Rite Aid’s inventory management problems may hamper the struggling retailer’s turnaround efforts, according to a new report by Rite Aid Disclosure Watch. The report, titled Not as Advertised: Out-of-Stock Sale Items and Rite Aid’s Bid for Customer Loyalty, documents a continued problem of out-of-stock promotional inventory in Rite Aid stores and raises questions about the company’s ability to successfully execute key elements of its Wellness+ loyalty program.
The study is based on 1,100 visits to 220 Rite Aid stores in 13 states and the District of Columbia between Fall 2011 and Spring 2012. In five visits to each Rite Aid location surveyed, researchers looked for a basket of selected sale items advertised in the store’s circular. Key findings of the report include:
- Missing sale inventory is a persistent problem. At least one of the selected sale items was missing in 78 percent of the 1,100 store visits. Forty percent of Rite Aid stores visited were missing sale inventory every time visited, and 70 percent of stores were missing inventory four out of five times visited.
- Regions and markets performed inconsistently. Among the regions surveyed, out-of-stock issues were most prominent in New England, where more than 70 percent of stores visited had missing sale inventory all five times surveyed. Among metropolitan areas, 86 percent of New York City stores surveyed were missing inventory in every visit. On average, 20 percent of the items surveyed were out-of-stock in New York City, a critical retail market.
- Some items were consistently out-of-stock across markets. The items in the survey are the types of products that consumers regularly purchase for their health and daily household needs, and Rite Aid did not deliver across markets for several items. For example, a Theraflu sale item was out 46 percent of the time in the week surveyed, which was during the flu season.
Rite Aid has suffered net losses for the past 18 quarters, and has repeatedly cited the Wellness+ loyalty program as a major initiative of its strategy to restore its financial health. One of the main incentives for Wellness+ membership is access to weekly sales advertised in the store’s circulars, which makes sale item availability important for the success of the program. Research has shown that product availability is a key component of building trust and loyalty with shoppers and regular outages diminish customer satisfaction.