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Understanding the Real Impact of Stockouts in Your Business

Understanding the Real Impact of Stockouts in Your Business

CEO & Co-Founder at Flieber

If you’re here, you know stockouts can harm your business in more ways than one.

Whether it’s maintaining your marketplace rankings, protecting your market share, or scaling your revenue to $10M and beyond, keeping your business free from stockouts can help you get there faster.

But in order to avoid stockouts, you first need to understand how they impact your business. Let’s get started.

1. Lost sales

It takes money to make money. In the world of retail, this old adage rings painfully true.

If you’re looking to increase your e-commerce sales through proven strategies like launching a new channel, investing in influencer marketing, or entering a new market — capital is the name of the game.

But according to research, the cost of inventory distortion reached an astounding $1.9 trillion in 2022. That’s a lot of money left on the table.

If you’re like most retailers, you plan your future investments around your future sales. And you can’t afford to let stockouts drain your revenue.

Unfortunately, most inventory planning platforms use a limited formula for measuring stockouts. By mistaking past stockouts as seasonality, they keep you locked into a vicious cycle where you’re constantly forecasting too much or not enough inventory.

With a modern inventory planning platform like Flieber, these adjustments are made automatically, saving you hours in manual data wrangling.

2. Lost rankings

For marketplace sellers, lost rankings can be just as damaging as lost sales.

According to data, when products in positions 1-10 on Amazon go out of stock for even one day, their rank falls by over 28%. After three days, rankings drop by 83% and after more than 10 days, they fall by nearly 150%.

If a temporary stockout ends up going longer than planned, you could lose the ranking positions you worked so hard to obtain. And in some cases, they can be impossible to recover.

Earlier in my e-commerce career, my team and I were selling pet stairs to help dogs climb up onto a bed or sofa. It sold like crazy.

In fact, we sold the first batch of inventory so fast, we didn't have enough time to bring in replenishments. Of course, it didn’t help that pet stairs are a bulky product. To keep our margins intact, we needed to bring the units in by ocean instead of air.

So, we ran out of stock. Despite the fact that we had ordered more than enough replenishments, Amazon never returned the listing to the same levels. With our rankings gone, our sales fell and we quickly found ourselves overstocked, with few options for offloading the product.

3. Lost loyalty

Ads. Influencers. SEO. It takes a lot of effort to drive traffic to your store.

Every time a stockout hits, you lose your investment in customer acquisition. And unless you’re a brand that benefits from the anticipation of intentionally going out of stock, that’s time and money you’ll never get back. 

But scarcity marketing isn’t a play every brand can make. And in most cases, it’s your competitors who benefit when you go out of stock.

Put yourself in your customer’s shoes. If you’re shopping for your usual shampoo and find that it’s out of stock, are you going to stop washing your hair?

Unless you’re in a niche with incredibly loyal customers, like shoes or electronics, there’s a good chance shoppers are going to go elsewhere — especially in an environment where placing an order is as easy as saying, ‘Hey Alexa, buy that shampoo again.’

With every stockout, you’re giving the customer the opportunity to try a similar product from a competitor. And with data showing that current customers spend 67% more than new customers, this can have a detrimental effect on both your current and future sales.

Don’t let stockouts hold you back

Flieber is the modern inventory planning platform that helps you identify and avoid stockouts before they become a problem for your business.

With real-time alerts when it's time to order more products, increase prices, or reduce ad spend, you’ll have everything you need to keep your sales, rankings and customer acquisition on track.

Flieber’s inventory forecasting even accounts for ramp up and backordering periods due to past stockouts, helping you avoid falling back into the trap of ordering too much or not enough inventory. 

Try the inventory algorithm that’s been tested on over 3 million SKUs. Learn more with your free trial of Flieber.

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