Lost Sales Value

Lost sales value estimates revenue that would have occurred without an availability failure but did not occur. It is a counterfactual quantity: recorded sales do not show every purchase a customer might have made. A delayed shipment is not automatically a permanently lost sale.

Assume ten unavailable units would each have sold for 20 currency units, with no later purchase or substitution. Under those assumptions, estimated lost revenue is 10 × 20 = 200 currency units. If six are bought later, the same 200 cannot be treated as permanent lost revenue. Profit impact additionally depends on costs and margins.

Explain how demand is estimated, the observation horizon, expected price, and treatment of cancellations and substitution. Stocky, for example, estimates lost revenue using a historical sales rate over a selected sample period. Such an estimate can be useful, but seasonality, promotions, and censored demand can make that rate unrepresentative.

Related reference: Shopify inventory reporting documentation. Examples and calculations here are illustrative.