Growth In, Stock Out

A company’s sales can grow only if both sides of the equation are able to grow. One side is the demand side, and the other side is the supply side. In India, the demand and consumption side are growing rapidly, but the supply side is struggling to keep pace. This imbalance is leading to frequent stockouts, which in turn hampers a company’s sales growth.

This surge in consumption is not just about pent-up demand, revenge buying, or revenge travel. It is about the normal pace of consumption increasing. Several factors are driving this shift:

• Increase in purchasing power and higher per capita income among Indian consumers.
• Growing desire among families to own branded products and services.
• Transition from a perspirational to an aspirational consumer base.
• Demographic dividend: A large and young population fueling demand.
• An ambitious and expanding middle class.

Many companies are actively driving demand through various marketing strategies:

• Expanding product portfolios
• Innovative packaging
• Strong branding initiatives
• Aggressive advertising campaigns
• Strategic promotions
• Utilization of both online and offline marketing channels

This demand creation is beneficial for the economy. However, companies must also focus on supply-side management to ensure they can meet the rising demand effectively.

To prevent Stock OUTs, companies must strengthen their supply-side operations, including:

• Efficient distribution networks
• Optimized sales strategies
• Robust inventory management systems
• Balanced product portfolio mix
• Strategic range selling
• Quick replenishment mechanisms

Companies that only focus on boosting demand without fortifying supply chains risk losing out on revenue due to stock shortages. Ensuring a seamless supply-demand balance is key to sustained business growth in India’s expanding consumer market.

If a company creates demand but fails to manage supply, it is essentially helping competitors take away market share at its own cost. Therefore, businesses must ensure that while growth is in, stock is not out.

A case in point is Ferrero Rocher’s Diwali festival pack. The brand successfully launched a special Indian-adapted festive pack that generated immense excitement and was highly appreciated by consumers. However, despite a well-timed concept, strong branding, and attractive packaging, stockouts led to disappointed consumers and lost sales.

Moving forward, brands must ensure that both demand creation and supply chain efficiency go hand in hand. This will not only maximize sales but also enhance customer satisfaction and brand loyalty.

Many times, the supply side is affected due to issues like shortages of ingredients, components, and raw materials. For example, the automobile industry continues to face high demand, but stockouts leave consumers either empty-handed or waiting for months to drive their favorite car. While some of these factors are beyond a company’s control, the outcome remains the same—growth in, stock out.

Similarly, several commodities transitioning from loose to branded and packaged formats are experiencing stockouts. This could be due to:

• Inaccurate demand estimation
• Surprise at the rapid demand surge for packaged goods
• A pessimistic outlook towards the Indian consumer market

Regardless of the cause, the company ultimately loses out—on sales, on market share, and on consumer trust. To sustain growth, brands must be prepared to anticipate demand and ensure supply readiness.

Even in the case of food products, which are highly popular and regularly consumed, stockouts have become a common problem. Whether through multi-brand stores and distribution networks like Haldiram and Bikaji, or exclusive brand stores such as Theobroma and Trupti in Western India, consumers frequently encounter out-of-stock situations.

The real danger is when brands and retailers start taking pride in stockouts, rather than seeing them as a warning sign of lost market share and disappointed consumers. As highlighted in my book BRAND SWITCH™, one of the primary reasons consumers shift to other brands is stock unavailability.

Interestingly, this trend is not limited to any particular segment. Whether it be:

• Premium or popular brands
• Expensive or inexpensive brands
• Urban or rural brands

The issue of Growth IN, Stock OUT is prevalent across industries—garments, jewellery, FMCG, consumer durables, IT/computer peripherals, and OTC products. Brands that fail to address supply chain challenges risk losing their loyal customers to competitors who can ensure availability and reliability.

It is important to acknowledge that some companies take extra care to ensure they do not face stockouts. These companies invest in robust tracking systems, efficient distribution, and proactive inventory management. By prioritizing service in the market, they maintain consistent product availability and, as a result, increase their market share.

While it is commendable for brands to focus on being fashionable, trendy, and in demand, they must also ensure they are ‘IN’ stock. The companies that strike this balance will be the real winners in the long run.