What Are the Disadvantages of Being Out of Stock?

by Cynthia Gomez; Updated September 26, 2017
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If you’re a small business owner or inventory manager at a large company, a large part of your job is ensuring that there is a steady flow of merchandise in and out of your store. Order too much of any one item, and the merchandise will pile up in your stock room, taking up valuable space. Meanwhile, money that could be used for other purposes is tied up in the unsold inventory. But if you fail to order enough to keep up with the demand, you’ll soon find yourself out of stock. And that comes with even worse consequences.

Customer Frustration

Put yourself in your customers’ shoes. They’ve made the trip to your store, anticipating the purchase of some item they’ve been looking forward to getting, only to find that you don’t have it in stock. Disappointment and frustration will inevitably ensue. You may have a similar item in stock to offer customers, and they may indeed settle for the similar item, but they will leave your store unhappy.

Loss of Competitive Edge

The last thing you want is for customers who have been loyal to your establishment to suddenly decide to go to the competition because the competition has the items they want, while you are out of stock. Customers may go to the competition for their needs, and decide that your competitor is a better bet overall, so you’ll lose these customers for good.

Reasons

There are a variety of reasons why you might find yourself out of stock. Perhaps the supplier simply doesn’t have as many of the item as are needed. Other times, however, business owners and inventory managers fail to effectively predict how much stock is needed based on past and emerging demand trends. A poor inventory control system may also be to blame. Finding the cause of the problem can ensure it doesn’t happen again.

Solutions

An immediate solution might be offering customers a rain check or IOU, so they are ensured the item as soon as a shipment arrives. To keep customers from going elsewhere for the item, you might also consider offering them a discount if they wait until you receive a new shipment. On the back end, you will need to create a system for ensuring you can better predict your inventory needs. Looking at past months’ sales of specific items and identifying times of the year when those items sell with more frequency will help you predict how much to order in the future. Additionally, an inventory control system will ensure that you always know how much of any given item you have in stock so that you know how much more is needed when ordering time arrives.

About the Author

Cynthia Gomez has been writing and editing professionally for more than a decade. She is currently an editor at a major publishing company, where she works on various trade journals. Gomez also spent many years working as a newspaper reporter. She holds a bachelor's degree in journalism from Northeastern University.

Photo Credits

  • Window display of retail clothing store image by Paul Hill from Fotolia.com