How much a stockout on a hero SKU really costs: a worked example

A stockout on a hero SKU costs more than merchants expect. It is almost never the retail value of the units you did not sell. Take a SKU doing 3 units a day at $34 retail and $12 landed cost, out of stock for one 14-day supplier lead time. The illustrative arithmetic lands near $1,000: roughly $616 of gross margin that never arrives, plus roughly $405 of emergency reorder premium paid to close the gap faster than a normal order would.

That is one SKU, one gap, one time. Here is the working, with every assumption named so you can swap in your own. Nothing below is a promise about your store, and no dollar figure here is Restoc's price, which is not published yet. It is arithmetic, and the inputs are yours.

The SKU we are costing

• Sandalwood candle, 8 oz
• Sales velocity: 3 units a day over the last 30 days
• Retail price: $34
• Landed cost: $12
• Gross margin per unit: $22
• Supplier lead time: 14 days
• Normal reorder quantity: 300 units at the $12 break price
• One supplier, one location, no stock parked anywhere else

Stock hits zero on a Tuesday. You notice Wednesday morning when a customer emails. You order Wednesday. Goods land 14 days later. Call it 14 days dark. That is the optimistic version, because it assumes you spotted it inside 24 hours.

Step one: the margin that does not arrive

Fourteen days at 3 units a day is 42 units. At $22 of gross margin each, that is $924.

Do not book all of it. Some of that demand survives the stockout. A few customers buy the 4 oz instead. A few wait for the restock. A few wanted a candle and bought someone else's. Assume you recapture a third of the lost units at the same margin. That leaves roughly $616 of margin gone for good.

The recapture rate is the one input nobody can hand you from the outside. You can measure it. Look at your last stockout, then look at what the neighbouring variants did during those days. If sales of the 4 oz jumped, your recapture is high and your true cost is lower. If nothing moved, it is near zero and the $924 is closer to the truth.

Step two: the emergency reorder premium

Merchants forget the second cost. It hides in the freight invoice rather than the revenue line.

• Expedited freight to shorten the gap: $180
• A short order of 150 units at $13.50 instead of 300 at $12, because you need stock on the shelf now: $1.50 extra on 150 units, so $225

That is $405 of pure premium, spent only because you ordered late. It buys you no extra inventory and no extra margin. It buys days.

Two further costs resist a clean number. Treat them as reasoning, not arithmetic. If you were running paid traffic to that product page, you paid for clicks that could not convert. And a page that sits out of stock for two weeks does not always come back to the same position in search or in your own collection sorting. Both are real. Neither belongs in a spreadsheet with a decimal point on it.

Step three: the total, and what it sits next to

$616 of lost margin plus $405 of premium is $1,021. One SKU. Fourteen days. One incident.

For scale only, take a generic monitoring tool in this category at $30 a month, which is $360 a year. That figure is a placeholder for the category, not a quote from any product, and certainly not Restoc's. Whether one incident outweighs a year of monitoring depends entirely on your own inputs, so run them. Set recapture at 60 percent and lost margin falls to about $370. Set recapture at 90 percent and shorten the gap to seven days, and the incident costs a few hundred dollars. That is a different conversation, and it is a legitimate one.

That is the point of doing this as arithmetic rather than a slogan. The number is not universal. It is yours, and it is almost always dominated by your lead time and your margin per unit.

What it would have cost to not run out

The alternative is a reorder point and something watching it. Velocity times lead time gives you the cover you need: 3 units a day over 14 days is 42 units. Add a buffer of seven days of cover, which is 21 units. Reorder point is 63 units.

At 63 units on hand you place the normal 300-unit order at $12 with normal freight. Premium paid: nothing. Margin lost: nothing. The only real cost is the buffer, 21 units at $12, so about $252 of cash sitting on a shelf for an extra week. That cash is still yours. The $1,021 is not.

This is the loop Restoc is built to run. The reorder point engine takes a configurable sales velocity window of 7, 14 or 30 days plus the lead time you enter per SKU. When a SKU crosses its reorder point it fires an alert by email or Slack webhook. The dashboard shows current stock, days of inventory remaining and reorder status per SKU. A weekly report lists everything below its reorder point with a suggested order quantity, exportable as CSV. It is on the waitlist now, not in your store yet. When it launches there is a 60-day free trial, built so at least one full weekly reorder cycle completes before any first charge.

What moves the number most

If you re-run one input, re-run lead time. It is a straight multiplier on the units you lose, so a supplier slipping from 14 days to 28 doubles the margin half of the cost.

• Lead time: linear, and the single biggest lever
• Gross margin per unit: a $40 margin SKU at the same velocity nearly doubles the loss
• Velocity: a hero SKU at 10 a day puts this past $3,000 on the same assumptions
• Recapture rate: measure it, do not guess it
• Detection delay: every day you do not notice you are out is another 3 units at $22

Where this arithmetic stops justifying anything

Be honest about the SKUs where it does not hold. A slow mover at 0.2 units a day with $6 of margin loses about 2.8 units over the same 14 days, which is roughly $17. No monitoring tool pays for itself on that product. If you stock 400 of those and nothing else, you do not have a stockout problem worth automating.

The case rests on your top ten or twenty SKUs, the ones that carry the month. Most merchants can name them without opening a report. That is also the honest answer to why not just check those by hand. You can, and plenty of people do, right up until the week a supplier slips, a bundle spikes demand, and nobody opens the inventory tab until Friday.