Out-Of-Stocks Are More Costly Than Losing A Sale — But There’s A Fix

“It should come as no surprise to anyone that out-of-stocks (OOS) are a critical problem for every retailer. But what continues to surprise is the lack of progress some retailers have made in controlling a problem that, while it may never be completely eliminated, can be successfully mitigated.

Stock-outs are the result of many factors from arbitraging labor costs and customer satisfaction to poor communication between vendors and retailers. But regardless of their cause, the fact remains that in-stock performance is both top of mind for most retailers and agnostic to trade channel or class.

For brick-and-mortar retailers, in-stock performance — most commonly calculated as share of assortment that has at-least one unit in store — is a critical litmus test for supply chains dependent on year-round assortments.

It’s logical to link assortment out-of-stocks to potential lost sales and subsequently margin loss. But the problem carries longer costs, too. Customer dissatisfaction, shopper defection and lost retail brand reputation are but a few.

Frequently, retailers overcorrect by holding higher inventory or spending hard fought gross margin dollars on expediting movement of goods. But preventing out-of-stocks today is possible, once the causes and effects are properly identified.”