Show more to sell more

by Admin
Updated: July 26, 2018

Optimal inventory for sales must take account of the strange psychology of show more to sell more

Optimal inventory levels in terms of supply chain dynamics can be modeled and calculated quite accurately. Unfortunately, that kind of analysis doesn’t take into account the psychology of sales as it relates to how much is visibly for sale.

Established ways of calculating retail inventory levels make assumptions about demand, e.g. if you’ll be replenishing the shelves at the end of each day, each shelf should be stocked with a day’s worth of inventory.

However, we all know that visible inventory levels affect demand and customers don’t respond well to half-empty shelves. This psychological factor is difficult to calculate but relatively easy to put into practice.

Theory tells us...

Everyone wants the last/only item because otherwise they’ll miss out completely. This is the Scarcity Principle.

Experience tells us...

Unless it’s something is truly precious and rare (either because of what it is or because of its exceptionally low price), no-one buys one of one.

When I first studied retail sales, we had a principle that in order to get customer to commit to buy you have to be committed to what you’re selling: Putting out fewer than 4 items to see if the product will sell is not a good test - it doesn’t work.

More catchy versions of this idea are along the lines of pile/stack ’em high, see/watch ’em fly (although I think this began as “Stack them high, sell them cheap” which means something different).

Alternatively: The sales of the many outweigh the sales of the few.

We can speculate as to reasons why this matters...

Sell more of more

When the visible inventory level is high, I feel encouraged to buy:

  • The retailer must have belief and confidence in the product.
  • The product must be popular - and everyone can’t be wrong.
  • The product must be popular - and if it turns out to be not so good I won’t be alone.
  • I have some control - I can choose the one that looks freshest.

Sell less of less

When the visible inventory level is low, e.g. if there are only one or two available, I feel uncomfortable about buying:

  • Maybe the product is new and not even the retailer trusts it.
  • Maybe the product isn’t popular (because it’s not good).
  • If the product did sell well, maybe everyone got the best ones and I’m left with the dregs (I’ll hold off until it’s restocked).
  • Maybe the supplier is going out of business.
  • Maybe the retailer is going out of business.

Independence of other factors

This principle works whether the product is new or established.

It also works whether or not there is a special offer.

More info

“What Is the Scarcity Principle?” at explorepsychology.com.

“Stack ’em High… and Watch ’em Fly” at linkedin.com.

I thought this principle was well-known but experience of various industries reveals not only that this isn’t the case, it’s often actively resisted: Putting a few on display to “see how they sell” usually fails.

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