the Back In Stock notifications, retailers can further grow their email and SMS lists, helping them advertise new products and special promotions through one of the most widely used marketing channels.

Leverage Your Current Stock with Advanced Technologies

Only 16% of retailers are planning to invest in technology to soften the damage caused by supply issues. The majority of retailers are going in the other direction — increasing products and delivery prices, slashing their assortment, and laying off the staff to cover the sales loss.

However, retailers can still leverage their current stock with the help of advanced technologies before jumping into the most drastic recovery options.

Are you operating on Shopify platform? Get started for free with ‘Find Clothes by Picture' feature!