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“Sold-out” signs: A double-edged sword

Both online and offline retailers present buyers with sold-out product options. Buyers assume that the products’ quality is responsible for them being sold out and tend to buy similar products to get the same quality. However, too many sold-out products can give buyers a negative feeling due to reduced freedom of choice and can reduce sales. Retailers can avoid the negative impact and harness the positive effects of sold-out product information by managing the proportion of sold-out options presented to buyers.

Customers browsing for products often come across sold-out options. Such a situation can occur both online and offline. The retailer usually offers alternatives to sold-out products. For

example, if Amul Butter 100 gm packs are sold out, the retailer might still have stock of (and suggest buying) Amul Garlic & Herbs Buttery Spread 100 gm, Amul Butter 500 gm, or Britannia Butter. This tactic of leaving “sold-out” situations on view helps buyers compare products and can affect purchase decisions based on such comparisons. However, the overall effect of the proportion of sold-out options (PSO) on a choice set is complex. . A study tries to answer the critical question: How does the PSO affect buyers’ purchase decision of products offered as substitutes?

The study found that initially, sold-out products can drive up sales through the “perceived quality effect”. This effect emerges because buyers assume that the product is of high value

and is sold out because of its features and quality. They attribute the same value to products that share those features and quality, essentially the products in the choice set, and buy an alternative from that set. For example, if a customer is looking for an electric kettle of a particular brand, but the kettle is out of stock, and the customer finds that the sold-out kettle has an auto-switch-off feature, they might buy a kettle of a different brand with the same feature believing that the feature makes the kettle more in-demand.

However, as the PSO increases, another factor starts counteracting the perceived quality effect. This factor, called psychological reactance, is a negative feeling experienced by

buyers when they realise that they have little freedom of choice. Reactance reduces their willingness to buy products from the choice set. As PSO increases, reactance also rises. For instance, if a person wants to buy a brown ceramic coffee mug but finds that all brown mugs, all ceramic mugs, and all coffee mugs are sold out, they might feel too annoyed to make any purchases. The higher the PSO, the lesser freedom of choice buyers have, and the more aversive their feelings are towards the choice set. Moreover, the perceived quality effect pushes sales up slower than the rate at which psychological reactance pushes sales down.

Interestingly, reactance affects buyers more when they are purchasing for themselves. When buying for others, they do not consider the lack of choice to be as important, so high PSO

does not lead to as much psychological reactance as when buyers purchase for themselves. Also, there are some other factors besides PSO that can push up psychological reactance. These factors can be the language used in promotions, online recommendations for or against the products in the choice set, or loyalty program benefits for those products being dissatisfactory.

Therefore, retailers need to carefully consider various factors when deciding how much PSO is ideal and will increase buying behaviour. The first step in that direction is to provide accurate sold-out information. Retailers should not try to create a false sense of high sales by presenting inaccurate sold-out product data. This practice is neither ethical nor beneficial as, beyond a point, high PSO can cause psychological reactance.

Moreover, retailers should try to control the other factors affecting psychological reactance. Where controlling or limiting those factors is difficult, they can remove sold-out signages to reduce PSO and thereby reduce psychological reactance as well. Robust logistical practices can also help by ensuring that popular or highly valued products do not go out of stock too often.

Finally, buyers can also benefit from this study’s findings. Being aware of the impact of sold-

out information, they can ignore it to avoid being unduly influenced to buy certain products. At the same time, being mindful of the phenomenon to psychological reactance, they can make more rational decisions regarding high-quality products and good bargains.

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