Skip to main content
Got Stockouts? Know the Telltale Signs of Lost Sales from Stockouts

Got Stockouts? Know the Telltale Signs of Lost Sales from Stockouts

CEO & Co-Founder at Flieber

In business, there’s nothing like the pain of knowing you could be making more money than you already are.

Whether you’re losing sales due to a drop in marketplace rankings, not being first to market, or not having enough inventory in stock, the fact is — that’s money on the table that should be in your pocket.

While there may not be a lot you can do about controlling the competition or outsmarting Amazon’s algorithms, losing sales due to insufficient inventory is avoidable.

That is, if you know how to plan for it. Let’s dive deeper.

What really happens when there aren’t enough units in stock

What most merchants don’t know is that you’re actually losing sales long before you run out of stock. If you think about it, it makes sense.

Take Amazon for example.

Amazon has control of your inventory. As soon as it sees that you don’t have enough stock to meet your current sales pace, it’s going to start limiting your visibility.

That means you start losing sales and rankings, before you even officially run out of stock.

For DTC, the struggle is just as real. Every time a stockout hits, you lose your investment in customer acquisition. In other words, you spent time and money to get them to your site, only to give them an opportunity to look elsewhere.

And unfortunately, the majority of inventory planning systems in the market won’t do anything to help you prevent that. They simply get your inventory information, see if you had zero stock and on which day, and that’s that. 

But “zero or not” isn’t enough.

Even if you know you’re approaching a stockout and take action to reduce your advertising or increase your prices to control the pace of sales until replenishments arrive, the fact is you could have sold more by identifying the pattern sooner.

How to know if you’re losing sales before you stock-out

Here’s the truth: anyone can measure lost sales.

Just calculate the number of times you sold less than you should have because of not enough inventory, then compare it to what your actual sales were doing that period.

In Flieber, it’s two simple lines that tell you everything you need to know.

Like we said, that’s the easy part. The hard part is to identify the lost sales in the first place. And that part is far more complex.

Most retailers rely on the basic formula: if inventory equals zero then lost sales / if not, then not. 

But those formulas don’t account for the decline in sales on marketplaces as your on-hand inventory decreases, or the ramp back up again after replenishments have reached your fulfillment centers.

And it doesn’t even touch the complexity of having to recoup your ranking position or CAC.

If you’re only experiencing short-term drops in inventory, you may not feel the impact as much. But even if you’re active in a category with an unspoken grace period for stockouts, you can’t afford to gamble your sales.

Keep sales and inventory on the same page

The past is flawed. If you’re like most retailers, the problem with your sales data is that there’s no context.

You can’t remember if sales were up because you ran a promotion that day, or if they were down because your competitor ran a promotion. And you shouldn’t have to.

Instead, use an inventory planning system that does the grunt work for you.

Flieber’s algorithms are specifically designed to help you prevent lost sales due to not enough inventory, including steps for:

  • Lost sales identification: tested on over 3 million SKUs, this algorithm is specialized in identifying patterns that lead to lost sales before they become a problem
  • Price normalization: shows you what your sales should have been if you hadn’t reduced your price and driven sales up, or raised prices and driven sales down
  • Outliers: this can include listing suspensions, influencer campaigns, or any other factor that can cause a sudden drop or spike in sales

Other inventory planning platforms blindly follow the well-trodden “zero or not” approach, mistaking price fluctuations and past stockouts as seasonality and keeping you stuck in a vicious cycle where you’re constantly forecasting too much or too little inventory.

Identify changes before it’s too late

In a competitive retail landscape, even small issues can cause big problems for your sales.

Flieber analyzes patterns to keep your business a step ahead.

With algorithms in the backend constantly monitoring both your sales pace and inventory, it knows when you’re losing sales due to a potential stockout and notifies you immediately to take action and protect your business.

New call-to-action

Recent Posts