Date Added: Jan 2010
The cost of inventory to a retailer is far greater than simply the invoice cost and freight. There are inventory carrying costs, shrink, damage and obsolescence costs, and even the cost of lost sales due to too much inventory. These costs can add up quickly, almost imperceptibly. But these costs are real, and they do end up on the income statement eroding profits. When stores are overstocked, it's simply much harder for customers to find what they came in for, and much more likely they'll leave without it. When there's too much stuff, aisles can become narrower, discouraging customers from exploring deeper into the store.