All exact science is dominated by the idea of approximation. – Bertrand Russell (1872-1970)
Okay, so that title might seem a bit “clickbait-y” and even a little dumb without some context, so bear with me here.
Before we get started, this piece is not about optimizing inventory investment by paring back inventory (and risking out of stocks) on long tail items “for the greater good” or any other such nonsense.
If you’re in the retail business in 2025, then you’re competing with Amazon at least to some degree. Those long tail items are probably as important to your long term success as a business than the so-called “bread and butter” fast sellers.
If holding stock on those long tail items gives you heartburn, then you’re better off increasing the selling price to offset the carrying cost than trimming your inventory. Customers will pay a premium if they know you’re the only game in town (or at least the most reliable game in town) to get those hard-to-find items.
Now, back to the topic at hand.
If you read the title of this piece and thought to yourself “What a dumb question!”, I’d wager that you were probably conflating the terms “in-stock” and “on shelf availability”.
What’s the difference? Customers don’t care that you have available stock somewhere within the 4 walls of the store. They want it on the shelf.
While it’s true that stock can’t be on the shelf if it’s not in the store in the first place, there are times when putting additional inventory in the store to boost your in-stock metric can actually harm on shelf availability – and sales.
Consider a simple example for a particular item where the shelf capacity for the item is 10 units. The shelf is completely full and the store is currently holding an additional 20 units in inventory in the back room or some other overflow location.
A couple of weeks go by. The 10 units of shelf stock has sold and the selling location is now empty. For a few days, either nobody notices the hole, the stock has been misplaced or is in a difficult to access overflow location within the store.
What will the replenishment system do? Probably nothing, because there is still plenty of stock in the store to sell. How does the in-stock report look for this item? Fantastic! But you’re losing sales.
In other words, boosting inventory levels in the store will definitely improve your in-stock metric, but if it’s done to excess, inventory can actually harm sales.
One problem we have is that in-stock is relatively easy to reliably measure, while on shelf availability is not. So we are forced to use in-stock as our proxy measure for customer service, when that’s not always the case.
So getting back to the original question: Are you really sure you want high in-stock?
The answer is yes – so long as you’re actively doing everything you can to effectively make in-stock a reliable proxy for on shelf availability:
- Keeping your store level inventory accurate
- Developing and maintaining accurate planograms (and compliance to those planograms in store)
- Triangulating your planograms with stocking policies and pack sizes to ensure that inbound stock can flow directly from the receiving bay to the shelf