Stockout Explained: Simple Guide with Stockout Rate Examples

Stockout happens when a product is unavailable at the moment a customer wants to buy it. It’s one of the most common and costly inventory problems for retailers and suppliers. Stockouts lead to lost sales, unhappy customers, and sometimes, lost trust.

To understand how often stockouts occur, businesses use a metric called the stockout rate. This rate measures how many products are out of stock compared to how many are supposed to be available. By learning the stockout rate formula and reviewing a stockout rate example, companies can track performance and take action before customers walk away.

In this guide, we explain what causes stockouts, how they affect business, and the best ways to prevent them.

What Is a Stockout?

Stockout means a product is unavailable when a customer is ready to buy it. This happens when inventory runs out and the item can’t be sold or shipped. Stockouts lead to missed sales and disappointed customers.

A stockout forces businesses to either delay the order, cancel it, or ship it later, often at an extra cost. If the product still shows as available, customers may place orders that the business cannot fulfill, causing frustration.

Stockouts are the opposite of overstocking, where there is too much inventory that may never sell. Both problems hurt profit, but stockouts directly impact customer trust and revenue.

To track how often stockouts happen, businesses use a stockout rate. This rate shows how many products were unavailable compared to how many should be ready to sell.

Why Stockouts Matter

Stockouts matter because they lead to missed sales, frustrated customers, and added costs. When a product is unavailable, customers may cancel their order or buy from a competitor instead. That sale—and possibly the customer—is gone.

Stockouts also create operational problems. If an item is sold but not in stock, businesses must refund the customer, delay the shipment, or split deliveries—each option adds cost. Repeated stockouts can result in bad reviews, lower customer satisfaction, and long-term damage to your brand.

Even one stockout can affect inventory accuracy, warehouse processes, and sales forecasting. When stockouts become frequent, they point to deeper issues in demand planning, supplier performance, or inventory control.

Avoiding stockouts helps protect revenue, retain customers, and keep operations running smoothly.

Stockout Rate: What It Is and How to Calculate It

The stockout rate shows how often products are unavailable when customers want to buy them. It helps businesses measure how well their inventory is meeting demand.

A high stockout rate means many items are out of stock. This can lead to missed sales and unhappy customers. A low stockout rate shows inventory is well-managed and products are available when needed.

Stockout Rate Formula

To calculate the stockout rate:

Stockout Rate = (Number of Stockouts ÷ Total Number of Products Available) × 100

This formula gives the percentage of products not in stock at the time of sale.

Stockout Rate Example

If your store carries 500 products and 25 of them are out of stock:

Stockout Rate = (25 ÷ 500) × 100 = 5%

This means 5% of your products are unavailable for sale, which may lead to lost revenue and lower customer satisfaction.

Tracking stockout rate helps you respond quickly and plan better to keep products available.

What Causes Stockouts?

Stockouts happen for many reasons, but most trace back to poor planning, inaccurate data, or supply issues. Some causes are in your control. Others are not. Knowing the difference helps you fix what you can and prepare for what you can’t.

Here are the most common causes of stockouts:

• Inaccurate inventory records. Manual errors, missed scans, or miscounts can lead to incorrect stock levels. If the system says a product is in stock when it’s not, customers may place orders that can’t be filled.
  
• Poor demand forecasting. If you order too little, you run out. Without accurate sales data and trends, it’s hard to know how much to keep on hand. This is a leading cause of stockouts.
  
• Supplier delays. When a supplier ships late, the delay can affect your ability to restock products in time. Even one late delivery can cause a gap in availability.
  
• Manufacturing issues. If production stops due to a machine problem or lack of materials, products may not reach your inventory when expected.
  
• Logistics problems. Accidents, weather, or shipping errors can slow down or block deliveries. These problems often happen with little warning.
  

Stockouts are often a sign that one part of your supply chain is not working as it should. Fixing these issues starts with better data, clear communication, and timely actions.

When Stockouts Are OK (And Even Good)

Stockouts are usually a problem, but in some cases, they’re expected or even planned. For certain products, running out of stock at the right time helps reduce waste, make room for new items, or drive demand.

Here are a few situations where stockouts make sense:

• Fresh products. Grocery stores aim to sell all fresh produce, dairy, and baked goods by the end of the day. If shelves are empty at closing, that’s a good sign. It means less spoilage and waste.
  
• Seasonal or limited stock. Clothing retailers often clear out old collections to prepare for the next season. Stockouts signal that products moved as planned. This keeps inventory fresh and storage costs low.
  
• Tech and auto models. Products like phones, cars, and appliances go through generations. Companies try to sell through old models before launching new ones. A stockout before a product update means clean inventory and better margins.
  
• Scarcity marketing. Some brands use low stock on purpose. Limited runs or drops can increase demand and create urgency. Customers feel lucky to buy and are more likely to return.
  

Even in these cases, stockouts should be managed carefully. Good planning, clear communication, and strong inventory controls are still essential to avoid losing sales when stock runs out faster than expected.

How to Reduce or Prevent Stockouts

While some stockouts are hard to avoid, many can be prevented with better planning and inventory control. The right systems and habits help you stay ahead of demand and avoid running out of key products.

Here are five proven ways to reduce or prevent stockouts:

• Keep inventory records accurate. Errors in stock counts are a major cause of stockouts. Use inventory management software to sync stock levels across sales channels and update them in real time.
  
• Improve demand forecasting. Use past sales data, trends, and seasonal patterns to predict how much stock you’ll need. The more accurate your forecast, the fewer surprises you’ll face.
  
• Monitor your supply chain. Track vendor performance and lead times. If a supplier is often late or unreliable, consider switching to one that delivers consistently.
  
• Use safety stock. Keep a buffer of extra products in case of delays or demand spikes.
  Safety Stock Formula:
  (Max daily usage × Max lead time) – (Average daily usage × Average lead time)
  
• Reorder early. Set minimum stock levels and reorder points. Inventory software can trigger alerts or automatic orders when products hit a low threshold.
  

Reducing stockouts protects your revenue, keeps customers satisfied, and gives you more control over your operations. It also makes your business more resilient when unexpected delays or demand changes occur.

Conclusion

Stockouts hurt sales, frustrate customers, and add costs. They often signal gaps in inventory tracking, forecasting, or supplier performance.

But stockouts can be controlled. With accurate data, strong inventory systems, and better planning, businesses can keep products available and customers happy.

Tracking your stockout rate, using tools like the stockout rate formula, and learning from each stockout rate example helps you understand where things go wrong—and what to fix.

Even when stockouts happen, how you respond matters. Clear communication, fast action, and a plan to prevent repeat issues protect your brand and customer relationships.