Measuring Opportunity Cost with Stock Lifetime Value
This study addresses the limitation of conventional e-commerce A/B tests, which often overlook the long-term impact of interventions on profitability across an inventory item’s full lifecycle due to short experimental windows. To overcome this, the authors propose Stock Lifetime Value (SLV), a novel metric that aggregates the expected profit of current inventory over its entire sales horizon within short-term experiments, thereby enabling more accurate assessment of long-term profitability. SLV uniquely integrates inventory constraints and seasonal lifecycle dynamics into the A/B testing framework, combining causal inference with financial mapping to support both item-level and user-level experimentation while aligning with annual financial reporting. Empirical validation at Zalando demonstrates that SLV effectively predicts actual profits over an 18-month horizon, enhances pricing algorithm performance, and delivers interpretable estimates of annual financial impact.