Study: Global retail losses due to inventory ‘distortion’ hit $1.77 trillion
Inventory distortion — the combined cost of overstocks and out-of-stocks — continues to challenge retailers, particularly in the U.S.
The total cost to retailers for inventory distortion (combined cost of overstocks and out-of-stocks) amounts to $349 billion in lost sales for U.S. and Canadian retailers in 2022. That’s according to new research from from analyst firm IHL Group, which said that disconnect between what consumers want to buy at their local stores and what they actually do buy continues to drive discontent.
Although consumers have seen improvements in on-shelf availability, the rapid growth of theft and organized retail crime has overshadowed systems and process gain in the United States.
“Improvements in the supply chain and product availability around the world in the past year have been dramatic leading to fuller shelves,” said Greg Buzek, president of IHL Group. “Unfortunately, in the United States the incredible rise in theft has outpaced those improvements leading to 17.7% more out-of-stocks for North America than the previous year.”
The research study – “Inventory Distortion — The Good, The Bad, the Ulgy” looks at the true costs and experiences of consumers as they report reasons that they leave stores without buying items they planned to purchase other than the price was too high. These reasons range from sizes not being available, lack of employees to help, products locked up or in the stockroom or simply empty shelves.
The research also looks at the cost of overstocked merchandise, which is merchandise that was simply mis-forecast or didn’t arrive in time for the season that then has to be heavily discounted.
In total, the cost of inventory distortion amounted to a staggering $1.77 trillion worldwide, down $172 billion from the previous years. Out-of-stocks represent 68.2% ($1.2 trillion) of the total cost, with overstocks representing 31.8% ($562 billion).
Some other highlights of the research are below.
•Supplier issues remain the largest driver of inventory distortion at $418 billion
•Theft and organized retail crime jumped to $379 billion with the greatest growth in the United States.
•Personnel issues (either lack of personnel or poor training) causes $291 billion. Poor systems ($239 billion) and inefficient processes ($173 billion) are other major causes of inventory distortion
•Spoilage and lockdown issues have seen major improvements but still are contributing $67.4 billion to the issue, but this is down from nearly $570 billion in losses in 2020.
The independent research was sponsored by Zebra Technologies, Blue Yonder and Sensormatic Solutions by Johnson Controls and silver sponsors IBM and Pull Logic.