UK retail marketers are risking customer frustration and reduced profitability by wasting ad budgets on low stock items, according to new research by product performance management (PPM) platform ROI Hunter.
A concerning 47% of retailer budgets are spent promoting low availability items such as clothing with one size, style or colour left in stock. Over two-thirds of businesses (67%) claim to have full visibility and control over ad spend on individual items, and to add to the high levels of confidence, 68% even believe that their available budget is being used effectively. But reality paints a different picture. Almost four-in-ten (39%) say that their budget has already been less effectively spent in the last year.
Karel Schindler, CEO at ROI Hunter, commented: “The cost-of-living crisis has driven consumers to be selective in how and where they spend their disposable income. Displaying ads for unavailable items will only misplace the budget and encourage loyal customers to shop elsewhere.”
Adding to the concern, though as many as eight-in-ten retail marketers recognise profitability as a top KPI, fewer than a third (32%) of are currently reporting on it.
Looking ahead, over three-quarters of marketers (77%) expect their marketing budget to increase over the next 12 months, and 66% think this injection of cash will help increase gross profit. However, retail marketers risk wasting more available cash by failing to shift the budget away from low availability items.
Profitability is also being threatened by other factors. Over half (56%) of retail marketers can’t see which products are likely to become deadstock, leading to further misspent budget on items that can’t be shifted from the warehouse.
Schindler said: “Businesses must take control of their marketing budgets to drive profitability. By setting up a filter to automatically pause promotion of products when they have less than a set percentage of variants in stock, retailers can instead focus their budgets on in-demand items with high availability. This is the type of optimisation that can be achieved through product performance management.”
