How much does a stockout cost?

Have you ever wondered what is the cost of a stockout for one of your Amazon items? This brief article will help you determine what that is.¬†We’ll use an example item for this.

The first step in this calculation is to determine what the profit is for the sale of one unit. Amazon’s Profitability Calculator can help with that. Here is the formula for our example item.

Profit Calculation

Price $36.99
Amazon Commission: $2.96 (8%)
FBA Fees: $6.03
Cost: $7.00
Profit: $21.00

In this particular case, each time one unit sells we make $21. The second step in this calculation is determining how many units per day you sell. For this example, we sold 121 units in 30 days, so we sold 4.03 per day in this period.

Step 3 is the fun part! To calculate the cost of a stockout, you’ll just use this formula.

Cost of Stockout Formula

COSO = (Avg. Units Per Day) x (Profit Per Unit Sale) x (# of Days of Outage)
COSO = 4.03 x 21 x 14
COSO = $1,184 (or $84.63 per day)

You can see here that even though we only sell four units per day of this product, it will cost $1,184 in profit if we have a stockout that lasts two weeks for this item. As you can see in this example, out-of-stock events are extremely expensive!

It is also important to consider whether or not you are the only seller on an Amazon page. If you are the only seller on the page, then a stockout event will destroy your sales rank. When the product is available for sale again, your sales rank will be worse than before the event, and you won’t get as many natural sales from general site searches. The cost of this scenario is even more than what we calculated above, but you can’t easily quantify this cost.

Would you like to be able to see the value of an out-of-stock event for all of your items in real-time? Forecastly can help you stay on top of all your inventory by showing you this data in one clear view.

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