The True Cost of Going Out of Stock
The True Cost of Going Out of Stock
Every seller experiences running out of stock but do you know the true cost of going out of stock? Kevin looks at a product he was out of stock of for just three days and figures out what the actual snowball effect was for himself. You’ll be amazed what that short amount of time cost him in sales.
“It’s not inconceivable that if your ranking drops from 1 to 3 or 3 to 5…it could take as many as 30 days to recover that ranking if you recover it at all.” -Kevin Rizer on the True Cost of Going Out of Stock
Effects of Going Out of Stock
Going out of stock can have a compounding effect on your business. It can be positive, but it can also be negative. Kevin experienced the latter.
“If your product is a consumable….your loss from a short time out of stock….could be 10X.” -Kevin Rizer
They had one product that sells for $500 a day. They thought they could regain the loss. But when they factored it, that 3-day out of stock situation cost them more.
Loss in Sales and Ranking
The $500 they lost in three days totaled to $1500. But when they had their stock back in the fourth day, their ranking slipped to number three.
“Knowing your numbers on Amazon is critical to your success.” -Kevin Rizer
They saw some loss in ranking in their most important keywords. The 3-day stock out definitely cost more them more than just their sales.
Factoring the Loss
Kevin shares the importance of conversion. It could take more than a month to recover the loss.
“A seemingly short 3 days out of stock is going to affect your conversion rate.” -Kevin Rizer
From $500 a day, they lowered their product’s value to $300 a day. That would mean $200 of loss. If it would take a month to recover, that would mean a total of $600 of loss.
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