The impact of disclosing inventory-scarcity messages on sales in online retailing

Sungho Park, Elliot Rabinovich, Christopher S. Tang, Rui Yin

Research output: Contribution to journalArticlepeer-review

Abstract

To influence demand, some online retailers post messages (e.g., “5 units or less left in stock”) on their product pages to signal impending stockouts. These “scarcity” messages provide consumers “partial” inventory information, revealing only an upper bound on the number of units available for sale. To examine the impact of these messages, we obtained price and sales data from an online-retailer website across a sample of durable goods before and after the retailer posted the messages over multiple inventory-replenishment cycles. We then used these data to assess empirically the effect of these messages on these products' daily sales. We find that disclosing these messages can decrease daily sales by an average of 17.60%. This finding suggests that scarcity messages such as these can have a negative influence on the sales prospects of durable goods. We also observe, on the other hand, that price discounts are quite effective in increasing sales and offsetting the losses induced by scarcity messages. On average, a reduction of 1% in stock keeping unit price increases daily sales by approximately 3%. Therefore, relative to disclosing scarcity messages, price discounts are a much more effective tool at increasing inventory turns.

Original languageEnglish (US)
JournalJournal of Operations Management
DOIs
StateAccepted/In press - Jan 1 2020

Keywords

  • econometrics
  • inventory management
  • online retailing
  • operations management-marketing interface

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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