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The Cost of Lost Sales

Written by: Will Atkinson

Article Overview: Accurate inventory stocking according to demand and sales history is vital to reducing lost sales and inventory overhead, thereby increasing profit, customer satisfaction, and loyalty.

The Cost of Lost Sales

We've talked a lot about inventory here, and there are lots of great strategies for maximizing turnover and throughput, but I want to talk about some of the less obvious implications of improper inventory management.

First, the obvious problems with poor inventory management are:

1) Lost sales due to empty shelves

2) Shelf space being filled with unpopular items (this takes up useful and productive shelf space, but it also portrays you as out of touch)

3) Customers can't get the items that they DO want.

So, if you stock your store using your instincts, or by trusting the vendor reps who call on you, you run the risk of all of the above, hurting your profits and your image. But, if you have a good point of sale system to track customer purchases, you can readily compare your recent sales and inventory activity to that same activity in the year ago period for the approaching order period. This allows you to see what is selling now, as well as what sold well a year ago next month. You can use this data to make educated (and likely correct!) decisions about what to order and where to put these items in your store.

If you have the wrong items on main display, then not only will they not sell, but your customers will not be able to get the items they want, meaning you lost that sale, and you're paying for inventory that may never sell, or at least not without a big discount. Plus, your customers may form the opinion that you don't carry what they want, and they'll go elsewhere to get it. We don't even want to think about the long term costs of this effect, do we?

The takeaway is that instead of ordering and stocking by memory, instinct, suggestion, or any other false metric, dig into the data that your POS system gives you to make the right decision about what to put in your store each and every time you order. Sure, it may take a few minutes longer, but it could mean the difference between success and failure for your business.

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Article Tags: correct decisions, customer purchases, empty shelves, few minutes, instinct, instincts, inventory management, memory, nbsp, point of sale, point of sale system, pos system, profits, right decision, shelf space, suggestion, takeaway, throughput, turnover, vendor reps



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