The lost retail revenue from Sales Returns, Overstocks, Out-of-Stocks

The numbers are extraordinary: a new research report from retail analyst firm IHL Group, sponsored by OrderDynamics, points out that retailers worldwide lose $1.75 trillion annually in revenue opportunities due to the combined costs of overstocks, out-of-stocks and sales returns.

IHL and OrderDynamics call this the “Ghost Economy” being the “hidden” activities that occur within a retail enterprise that wreak havoc with sales and profitability. Two critical components every retailer constantly have as strategic priorities.

Their research report, Retailers and the Ghost Economy: $1.75 Trillion Reasons to be Afraid, breaks down the annual losses from returns, out-of-stocks and overstocks as follows:

• Returns: $642.6 billion each year;

• Out-of-Stocks: $634.1 billion each year; and

• Overstocks: $471.9 billion each year.

For a typical retailer, the losses are the equivalent of increasing revenue by 11.7 percent. Another way, retailers currently lose 11.7 percent of revenue due to the combined impact of overstocks, out-of-stocks and needless returns (preventable returns). Imagine adding $117 million for every $1B in retail sales.

Having had the personal pleasure and experience working with global retailers, in particular tackling both returns and overstocks, it became obvious very early on many of these contributing issues leading to the Ghost Economy can be aggressively addressed today by connecting the relevant data-points and understanding the “Why?”. And in the face of a $1.75 trillion problem, that’s welcome news.

Thank you Kevin Sterneckert, ex-chief marketing officer at OrderDynamics, and IHL Group for sharing this extraordinary hidden insight. Retailers can today turn data into profit and add $117 million for every $1B in retail sales. What is stopping you?