Retailers are losing $1.75 trillion annually due to the cost of overstocks, out-of-stocks and needless returns according to new research from IHL Group, commissioned by OrderDynamics.
The report on the $14.5 trillion retail economy said that these inefficiencies result in "monies left on the table and the loss of sales that otherwise would be available."
The losses broken down by category include $642.6 billion in preventable returns, $634.1 billion in out-of-stocks and $471.9 billion in overstocks.
In total, most retailers lose 11.7 percent of revenue due to overstocks, out-of-stocks and preventable returns. Fixing these inefficiencies, according to the study, could add $117 million in revenue for every $1 billion in retail sales.
"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.
What causes overstocks and out-of-stocks? The top three sources of inventory distortion are internal process failures, personnel issues and data disconnects/systems that are not integrated.
Target's (NYSE:TGT) recent Lilly Pulitzer collection was out-of-stock less than 24-hours after launch, creating quite a buzz. The popular 250-item limited edition collection caused the website to go down for 20 minutes, created lines outside of physical stores and left frustrated customers to go on social media to broadcast their unhappiness.
-See this OrderDynamics press release
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