How stockouts can damage customer trust

By Oleg Mikhailenko
Published in Solutions
June 20, 2022
2 min read
How stockouts can damage customer trust

Merchants can lose precious sleep over the question of how to manage customer expectations. It seems like more than ever, the baseline of what it takes not to excel, but to simply maintain competitiveness in an ever-toughening industry is ramping up day by day. It’s no secret that we live in a post-Amazon world. Prime raised the bar by allowing customers to get used to free two-day shipping for hundreds of thousands of products. Now that it’s so easy to order something on Monday and have it on your doorstep midweek, buyers are expecting more. And given the sheer growth of the industry in the aftermath of the Covid-19 pandemic, they’re in a position to demand it.

However, this doesn’t mean that there’s cause for despair. Unlike what a lot of expensive consulting services will tell you, absolutely none of this is rocket science. Once you’ve figured out the question of free shipping and learned the basics of delivering excellent customer service, there’s actually one simple thing that can prevent your business from being left in the dust: maintaining a level of safety stock inventory so you can prevent stock outs at all costs.

What is safety stock?

In a nutshell, you can understand the safety stock definition as the minimum level of inventory required to last you through the arrival of your next influx of merchandise. Different merchants and 3rd party logistics providers will have differing ideas on what constitutes an acceptable minimum level of inventory, and there’s a number of safety stock calculator sites out there that can help you make smart decisions for yourself and your business.

What’s the best way to know how to calculate safety stock?

Safety stock calculation isn’t as complicated as many make it out to be. If you’re wondering if there’s some sort of specialized safety stock formula you can follow, we’re going to break it down for you here. First, take a look at the average time it takes for a fresh order of new merchandise to be manufactured, arrive, and be keyed into inventory. Multiply that number by one and a half or even two times to be safe and account for any delays, which are unfortunately pretty common in this day and age. Say the number you come up with is two months. Next, look at your sales. What’s the highest number of sales you’ve had in any two-month period? Take that number, and increase it by a little to account for any unexpected business booms. Now you have the minimum level of stock you ought to have at any given time.

What is a stock out?

If you happen to sell out of a specific SKU, you have what’s known as a stock out. Stock out costs can be more than you expect. Not only do they represent a missed opportunity for sales, but if it’s a product that your buyers are clamoring over, having a long period of time where the coveted item isn’t available can damage trust and brand loyalty. Hype can only make someone so patient, after all.

In conclusion

The safety stock equation isn’t such a hard one to manage, after all. But if you don’t feel like doing all the heavy lifting yourself, not to worry. P2Pseller’s got your back. Our information and inventory tracking software enables you to calculate the amount of safety stock you should have on hand at any given time, and automatically reorder product once you hit a certain threshold. Register a free account with us today to browse the full extent of our offerings, without any commitment required on your end. We’d love nothing more than to have you on board.


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Oleg Mikhailenko

Co-Founder, CEO P2Pseller

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