How does stock availability affect conversion rate?
It’s absolutely paramount to understand the varying effects of different data fluctuations, as well as being able to communicate the importance of these effects on our clients. Part of staying on top of Google’s ever-changing Shopping landscape involves carrying out our own research.
With the help of a current client of ours, we recently conducted a small experiment to better understand online consumer behaviour in relation to the stock availability of individual SKUs. In particular, we were interested in finding out how the conversion rate is affected by the availability of products, especially when coveted variants of your items go out of stock.
How is conversion rate affected by stock availability?
First, we found that Shopping ads for products with 100% stock availability (in all sizes) generally received the highest conversion rate. As variants of that stock begin to sell out, the conversion rate begins to drop in correlation with the level of available stock.
Usually, the most popular variants (e.g. sizes medium and large for fashion retailers) sell out first. This means that your potential customers will arrive on the product page to find their desired size (or other variants) is out of stock, preventing them from purchasing the product. This can lead to a sharp drop in the conversion rate, even if only one or two variants are selling out.
Consequently, if more of your potential customers visit your product page only to find their chosen size/colour variant is no longer in stock, it’s very likely that not only will the conversion rate for the parent SKU drop, your ROAS will suffer repercussions as a consequence.
The graphic below demonstrates the results of our analysis:
From the graph, we can infer that when stock availability drops to 10%, the resulting conversion rate achieved is half of what it is when stock is at 60% availability.
How can I manage my bids to prevent wasted ad spend on out-of-stock items?
One way to stay on top of varying stock levels on Google Shopping is by using custom labels. Custom labels are used to help retailers better organise their Shopping campaigns using attributes important to your business. You can read more about custom labels here.
This will enable you to analyse the data from the custom labels, which can then be used to build a report in Google Adwords. This method should facilitate monitoring and assigning new, lower CPCs for SKUs with low availability, and vice versa when the item is restocked.
As always, adding in these custom labels for your entire inventory can be extremely time-intensive, and difficult to stay on top of. Bidnamic can monitor stock availability for every SKU in your feed to analyse and action a new CPC without overbidding or jeopardising your ROAS target. Thus, with our AI-driven automation, there’s no need to add custom labels or input manual updates in the Google Merchant Centre or Adwords.
Bidnamic takes the legwork out of Google Shopping bid management: see how we compare to Smart Shopping and PPC agencies. To take back your valuable time spent poring over Google Shopping, book a call with one of our Google Shopping specialists.