Out of sight out of mind, out of stock: Phantom stockouts

‍Phantom out of stocks are likely stifling your sales, causing inventory to age unnecessarily, and tying up cash flow you need to operate and grow your retail business. 

What do we mean by “phantom” out of stock? 

This is inventory that is in a backstock room like a vault, but not present on the sales floor. It causes a discrepancy between recorded stock levels and actual stock on hand; essentially, it's a situation where the system shows items as in stock when they are actually missing or sold out. It's a problem impacting both supplier brands and retailers. Sometimes, this is also referred to as ghost stock.

The adage “out of sight, out of mind” applies here, and we’ll tag on that it’s also “out of stock”. 

If it’s not on the sales floor or in an obvious visible location, it’s very likely staff won’t recommend it to a customer or a customer won’t ask for it.

Let’s break down how inventory flows through the “rooms” configured in your point of sale. Whether these rooms are physical or virtual, they can usually be categorized into three primary buckets in terms of how inventory is counted. They include:

• Sellable
• Backstock
• Excluded

Sellable inventory is on the sales floor. On display, behind the counter, or in an easy accessible room where a retail employee can easily grab it to make a recommendation and ultimately a sale.

Backstock is physically on the premise but may be in a vault, warehouse room, or other inventory storage for overstock/overflow. This inventory isn’t easily within reach of a retail employee actively engaging with a customer. 

Excluded inventory is not sellable and shouldn’t be counted as on hand inventory. This inventory may be in rooms used to isolate quarantine, returns, damage goods to return, or expired products.

Happy Buyers allows you to categorize all of your inventory rooms into these three buckets, which unlocks the ability to easily understand what needs to be Restocked, and what needs to be Replenished. 

Inventory that needs to be Restocked is low in stock in all Sellable and Backstock rooms. This inventory needs to be re-ordered from a vendor to stock your store.

Inventory that needs to be Replenished is low in stock in all Sallable rooms, but you have inventory in Backstock rooms. This is where Phantom Out of Stocks occur. Your retail team that is physically in the store needs to be alerted to these SKUs every morning before open or every evening after close. Any products that have less than 2 days on hand in Sellable inventory need to be Replenished from your Backstock. This is especially important with fast moving SKUs.

Phantom Out of Stock Example

We can see this example below for how phantom out of stocks gum up the works of dispensary ordering. These prerolls are selling at a clip of almost 52 units a day. We have 20 days worth of inventory on hand, so this product does NOT need to be Restocked. However, we can see that there is less than a single day’s worth of inventory left on the Sales Floor. A member of the retail team needs to Replenish this product from the Back Stock room to the Sales Floor to ensure that sales continue to flow and that 52 units per day does not drop due a Phantom Out of Stock of this product.

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Happy Buyers counts a product as out of stock as soon as the Sellable Inventory goes to 0. Even if there are products in a Back Stock room, we count a Phantom Out of Stock as any other out of stock. This means phantom out of stocks will be dropped from run rate calculations, keeping the run rate accurate to only when the product is in sellable inventory.

You can always view your Sellable inventory by adding the “Sellable inventory” column to your Grid views in Happy Buyers.

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Want to see how Happy Cabbage solves for Phantom Out of Stocks and so many more intricacies of dispensary purchasing? Get a free demo and change the way you manage cannabis inventory.