Blog, Amazon Vendors, Briefing

A Guide to Managing Stockouts for Vendors

Learn strategies to manage inventory efficiently and maximize revenue on Amazon.

In this guide we'll show you how Amazon vendors can prevent stockouts, optimize inventory, and safeguard revenue using the ProcOOS metric.

Author:

Benjamin Weyrich

2 minutes read

Author:

Benjamin Weyrich

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Understanding ProcOOS: The Key to Unlocking Revenue Potential

ProcOOS stands for Procurable Out Of Stock, a metric provided by Amazon within the Retail Analytics interface. It represents the percentage of potential customers who visit your product page only to find the product unavailable. This metric is crucial as it directly correlates to lost sales opportunities - the higher the ProcOOS, the greater the revenue loss.

explained

ProcOOS = Lost Glance Views due to Stockouts / Total Glance Views

The Real Cost of Stockouts

A common misunderstanding among vendors is underestimatindg the revenue loss from stockouts. For instance, a ProcOOS of 50% indicates that half of your prouct page visitors leave without making a purchase due to stock unavailability, potentially doubling your perceived revenue loss.

Calculating lost revenue involves understanding your Glance Views, Lost Glance Views due to Stockouts, and the average revenue per detail page view, allowing for a more informed approach to stock management. 👇

formula

Lost Glance Views due to Stockouts = Glance Views × ProcOOS / (100% - ProcOOS)

For instance, should your product receive 60 Glance Views with a ProcOOS rate of 50% during a specific timeframe, the minimum Lost Traffic attributable to Stockouts would be 60 visits.

Lost Traffic = 60 × 50% / (100% - 50%) = 60

To determine the revenue lost because of stock shortages, an additional piece of information is required: the average income generated from each visit to your product's detail page.

This average earning per page visit can be computed by dividing the total revenue from orders by the number of Glance Views your product receives. 👇

formula

Average Revenue per Detail Page View = Total Revenue / Glance Views

As an example, if your product brought in $1,200 in sales and received 60 Glance Views during a specific timeframe, then the average income for each Glance View would calculate to $20:

Average Revenue per Glance View = $1,200 / 60 = $20

To estimate your lost revenue due to stockouts, multiply your lost traffic by your average revenue per detail page view: Approximate Lost Revenue = Lost Glance Views due to Stockouts × Average Revenue per Glance View

Or, you can simplify this by using the following formula:

formula

Approximate Lost Revenue = Revenue × ProcOOS / (1 - ProcOOS)

For example, if your product had a ProcOOS of 50% and generated $1,200 in revenue in a given period, your approximate lost revenue due to stockouts would be $1,200:

Lost Revenue = $1,200 × 50% / (1 - 50%) = $1,200

This suggests that your revenue could have been twice as much had you managed to prevent stock shortages!

Implement More Effective Measures

Understanding that there will never be sufficient hours in the day to address and avert every instance of stock depletion is crucial. It's for this reason that we emphasize the importance of prioritizing your efforts in areas that significantly affect your business.

By assessing the revenue losses, you'll be equipped to make more educated choices about which products need your immediate attention. Conduct these calculations, and you may discover that focusing on one product could yield a return on your time investment that is tenfold compared to another.

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Strategies to Reduce ProcOOS and Enhance Inventory Management

To effectively reduce ProcOOS and its negative impact, vendors are advised to:

Accurately forecast demand by considering historical data, seasonal trends, and promotional activities.

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Regularly monitor inventory levels and replenishment status to ensure stock availability aligns with demand.

Adapt inventory strategy based on product lifecycle and performance, optimizing stock levels for best-sellers or reducing inventory for slower-moving items.

Collaborate and share data with the marketing team to reallocate budgets away from products with low stock, avoiding exacerbating stockout situations.

Leverage Tools for Optimal Inventory Management

Tools like Catapult offer vendors a comprehensive solution for inventory optimization on Amazon, providing real-time data analytics and facilitating seamless coordination across departments. This ensures a holistic approach to inventory management, maximizing sales performance and minimizing revenue loss due to stockouts.

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Conclusion: The Path to Minimized Stockouts and Maximized Revenue

By understanding the impact of stockouts through the ProcOOS metric and implementing targeted strategies to manage inventory more effectively, Amazon vendors can significantly reduce lost sales opportunities and enhance their overall sales performance. Embracing the right tools and practices will not only improve inventory health but also strengthen your market position and customer satisfaction on Amazon.

Interested in leveraging your data to its fullest potential and streamlining your Amazon operations? Explore how Catapult can transform your Amazon data into actionable insights, fostering better inventory management and boosting your sales performance.