BKNG Booking Holdings Inc

By Christopher S. Tang 

Anyone who has bought a book on Amazon.com or made other online purchases is familiar with the message: "Only 2 left in stock -- order soon."

These days, because of the coronavirus crisis, customers are finding all sorts of products with little or nothing left in stock. This doesn't reflect a marketing strategy from the sellers of these products.

In more normal times, however, such "quantity scarcity" messages can serve a valuable purpose for online merchants. Because online shopping makes it easy to compare prices, many potential buyers will put off making a purchase decision while they check out prices elsewhere or wait for a discount to be offered. Scarcity messages give shoppers an extra nudge to buy without delay by making them fear they might miss out if they don't.

But do such messages really work?

My research -- with Sungho Park, Elliot Rabinovich, and Rui Yin of Arizona State University -- found that scarcity messages work best with time-sensitive and perishable products such as hotel rooms or plane tickets, as well as unique items like collectibles or limited editions.

They are less effective with durable goods such as home-improvement products or kitchenware, in part because they can give shoppers the impression that the product is being pushed because it is undesirable, lower quality, obsolete or discontinued. And in the case of items typically bought in larger quantities, such as partyware, lightbulbs and batteries, we found that scarcity messages can actually hurt sales by making shoppers believe they won't be able to buy as much of a product as they want.

That said, any retailer can enjoy the advantages of scarcity messages while avoiding the negatives -- if they do it right. Here are some of the steps they should consider.

Spotlight quality

The key, with durable goods in particular, is to use additional measures to amplify the shoppers' psychological trigger to buy immediately. For instance, retailers can counter the impression that a product is undesirable or low quality by sharing customer ratings and reviews, posting the number of shoppers looking at the item at a given moment and the number of units sold in the past day. To ease concerns that the item is being discontinued (perhaps because it was unpopular), the merchant can state whether the item is being replenished.

When posting scarcity messages, travel site Booking.com, for instance, shows the information about the number of people who viewed the room during the past hour, as well the number of rooms booked at that hotel during the day. Amazon might tell shoppers when extra copies of a book will be available in addition to the "2 items left" message. (Amazon declined to comment.)

Instill a sense of urgency

Because durable goods are neither time-sensitive nor perishable, sellers should induce "time urgency" by launching sales events that last just a short period in addition to posting the scarcity message. A seller could display a countdown clock showing the hours and minutes until the sale ends as a way to nudge shoppers to buy right away.

Amazon, during flash-sale events, will let shoppers know what percentage of the items have been claimed and include a countdown showing when the event will end -- say, "in 1 hour and 5 minutes." In some cases, Amazon will also offer faster shipment free if shoppers can commit to making a purchase within a few minutes. By intensifying time urgency, these mechanisms can increase sales rates, recent research shows.

Offer a bundle

With clearance items, it can be hard to get rid of the last few items in stock using scarcity messages alone because shoppers may think these clearance items are undesirable or low quality. Sellers could try packaging the clearance item with complementary products that move faster, and selling the bundle at a lower price than the two items together.

In January, for example, Amazon bundled its remaining inventory of seasonal Christmas Poinsettia Party plates with Hefty plastic cups, a year-round seller. Similarly, booksellers could post a scarcity message about the number of copies left of a book written by an author years ago and bundle that book with a popular book written by the same author.

One final, if obvious, point: Don't lie. Sellers can't afford the loss of trust if consumers find that the notices of scarcity aren't true. Even when they are true, the credibility of the scarcity messages can suffer -- and shoppers can get tired of seeing them -- if they are used too often.

Dr. Tang is a UCLA distinguished professor and Edward W. Carter chair in business administration at the UCLA Anderson School of Management. He can be reached at reports@wsj.com.

(END) Dow Jones Newswires

March 27, 2020 16:22 ET (20:22 GMT)

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