No retailer wants to email a customer saying their order has been canceled or delayed due to lack of inventory. It not only results in a dissatisfied customer, but it also could lead to a lost sale. Some studies have found that out of stock or backorders can cost companies 10% or more in lost sales.
To help minimize lost sales and keep shoppers happy, leading companies are implementing a product substitutions strategy. Product substitution empowers companies to navigate the challenges of stock availability while elevating the overall shopping experience.
In this article, we’ll dive into the benefits of product substitution and when it makes sense for your business.
What is Product substitution?
Retailers, manufacturers, and distributors often find themselves in situations where they need to replace a certain product with an alternative. This is where the concept of product substitution comes into play, serving as a strategic tool that empowers businesses to seamlessly swap an unavailable product with a suitable alternative during the fulfillment process. Whether it’s due to stock shortages or evolving customer preferences, product substitution enables a smooth and efficient transaction, ensuring a positive customer experience.
The key is to select a substitute that closely matches the customer’s original choice in terms of functionality, quality, and price, allowing the customer to receive a satisfactory product despite the initial unavailability. Effective product substitution requires a keen understanding of customer preferences, inventory management, and the ability to maintain a high standard of customer experience, even in the face of unforeseen challenges.
Product Substitution Example: Premium Kitchenware and Cutlery
Let’s say that a premium kitchenware and cutlery company uses the product substitution tool within Kibo’s Order Management solution. The company operates with two product quality grades: A and B. While Grade B products are offered online at a reduced price, the company faces the possibility of overwhelming demand that surpasses Grade B availability.
To ensure there’s no harm to customer satisfaction, the company uses product substitution to upgrade customers to Grade A quality, even when they’ve initially opted for Grade B. This strategic move involves distinct SKUs for both grades, guaranteeing that customers receive an upgraded product without any compromise.
6 Key Benefits of Product substitution
Implementing a product substitution strategy in retail can yield a range of significant benefits for both the business and its customers. Here are some of the key benefits:
- Revenue Protection: Product substitution serves as a safeguard for your revenue stream, enabling you to fulfill orders at the initial sale price or a closely aligned alternative price point. This proactive measure ensures that your revenue remains secure, even in cases where the original product’s availability fluctuates.
- Improved Customer Experience: Substituting an item with a suitable alternative when a customer’s preferred product is unavailable allows you to prevent disappointment and frustration. This proactive approach demonstrates a commitment to meeting customer needs, resulting in improved satisfaction and the likelihood of repeat business.
- Optimized Fulfillment: Product substitution allows you to maintain efficient fulfillment processes, even when faced with unexpected product unavailability. This prevents order delays and ensures that customers receive their desired products in a timely manner.
- Effective Inventory Management: When dealing with items that exhibit striking similarities, a thoughtful application of product substitution allows you to operate with leaner inventory levels. For example, envision a white staple shirt sourced from various vendors, each assigned a distinct UPC despite their identical nature. This item can be readily substituted without the consumer’s knowledge.
- Flexibility in Supply Chain Challenges: Retailers often encounter supply chain disruptions, such as production delays or transportation issues. Product substitution provides a valuable tool to navigate such challenges and continue delivering a consistent shopping experience.
- Higher Sales Potential: Product substitutions can lead to increased sales since you won’t have to cancel or backorder customer orders. This also gives you an opportunity to cross-sell or upsell other items that the customer has yet to discover.
Overall, product substitution not only helps retailers manage the complexities of supply and demand but also cultivates lasting relationships with customers based on trust and responsiveness.
Product Substitution with Kibo Order Management
Kibo Order Management offers product substitution out-of-the-box within its Fulfiller UI. Kibo’s product substitution feature ensures that, even when an intended product is temporarily unavailable, you can swiftly substitute it with an equivalent or comparably priced item, preserving both revenue and customer satisfaction.
Customers that use Kibo Order Management can:
- Remedy undesirable stock scenarios and keep delivery timelines by substituting products comparable to the desired product.
- Protect order revenue and remove fulfiller guesswork with pre-defined substitutable items matching the original or comparable sale price.
- Maintain loyalty among repeat or BOPIS shoppers with substitution of daily use items that have similar specifications as desired brand.
If you’d like to learn more about Kibo Order Management and the product substitution feature, please reach out to our team of experts.