The Devastating Effects of Going Out of Stock
By Kevin Brown, Client Services Coordinator at Lunge Marketing. 1/6/2021.
The global impact of COVID-19 has pressured retailers and suppliers alike to pivot their current retail approach and maintaining inventory online has become a necessity for succeeding. While many companies are unaware of the intricacies involved, low inventory can damage their brand reputation, sales goals, and search placements. The ramifications of going Out Of Stock (OOS) can be seen for days to weeks after being OOS for only one day.
Sales are the typical goal of any company, and since eCommerce is newer to many of them, it can be a rough start riddled with mistakes. These mistakes can be avoided when working with an experienced eCommerce company. A goal of carrying 60%-90% of products in-stock is key to retaining your sales position on many online channels. With this in-stock rate, your sales loss is 2%-7%, whereas dropping down to less than a 30% in-stock rate could result in a sales loss around 22%-42%. To avoid these issues, create KPIs and communicate your in-stock goals with your eCommerce managed services company and be explicit with your Amazon Vendor Manager about purchasing that can aggravate OOS concerns.
Amazon is the one of the largest and most popular platforms to drive sales, although there is a common delay in recovering sales after having low inventory on this channel. After one day of being OOS, it can take 3-4 days to recover to your initial sales metrics. Being OOS for 6-14 days can mean your recovery days will bump up to 6-7 days. During this time, third-party sellers (3P) and your competitors are winning your sales and developing their brand awareness from your lapse of inventory. Having an experienced team and accurate inventory forecasting can help prevent lost sales and maintain your brand’s position.
Brand visibility is the most powerful tool you have in eCommerce. If your brand is not seen, you are not in a customer’s consideration for purchase. The last aspect of your online sales that can be affected by being OOS is your search ranking. The longer you continue to be OOS, the longer it can take to get back on top. It is common that sustaining low inventory for one day on Amazon can result in 3-4 days to regain your search ranking, while 2+ days OOS can affect your rank for 6-7 days.
For these reasons, it is recommended that brands follow these general guidelines to succeed and grow their business online:
- Your eCommerce team should create KPIs to monitor and provide accurate inventory forecasting
- Be open with your Amazon Vendor Manager about fulfillment rates which you can sustain
- Designate an individual in your eCommerce team to supervise metrics daily, because your product is not considered when it is suppressed
- Manage inventory with priority on your top listings, sustaining at least a 60%-90% in-stock rate
If you are new to eCommerce or experiencing ongoing issues, reach out to Lunge Marketing. We are your eCommerce team, just located in a different office. We work directly with you to develop lasting strategies to grow your brand awareness, conversion rate, and sales online.