The ripple effect of rain checks

Being out of stock on featured items is one of the things consumers consistently rank high on any list of aggravating retail business practices—and for good reason. It is very annoying from the customer’s perspective to see an item promoted and to make a trip to a store for the featured item only to find it is sold out.

However, out-of-stocks are an inevitability in a highly promotional selling environment, which means retailers have to find ways to minimize customer annoyance. For Target, that means posting small pads of rain checks next to out-of-stock products and also offering instant substitutions for featured items. Neither is ideal from the perspective of the customer or Target. Rain checks are typically more trouble than they are worth, because they tend to escalate customer aggravation, create operational challenges and give rise to further problems down the road.

Target’s policy requires customer to retain the rain check and bring it with them on a return visit to the store that must occur within 45 days of the issuance of the rain check. This places a burden on the customer, who is forced to compensate for the retailer’s inaccurate demand forecast or a supply chain deficiency that failed to replenish the store in a timely manner. Either way, the potential for escalation occurs if, upon the return visit, the item is again out of stock.

One solution is to offer instant substitution with a comparable item. However, in cases where the small pads of rain checks are posted next to the out-of-stock item, it is incumbent on the customer to locate an associate to determine if a substitute is available. To counter this problem, Target offers instant substitute coupons that enable customers to substitute a comparable item. For example, when a store was out of stock on a 50-count package of one-quarter Target brand resealable storage bags, it offered the Ziploc brand product at the same price. This is a win for customers, but not a good deal for Target, since it was forced to sell a product at a lower price than intended.