Calculating the cost of out of stock’s

Vendors know an out of stock or empty peg is a very bad thing, so it’s hard to understand why most vendors are not managing their retail sales at a store and item level. Here is what we calculated for a vendor this week to estimate their lost sales due to out of stocks. The results were pretty eye opening.

This vendor has 4 retail customers. Retailer 1 has 3,600 stores, retailer 2 has 2,500 stores, retailer 3 has 1,800 stores and retailer 4 has 950 stores. Total retail stores = 8,850. Average in-stock % across all four retailers = 98% so approximately 177 stores are out of stock each week. Weekly unit sales for their top selling items average 6 per week so approximately 1,062 unit sales are being lost each week, which is roughly $15,000 in lost sales per week.

In other words this vendor is loosing over $750,000 per year in sales.

Suggested for you  Retail Metrics: What Are The Most Important KPIs You Should Be Tracking?