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Introduction
Despite decades of research, retail “shelves are still empty” (Aastrup and Kotzab, 2010, p. 147), causing shoppers to experience stock-outs. Many retailers believe that improving on-shelf availability (OSA) offers a tremendous opportunity to improve sales and bolster revenue. For example, Walmart recently indicated that OSA improvement represents a $3 billion sales opportunity (Dudley, 2014). OSA is a major component of customer service and a key performance indicator in the retail industry (Gruen et al., 2002; Aastrup and Kotzab, 2009). OSA measures the probability that a product is available in saleable condition when a customer seeks it at the shelf (Chopra and Meindl, 2009). Out-of-stock (OOS) is the complement to OSA and refers to a situation where a demanded item is not available, “not found in saleable condition, or not shelved in the expected location” (ECR Europe, 2003). Since OOS are a reflection of poor OSA, the terms OOS and poor OSA are used interchangeably in this paper.
Both retailers and manufacturers suffer significant losses due to poor OSA (Aastrup and Kotzab, 2009). One estimate of the immediate cost of stock-outs (Gruen and Corsten, 2007) suggests that retailers and manufacturers lose the equivalent of 4 and 2.3 percent of annual sales, respectively, due to poor OSA. In addition to immediate lost sales, poor OSA has negative long-term effects on customer demand. Ad hoc studies show store loyalty to be positively correlated with OSA; stores with less frequent OOS are more likely to have shoppers stay in the store and purchase a substitute when faced with an OOS (Consulting, 1996). OSA is also a significant attribute of customer service. Both American and European grocery shoppers rank OSA third among the most important components of customer service, after shorter queues and more promotions (Consulting, 1996; ECR Europe, 2003). Clearly, OSA is a critical performance lever for both retailers and manufacturers (Gruen and Corsten, 2007).
OSA has been extensively investigated by academics and practitioners for more than four decades (e.g. Corsten and Gruen, 2003; Fernie and Grant, 2008; Zinn and Liu, 2001). Two streams of research can be identified in the extant literature. The first focusses on the supply side of OSA and addresses the drivers of OOS/OSA, and the second focusses on consumer responses to OOS....