Retailers, stop paying for ads that don’t convert

Rob Shaw at Fluent Commerce explains how inventory awareness can drive down advertising costs and drive up conversion rates

 

In the UK, spending on digital advertising grew by 11% in the past couple of years, reaching a total of £28.7 billion. With the retail sector reporting a record rise in investment. However, research tells us that over two-fifths (41%) of overall ad spend goes to waste.

 

In the current economic climate, where retailers are fighting hard for profitability, this equates to a huge sum of money - and a huge problem to solve. But how exactly does wasted ad spend occur?

 

The customer journey

First, it’s important to understand what happens when a customer sees a product advertised online. Typically one of three scenarios play out:

 

Scenario one: The customer sees the item advertised and when they click the link it shows as in stock. The order arrives, they are happy. A sale is made. 

 

This is the path we all expect. Ideally, there were no delivery delays and the retailer can keep their brand promise. Chances of a repeat purchase are high. 

 

Scenario two: The customer clicks on the advertisement, but the item shows as out of stock or unavailable. They’re confused when they see the ‘out of stock’ message, thinking ‘why was the product advertised if it’s not even available?’  

 

No order is placed. Confusion may turn to frustration. And the retailer paid for that frustration in advertising spend. Will they click on one of the retailer’s ads in the future? Perhaps not. 

 

Scenario three: When the customer clicks on an advertisement, the item shows as in stock. They place the order but a few hours later they receive an unexpected message: ‘Sorry, your order has been cancelled.’ 

 

Why? It turns out that the retailer sold them something they didn’t have available. This causes more customer frustration and disappointment. Having had a bad experience, the customer may leave a negative review, and the retailer will have to spend even more money on customer reacquisition.

 

To prevent scenarios two and three, retailers need to make their ads inventory aware. 

 

This will ensure that ads no longer show for items that are out of stock, freeing up retailers’ budget and allowing them to promote in-stock items that can convert to sales. It also means retailers can reduce spending on items that are selling fast.

 

If they know how quickly stock is moving, brands can also increase budget on slower moving items to increase inventory turns. With an accurate view of inventory, retailers can also understand how much stock is left and fine-tune their ad spend to ensure stock moves fast enough to hit their target sell through date.

 

Becoming inventory aware

Unfortunately, retailers can’t rely on their ERP system or commerce platform to give them all this information. They need something that can keep inventory data in sync across all warehouses, stores, and systems, in real-time. Something that can be queried by thousands or millions of people at once without getting bogged down. 

 

With Distributed Order Management (DOM), retailers can figure out what inventory they have available so they can show customers an accurate view of what’s in stock across all channels and store locations. By consuming inventory feeds from other systems, retailers serve up information as quickly as digital shoppers can browse. And it can feed retailers’ marketing and advertising tools with inventory data to ensure they never try to sell something you don’t have again. 

 

Further precautions retailers can take to ensure their inventory is accurate include: 

1. Regular stock checks: Retailers should ensure that stock figures are correct and sales channel(s) are accurate. Having one view of inventory across stock in stores, distribution centres and warehouses, is fundamental for having an accurate understanding of how much stock retailers have at any given time. More importantly, it ensures that retailers know exactly where that stock is located. 
2. Updated sales channels: For multichannel retailers that list stock in full on each channel, being on the ball where stock is concerned is even more important. When stock drops on one channel, all other channels need to be quickly updated. For example, changing the figures on the retailer’s website, as well as Amazon and eBay, will help ensure they don’t oversell. 
3. Improved planning: It’s challenging for all retailers to successfully forecast demand, especially in today’s tumultuous market. Knowing where items are ordered from helps retailers to replenish orders quickly and in the right place, ensuring less ‘out of stock’ occurrences.  

Retailers should stop wasting advertising budgets on promoting products to customers online that they don’t have. By making their digital advertising ‘inventory aware’, retailers will not only improve customer experience and sell more through repeat purchases, but they’ll also drive down advertising costs. Now that’s a win-win for everyone. 

 

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Rob Shaw is GM EMEA at Fluent Commerce

 

Main image courtesy of iStockPhoto.com and oatawa