Have you ever thought of refusing to accept any orders for your online business just because the items are out of stock? Yes, it happens, and it happened with eHobbies, an online merchandiser. The strange thing is Seth Greenberg, the CEO of the company, is happy with his turn-away program. The company dared to refuse prepaid orders of 70,000 SKUs, a big count, because of going out of stock. The consumers were asked to sign up for an email alert, in which they will be notified immediately after the item arrives in the inventory. It was possible to accept the orders, because all were prepaid, but why eHobbies refused to do that? Was there any profit-risk involved in future orders or the company had any bad experience in past? Let’s explore in detail about the expectations, strategy, and results of running a turn-away program.
Bad Experience Of Past: Foundation For New Expectations!
It’s understandable that the availability of the merchandise might not be consistent with eHobbies. The item in demand was a new launch and went out of stock. It’s also common that the main supplier stopped the supply suddenly without any reason. However, the previous experience with eHobbies was not good when the company accepted back orders and suppliers couldn’t deliver the product on time, as committed with the customers. It created a tough situation for the company when they received a large number of customer queries about shipment. According to Seth Greenburg, the customer contacts weren’t good in any way because we couldn’t manage to deliver the product on promised time. Although, we were merchants, not manufacturers, but still our repute was at stake, he shared the bad experience.
The main purpose of accepting back orders was to check the consumers’ interest in the item, an idea about the demand level and then order the supplier accordingly. He didn’t pay attention to the commitment level required at the consumer end about any pre-purchase.
There is another way to get the idea of demand for out of stock products and that is to let customers subscribe for the stock alert email. The customers won’t have to place order, they just need to input their email address on stock alert subscription box. To explain this further I would like to share example of an extension that works on e-stores based on Magento platform. This extension is called as Magento Out Of Stock Notification, it adds a subscription box in the out of stock products to let users subscribe for the stock-alert email. Once the product is back in stock an automatic email is sent to the subscribers list.
Strategy At Work
After the previous experience, this time, the marketing team of eHobbies decided to try an email alert system. In this system, if an item is no more available in inventory, the “add to cart” button was automatically replaced by out of stock button. Along with that button, there appeared an option of email alert notification when the stock is available. The email alert system was integrated into warehouse inventory management system. Immediately, after the required item entered the inventory system, all the consumers, subscribed for the email alert, were notified automatically.
Greenberg, after getting inspired from movie The Polar Express, decided to collect email addresses of the prospects. He thought it would be better to inform them about the item once it reached in the stock rather than getting back orders. Although, it was quite risky and could result in lowering the actual purchase level because consumers couldn’t get what they want at the desired time. However, eHobbies realized that the new strategy had brought greater customer satisfaction, which they sacrificed in past with back orders. All it means, greater the risk, the greater are the benefits.
The experience has made eHobbies bring changes in the system. For example, if the item is high in demand and is exclusive offer of the company, then the back orders could be collected through add to cart button.
The email alert system helped eHobbies in meeting with customer satisfaction challenge successfully. Although, there were 6000 willing customers for the product, but the supply was limited. However, the email notification with discount coupons enabled them to control the damage in a timely manner. The whole stock was sold out just within 2 minutes of sending the notification. After the stock clearance, the website was updated with information about the next shipment month, March. The experience of March sales was different. eHobbies sent email notifications to 2000 prospects, but the conversion rate of March was just 25%. Although, it was quite satisfactory as per expectations of Greenberg about email alert system. He says that we are still ahead of our competition just because of the quick service and commitment.
From the experience of eHobbies, the following lessons are learned:
Avoid over estimation!
If customers request for email alert, it doesn’t mean they are truly willing to buy the item in future. They might be looking for “who provides it first.” The merchandiser has to take care of the prospects while making it sure they don’t go anywhere else. In example of Greenberg, if the item in demand is not an exclusive offer of eHobbies, they expect the conversion rate upto 25%.
Stay connected with the suppliers!
Tell the suppliers or manufacturers that their product is high in demand and there are piling up orders for that. The communication should be effective to get the supply at the right time.
Back orders help preparing for exact demand!
Although, email alert system is beneficial for a business, but back orders still have their value. Accepting back orders means a merchandiser have a clear picture of the exact demand and can inform the manufacturers accordingly.
Is email alert system trustworthy for the desired revenue generation, or back orders are the right approach? What do you think about the experience of eHobbies? Share your own story!