There’s a new study out suggesting that “retailers worldwide lose a staggering $1.75 trillion annually due to the cost of overstocks, out-of-stocks and needless returns” – three components of what the study is a kind of “Ghost Economy” haunting retail.
“These inefficiencies, the study says, result in “monies left on the table and the loss of sales that otherwise would be available.” And it says that a retailer “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.”FYI … the annual inefficiencies break down to $642.6 billion in preventable returns, $634.1 billion in out-of-stocks, and $471.9 Billion each year in overstocks.
Kevin Coupe’s Comments: The research was performed by retail analyst firm IHL Group, and commissioned by OrderDynamics.KC’s View:
As Senator Everett Dirksen is reputed to have said, “A billion here, a billion there, pretty soon, you’re talking real money.” Though these numbers might’ve staggered him. Obviously, if retailers are looking at these kinds of inefficiencies, they need to address them. My only caveat is that while they’re working to be more efficient, they need to spend as much money, time and energy trying to be more effective. Because efficiency and effectiveness are not the same thing.