To reach your highest sales potential, your product supply must perfect meet customer-demand.

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When a store has an empty shelf, bad things are happening. So bad that if a shelf stays empty for an extended period of time, it usually means the store is going out of business.

We know this because retailers can only make sales when their shelves are fully stocked, and they only exist to cycle through that inventory.

Their finances are calculated by inventory turns (annualized cycles of inventory replenishments) and if 10% of your shelves are empty, that means your sales are gauranteed to drop off that 10% of the store.

Amazon has similar economics, but their shelves are virtually limitless.

Where a grocery store might offer 2 brands of _organic canned black beans_, Amazon will allow all bean manufacturers a place on the shelf, and then let "customer experience" relegate the product to top or bottom of search.

Your goal as a brand/manufacturer is to meet customers demand as closely as possible.

Virtual shelves allow manufacturers to be more creative and offer SKUs in multiple variations that might not be possible through brick & mortar retailers.

Example: Paint Manufacturers:

Paint manufacturers historically sell paint in Quart-Sized cans, Gallon-sized cans, and 5-Gallon pails. On a spreadsheet its very simple to comprehend making 10 colors in 3 sizes and having 30-SKUs, but how often does a retailer sell a 5-gallon bucket of black-trim paint? And Red? Probably Never. So there is about _0.01%_ chances that a retailer would waste the physical space to hold many 5-gallon buckets of a product that would never sell, instead they could replace it with 10-quarts that are much more likely to sell...

Virtually, Amazon can let you offer quarts, gallons, 5-gallons, But also "virtual" boxes of 2-quarts and 2-gallons where the manufacturer simply ships extra and saves money on shipping.

When the customer wants 2-quarts, and they're able to order in a single-box shipment then its a win/win/win. Customer gets a cheaper price, manufacturer sells more volume, and Amazon gets the sale versus that customer moving back to a brick & mortar shopping experience.

Read More: The 2nd portion of the virtuous cycle is about Optimizing your Customer Experience.