Is it better to overstock or understock inventory when starting a business?

Asked a year ago

In your guys experience, what do you think is the best way to go when starting out? I'm about to open an online retail store with a forecast in mind but margins are slim so I don't want to overstock and have to do a big discount sale in the future. On the other hand, I also don't want to have problems fulfilling orders and starting off with a bad brand reputation. Thoughts?

Abeeha Qasmi

Thursday, March 09, 2023

Overstocking and understocking can both be detrimental to your business. Based on the inventory forecast, you must balance your inventory levels to avoid having unsold items on your shelves or missing out on sales due to the "out of stock" SKUs. However, it's relatively better to be overstocked than to run out of inventory. Stockouts can significantly affect your sales, brand image, customer satisfaction, and retention rate.

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