Let’s talk about a very important term in the merchandising industry and modern retail in general. It is on-shelf availability or OSA for short. It stands for the availability of goods in different trading placements (shelf, refrigerator, checkout area, i.e. all display areas) in offline stores.
The rapid development of modern retail began in the first half of the twentieth century in the USA, when the barrier, which was a counter between the consumer and the product, disappeared. Before that, traditional trade was conducted exclusively "over the counter".
Modern retail started with the self-service store, where you walk into a store and have direct access to the goods without any salespeople there. There's a cashier at the exit where you have to pay, and that’s it. Within the history of commerce, this new format has changed everything, because it gave an opportunity to sell cheaper and, most importantly, sell more. The important thing about this format is that the product must be on the shelf. Otherwise, no one will buy it. There have been many different studies on what people do if a product is not on the shelf. A person most likely buys a substitute or leaves for another store. One way or another, he meets his need. So what metric should be used to represent a product’s availability for customers in a store? That’s where OSA comes in.
What does OSA mean?
The on-shelf availability (OSA) of an item is the percentage of time it has been on the shelf or the percentage of stores that have it on the shelf right now. A two-digit drop in OSA is said to mean a one-digit drop in sales. For example, an OSA of 80% stands for about a 5-7% drop in sales of a product. These numbers are based on statistical studies on how OSA affects sales.
A study was conducted on the top three things shoppers expect from their stores. It revealed the following: firstly, smaller lines at the cash register; secondly, more discounts; and finally, availability of goods. These are all things that shoppers would like to improve in their retailers. In fact, they’re all necessary for customers, retailers, and brands. Manufacturers (or brands) are even more interested in OSA than retailers. We see this very clearly at Eyrene. Retailers care about getting some products from a needed category on the shelf. And a brand, of course, cares about having its products represented. Let’s look at soda as an example. Brands want it to be represented in different volumes for different purposes - to drink right away or to take along on trips. Whereas a retailer simply cares about category availability, a brand cares about the availability of specific items. So for a brand, OSA is a more sensitive criterion to watch.
What OSA score is considered normal?
There is no one correct answer. It really depends. First of all, stores can’t fit all existing goods delivered by brands. Secondly, brands are usually smart and understand that some products are very important and bring in the main money. These products must be everywhere, whether in a small store or in a giant supermarket. The OSA must always be 100% for them. If it’s not 100%, then something is wrong and needs to be checked and fixed. The reasons why a particular important product is not on the shelf can vary: not ordered; not shipped; shipped, but it didn’t arrive on time; arrived, but still in the stockroom.
At the same time, there are goods that are only presented in hypermarkets, with the full assortment. In this case, 80-90% OSA is okay for them. But again, this all changes over time. When a new product comes out, it's closely watched. The novelty has to make its way into stores. On the one hand, it's less presented because it hasn't reached everywhere yet. On the other hand, it is very important to increase its presence and people’s awareness of it.
OSA and inventory - don’t mix them up!
The term “inventory” has been around for a long time. The vendor regularly counts what it has in stock. At first glance, it may seem like OSA and inventory are the same.
Let’s have a closer look. The product may be in stock, but it may not be on the shelf. Or the product is on the shelf, but it's out of stock. Or the product is both in stock and on the shelf, but people don't want to buy it. Inventory and OSA are different but are definitely connected in many ways. For example, if a product isn't in stock, it probably isn't on the shelf either. The reverse is not true.
How to quantify OSA more accurately, in numbers?
Retailers and brands need numbers to aggregate information by region, as well as make plans and forecasts on sales. Let’s highlight some important facts to consider.
OSA can be differentiated by sales placement
Usually, a certain category of goods has primary placement in the store. It's also called a home shelf. It's a place in the store where a particular product is always on sale. And it has to be there all the time.
Availability of items on the home shelf is an important criterion. As a rule, Eyrene customers track it separately. But there are many other places in the store besides the home shelf. Sales placements may be different, but usually, OSA is tracked on the main one. Merchandising science says that the product must be on the home shelf, and it can also be at additional placements. All of these non-main locations are called secondary placement. So, again, the home shelf is primary placement and everything else is secondary placement.
As a rule, our customers calculate OSA in two ways: at the main display area and in the store in general, so there’s OSA on the shelf and OSA in the store. One is always equal to or larger than the other.
OSA for item substitutions?
When calculating OSA, some brands allow substitutions, others don’t. For example, say a particular beer isn’t available in a can, but the same beer is available in a bottle. Brands may consider this situation as acceptable and consider that the product is available at the sales placement.
Others don’t accept this vision. i.e., a can can’t be substituted by a bottle. At Eyrene, we can customize requirements like this for clients and set up business rules as needed.
OSA based on product lists
Some brands may rank the products by importance and create appropriate lists. The most common practice that we’ve seen is to have three lists. The first list is a core list, or must-have, which is something that must be in the store, not run out, and be presented on the shelf. The second list is nice to have, i.e. the goods that are useful to have; merchandisers may get bonuses if these goods are placed on shelves. And finally, the third one is a list of new products. This list is tracked separately and is regularly updated because novelties exist for a while, then lose this status.
As we’ve seen while working with different brands, they track the items on the home shelf and in the store in general, and with the help of product lists. We’ll continue about OSA in the next part, specifically ways to monitor and increase it.