The Impact of Disclosing Inventory-Scarcity Messages on Sales in Online Retailing

Forthcoming, Journal of Operations Management

34 Pages Posted: 6 Feb 2020

See all articles by Sungho Park

Sungho Park

Arizona State University (ASU) - W.P. Carey School of Business

Elliot Rabinovich

Arizona State University - W.P. Carey School of Business

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Rui Yin

Arizona State University, W. P. Carey School of Business

Date Written: December 16, 2019

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 these 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 SKU 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.

Keywords: operations management-marketing interface, inventory management, online retailing, econometrics

JEL Classification: M31

Suggested Citation

Park, Sungho and Rabinovich, Elliot and Tang, Christopher S. and Yin, Rui, The Impact of Disclosing Inventory-Scarcity Messages on Sales in Online Retailing (December 16, 2019). Forthcoming, Journal of Operations Management, Available at SSRN: https://ssrn.com/abstract=3527687

Sungho Park

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Marketing Department
PO Box 874106
Tempe, AZ 85287-4106
United States

Elliot Rabinovich

Arizona State University - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/x980.xml

Rui Yin (Contact Author)

Arizona State University, W. P. Carey School of Business ( email )

Tempe, AZ
United States
4809652998 (Phone)

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