LONDON--(BUSINESS WIRE)--Retailers worldwide lose a staggering $1.75 Trillion annually due to the cost of overstocks, out-of-stocks and needless returns, according to new research released today from retail analyst firm IHL Group, commissioned by OrderDynamics.
IHL’s new research, “Retailers and the Ghost Economy: $1.75 Trillion Reasons to be Afraid,” is a landmark report that details the impact of overstocks, out-of stocks and needless returns — three of the primary components of the Ghost Economy haunting retail — on the $14.5 Trillion retail economy worldwide. These inefficiencies result in “monies left on the table and the loss of sales that otherwise would be available,” as IHL’s study notes. The worldwide losses in these three categories are:
- Preventable Returns: $642.6 Billion each year
- Out-of-stocks: $634.1 Billion each year
- Overstocks: $471.9 Billion each year
Losses equal to 11.7% annual revenue for typical retailer
For the majority of retailers, the combined impact of overstocks, out-of-stocks and preventable returns add up to 11.7% of lost revenue. Addressing the inefficiencies and data disconnects throughout their organization could mean the equivalent of 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.
“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,” said Greg Buzek, president of IHL Group. “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.”
Failures in internal processes, personnel issues and data disconnects
The IHL report underscores the gravity of these disconnects. The report takes a close look at what the research firm terms “inventory distortion” — the combined impact of overstocks and out-of-stocks. The top three sources of inventory distortion, according to the research, are: Internal process failures (#1, representing $284.9B in losses), personnel issues (#2, $259.1B) and data disconnects/systems that are not integrated (#3, representing $222.7B).
“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.”
“Retailers and the Ghost Economy: $1.75 Trillion Reasons to be Afraid” is available for download here. It is the first report in a four-part series. Subsequent reports will take a closer look at each of the three components of the Ghost Economy haunting retail: Overstocks, Out-of-Stocks and Returns.
OrderDynamics is the world’s leading Big Data prescriptive analytics software company, built for enterprise-level retail. We believe that the order is the moment of truth – when profit can be made or lost. We help the world’s leading retailers activate commerce from first interaction to final fulfillment with our Dynamic Action, Commerce Platform and Order Management solutions and Service offerings. Thought-leading research firm Frost & Sullivan recently named our Dynamic Action prescriptive analytics solution as a “Big Data analytics solution for retail that is unlike any other in the market” and “critical for retail success.” We empower agile and intelligent commerce experiences so that our more than 90 clients, operating in 33 countries, including Neiman Marcus, Brooks Brothers, Speedo, Laura Canada, T.M. Lewin and Asda Direct, win at that very moment of truth.
About IHL Group
IHL Group is a global research and advisory firm headquartered in Franklin, Tennessee, that provides market analysis and business consulting services for retailers and information technology companies that focus on the retail industry. For more information, visit www.ihlservices.com.