New Report Shows Staggering Global Losses For Retailers

By Christine Kern, contributing writer

Retailers lose up to $1.75 trillion a year on overstocks, out-of-stocks, and returns.

Overstocks, out-of-stocks and needless returns cost global retailers as much as $1.75 trillion a year, according to a new report by IHL Group.

The report, “Retailers and the Ghost Economy: $1,75 Trillion Reasons to be Afraid,” details the impact of three of the primary components of the “Ghost Economy” haunting retail  on the $14.5 trillion retail economy worldwide. The IHL study asserts that these inefficiencies result in “monies left on the table and the loss of sales that otherwise would be available.”

The study found the following worldwide losses: 

• Preventable returns: $642.6 billion each year
• Out-of-stocks: $634.1 billion each year
• Overstocks: $471.9 billion each year

“Retailers all too often focus on a variety of ways to drive revenue and increase comparable year-over-year sales, but retailers can realize huge gains by addressing opportunities that are in hand and slipping through enterprise fingers,” Greg Buzek, president of IHL Group, explained.

“These problems are within retailers’ grasp to solve, but it requires more than data, more than business intelligence. It requires understanding the root causes of inventory and data disconnects and implementing the technology solutions and operational changes to address these revenue-limiting issues.”

The combined impact of overstocks, out-of-stocks and preventable returns represents 11.7 percent  of lost revenue for most retailers queried in the study. That means that addressing the inefficiencies and data disconnects throughout their organization could translate to adding $117 million in revenue for every $1 billion in retail sales — or an additional $2.9 billion in revenue for a $25 billion retailer.

“Retail CEOs are more challenged than ever to answer the growing omni-channel demands of consumers while providing profitable growth for owners and shareholders,” said Kevin Sterneckert, CMO of OrderDynamics. “With internal process failures, disjointed data and siloed organizations, the answers C-level retailers need are almost impossible to attain without access to new, innovative technologies purpose-built to deliver the full potential of an organization. This report gives clarity to the key issues that retail executives must focus on and outlines the steps needed to make improvements to their bottom line.”

The report is the first in a four-part series, and subsequent reports will examine each of the three components of the Ghost Economy haunting retail: overstocks, out-of-stocks, and returns.