The Impact of Disclosing Inventory-Scarcity Messages on Purchase Frequencies and Daily Sales in Online Retailing

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 and during multiple inventory-replenishment cycles and indefinite time horizons. We then used these data to assess empirically the effect of posting these messages on these products’ purchase frequencies and daily sales. We find that publishing these messages fails to reduce the average frequency of purchase for the top 50% fastest selling SKUs in the sample. For the other SKUs, these messages can increase the frequency of purchase by 14.80%. We also observe that posting these messages can decrease daily sales by an average of 17.60% and that this effect is most pronounced for products purchased in larger quantities. This suggests that these messages’ inventory information has a negative influence on the sales prospects of durable goods over multiple replenishment cycles and indefinite time horizons.