It's become something of a cliche to refer to out-of-stocks as a 'perennial' problem - something inevitable, like death and the taxes you mailed in a few days ago. The retail industry has come to view current out-of-stock rates (8% on average, nearly double that for promotional items) as acceptable if not desirable, like the occasional messy store shelf or malfunctioning POS terminal.

Well, consider this your wake-up call. Out-of-stocks are bigger, badder and more costly than anyone thought. The average retailer is losing the equivalent of $3.19 for every customer that walks through the doors due to out-of-stocks. These are either lost sales of specific items or a substitute product in that category. Overall, the actual loss to competitors from out-of-stocks measures $93 billion annually.

We discovered these figures doing the research for the 5th Annual RIS News/IHL Group Store Systems Study where one of the most important take-aways was the huge disconnect between consumers' and retailers' take on out-of-stocks. The disconnect comprises not just what constitutes an out-of-stock situation, but how important they are in the psyche of customers and their perception of you as a retail destination. Consumers loathe out-of-stocks: in survey after survey, consumers say that not being able to purchase a product that a store is expected to have, or has been promoted in advertisements, is second only to standing in long lines on their list of shopping frustrations.

The other key finding is that retailers are defining out-of-stocks much more narrowly than consumers. While retailers measure out-of-stocks by looking at low counts in their inventory system or empty spots on a shelf, consumers include multiple factors that prevent them from purchasing a product, such as failing to get help locating a product or failing to get assistance retrieving an item from a locked compartment or high shelf. Quite frankly, the retailer definition is not the one that counts, but the consumer's perception is the reality when it comes to ringing the sales.

A retailer that invested in completely fixing its out-of-stock problem would gain a solid competitive edge. The average retailer could increase same store sales 3.7% by converting all perceived out-of-stocks into transactions. Specialty soft goods could have the biggest potential win: solving out-of-stocks would boost their same-store sales 7.1%, while department stores would see a 4.2% jump.

There are many reasons for out-of-stocks. Poor planning by buyers represent about $16.4 billion in lost sales. Problems in store execution account a for a near equal amount of $16.3 billion. Supplier delivery problems account for $12.9 billion, and Inadequate staffing causes $8.6 billion in losses each year. Finally, $6.9 million is lost simply because merchandising and marketing get the advertisement timing wrong.

Unfortunately, retailers seem to be in denial about the problem and how big it is at their own chain, holding tight to that acceptable 8% out-of-stock industry rate. However, in a tighter economy, converting every customer that walks in the door is a high priority. You simply cannot afford to lose them. While some consumers who don't find a product may simply give up the search, most will simply go to another store. That's why fixing out-of-stocks is an urgent competitive opportunity and may be the difference as to which competitors survive and those that thrive in a downturn.

Note: Should you be interested in the raw detail of this study for your own analysis, visit www.ihlservices.com for more information