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Out-of-stocks, Overstocks, Returns Cost Retailers $1.75 Trillion

Dec. 17, 2015
"Out-of-stocks" accounted for $634.1 billion in lost retail sales for the year ended in the spring — 39% higher than in 2012.

Profits this holiday season are facing challenges. For companies doing business both online and in store, out-of-stocks, overstocks and returns are costing retailers $1.75 trillion a year, as reported by Krystina Gustafson, of CNBC.

According to a study commissioned by IHL Group, "out-of-stocks" accounted for $634.1 billion in lost retail sales for the year ended in the spring — 39% higher than in 2012.

Overstocks contributed $471.9 billion in lost revenues, up 30% from three years prior.  Overstocks, in particular, are expected to be a big issue this holiday season, as a delay in cold temperatures has left retailers with too many jackets and boots, Gustafson reports. The industry has already warned that this will lead to severe markdowns toward the end of the season, eating away at their profits.

While margins are expected to contract even further as the season progresses, they're already taking a hit. According to separate analysis by DynamicAction, retailers ahead of Black Friday were already selling about 21% fewer items at full price than they did at the same point in 2014, Gustafson reported.

A study by the GT Nexus found that sometimes the problem occurs more at the store than online.  The group found that 75% of U.S. adults have come across an unavailable product in stores over the past year, with 63% encountering that issue online. As a result, the majority of these frustrated shoppers decided to shop at another retailer or buy nothing at all.

This shortage intensifies over the holiday season. Data from Adobe's Digital Index found that 35% of online sales volume went toward retailers' Thanksgiving Day doorbusters, leading to "a lot more out of stocks" on Black Friday than the firm expected.

More on these supply chain challenges on MSNBC. 

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