Report: Queues, out-of-stock items cost retailers billions

Negative shopping experiences are costing retailers an estimated $71 billion in abandoned sales annually, according to a report from global payments company Adyen.

The report, which is based on findings from a global survey, including 404 consumers and 200 retailers in Australia, has put a dollar value on “friction points” in the shopping journey, such as out-of-stock items, long queues and lengthy checkouts online. 

These negative experiences not only frustrate customers and diminish loyalty, they leave significant revenue on the table, since many customers fail to follow through on their purchase when they encounter one.

Australia falling behind

“We were really surprised by the sheer size [of the cost] of negative shopping experiences,” Michel van Aalten, ANZ country manager of Adyen, told Inside Retail Weekly. 

According to the report, out-of-stock items cost retailers around $14.3 billion, long lines cost $12.9 billion and online checkout friction costs $8.7 billion in abandoned sales annually. 

Combined with other negative experiences, such as a lack of cross-channel buying options and payment cards being falsely declined due to suspicion of fraud, retailers are losing out on an estimated $71 billion in potential sales each year. 

The report also measured the potential revenue gain from positive experiences, and found retailers could boost sales by $21 billion annually if they engaged in cross-selling, made personalised offers and provided cross-channel buying options. 

By eradicating negative experiences and acting on positive ones, Australian retailers could lift annual sales by an estimated $92 billion, the report suggests. But few are currently equipped to tap into this opportunity, according to van Aalten. 

“What really stood out to me is that Australia has fallen behind its global counterparts,” he said. 

According to the report, only 22 per cent of Australian retailers have a formal digital transformation strategy in place, compared with 38 per cent of retailers in the US and 36 per cent of retailers in the UK. 

“There’s not too much crossover between in-store and online channels,” he said, “that’s why Aussies are abandoning purchases in droves.” 

Even though solutions exist to address friction points in the shopping journey, such as self-service kiosks and mobile points of sale, uptake of this technology has been relatively slow in Australia compared with the US and UK. 

Woolworths, 7-Eleven and Domino’s are currently trialling scan-and-go and cashless stores to reduce queues, but according to van Aalten, they are the clear “frontrunners”. 

“It needs to be quicker,” he said. “I don’t think it’s a secret that our society is changing rapidly towards digital. Shoppers demand immediacy.

“They aren’t shy to ditch a purchase altogether to have an experience, and to improve experiences, you need to leverage technology.” 

Not everyone believes that technology is the only answer to retailers’ problems, however. Peter James Ryan, a retail and marketing expert and the head of Red Communication, believes the widespread adoption of in-store technology is counterproductive to the core of the retail experience.

“Physical stores are losing the plot by adopting far too much technology in an environment that is really about a multisensory experience,” he told Inside Retail Weekly. 

He believes retailers can keep customers from walking out of stores due to long queues simply by entertaining or stimulating them while they wait, rather than investing in self-service checkouts.  

“Customers only dwell on queue time when they’re bored,” he said.

“The best example of this is Disney. The wait times [at the amusement park] are 20 minutes, but the queue is part of the experience.” 

But Ryan acknowledged there is one good reason for retailers to adopt self-service kiosks, and that is the rising cost of labour. 

“If you stand there and watch people scanning items, trying to pack their own baskets, there’s no way it’s more efficient than a really good checkout person… But it’s a good labour-saving element.”