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These inefficiencies result in "monies left on the table and the loss of sales that otherwise would be available," according to Retailers and the Ghost Economy: $1.75 Trillion Reasons to be Afraid. The worldwide losses each year in these three categories are:
• Preventable Returns: $642.6bn
• Out-of-stocks: $634.1bn
• Overstocks: $471.9bn
Loses impact annual revenue
For the majority of retailers, the combined impact of overstocks, out-of-stocks and preventable returns add up to 11.7 percent of lost revenue. Addressing the inefficiencies and data disconnects throughout their organization could mean the equivalent of adding $117m in revenue for every $1bn in retail sales - or an additional $2.9bn in revenue for a $25bn 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."
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 (representing $284.9bn in losses), personnel issues ($259.1bn) and data disconnects/systems that are not integrated (representing $222.7bn).
"Retail CEOs are more challenged than ever to answer the growing omnichannel 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."
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