Glossary - Products and inventory
Stockout
A stockout is the state where a product has zero sellable units available, so demand arrives but cannot be fulfilled. It is measured as a stockout rate: the share of SKUs, or of SKU-days, out of stock over a period. Ecommerce operators track it to size the revenue and margin being forfeited and to fix reorder timing.
| Variable | Definition |
|---|---|
| Out-of-stock SKU-days | Days each active SKU spent at zero sellable units during the period, summed across SKUs. |
| Total active SKU-days | Active SKUs multiplied by days in the period. Retired and discontinued SKUs are excluded. |
To size the damage: lost sales = expected daily demand while in stock, multiplied by days out of stock, multiplied by price - and by contribution margin per unit for the forfeited margin.
Worked example
The forfeited $1,296 is contribution margin that would have arrived with no extra marketing spend - the demand was already there. That is what makes stockouts on proven sellers so expensive relative to their fix.
What is a good stockout rate?
Zero is not the target, and there is no honest universal benchmark. Eliminating every stockout means carrying safety stock on everything, which ties up working capital and breeds dead stock in the tail. The right level depends on your margin structure: the contribution margin forfeited per missed unit, how variable demand is per SKU, how long and how reliable supplier lead times are, and each SKU's class - an ABC analysis A item earns near-zero tolerance, a C item does not. The practical move is to compute the forfeited margin per stockout-day for your own SKUs, as in the example above, and let that number set the priority.
Stockout vs related metrics
| Metric | What it tells you | How it differs |
|---|---|---|
| Reorder point | The stock level that should trigger a new order | The control that prevents stockouts; the stockout rate scores how well it works |
| Days of cover | How long current stock lasts at current velocity | A forward-looking runway; a stockout is the runway hitting zero |
| Sell-through rate | Share of received units sold in a window | Can look excellent precisely because the SKU stocked out early |
| Dead stock | Stock with no realistic path to selling | The opposite failure: capital sitting in stock nobody buys |
Common mistakes
- Measuring from a snapshot. Today's out-of-stock list misses every stockout that opened and closed during the period. Count SKU-days, not a moment.
- Letting stockouts censor the demand estimate. Averaging daily sales across a window that includes out-of-stock days understates true demand, which understates both the loss and the next reorder point. Estimate demand from in-stock days only.
- Counting retired SKUs. A discontinued item at zero stock is an exit, not a stockout. Keep the denominator to active SKUs.
- Treating every stockout equally. A day out on an A-class hero and a day out on a C-tail item are different events with different costs. Weight by forfeited margin.
- Fixing with blanket safety stock. Raising safety stock everywhere trades a stockout problem for a dead stock problem. Fix reorder points SKU by SKU.
FAQ
Divide out-of-stock SKU-days by total active SKU-days in the period. A point-in-time version, out-of-stock SKUs divided by active SKUs today, is simpler but misses every stockout that resolved during the period.
Multiply the SKU's expected daily demand while in stock by the days out of stock, then by price. Use in-stock days only to estimate demand, otherwise the stockout itself drags the estimate down and hides the loss.
No. Reaching zero on every SKU means holding safety stock everywhere, which ties up working capital and creates dead stock in the tail. Near-zero on A-class items and measured tolerance on the tail is the usual shape.
Updated July 2026