Retailers lose 1.75 trillion dollars in revenue due to overstocks

Retailers worldwide lose a staggering 1.75 trillion dollars annually in revenue due to the cost of overstocks, out-of-stocks and returns, according to new research from retail analyst firm IHL Group, commissioned by OrderDynamics.

In the ‘Retailers and the Ghost Economy: $1.77tn Reasons to be Afraid’ report, IHL notes that the impact of overstocks, out-of stocks and needless returns are three of the primary components “haunting” retails 14.5 trillion dollar worldwide economy. It states that these inefficiencies result in “monies left on the table and the loss of sales that otherwise would be available.”

The worldwide losses in these three categories are preventable returns, accounting for 642.6 billion dollars each year, out-of-stocks following closely with 634.1 billion dollars each year, and overstock stands at 471.9 billion dollars.

These losses IHL claims equals 11.7 percent of the annual revenue for a typical retailer, and by addressing the inefficiencies throughout their organisation could mean the equivalent of adding 117 million dollars in revenue for every one billion in retail sales, the equivalent to an additional 2.9 billion dollars in revenue for a 25 billion dollar retailer.

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

“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.”