Retailers Lost $1.73 Trillion to Inventory Errors Last Year, Even After Spending $172 Billion to Fix It

Global retailers spent $172 billion last year to tighten how they order and stock products. It barely dented the bill. Inventory errors still cost the industry $1.73 trillion, according to analyst firm IHL Group.

That number covers what the trade calls inventory distortion: the price of empty shelves and overstuffed backrooms added together. It works out to 6.5% of all retail sales, and it roughly matches the annual economic output of South Korea. North America carries $415 billion of the total.

Supply Chain Problems Are the Single Biggest Piece

Most of that money leaks out through the supply chain. IHL puts disruption there at $301 billion a year, the largest single slice of the total. Shipping chokepoints and shifting tariffs leave buyers guessing at how much to order and when it will actually land. Guess low and the shelves empty out. Guess high and the cash sits in a warehouse doing nothing.

AI Users Posted Sales Growth 2.3 Times Higher Than Everyone Else

The bigger question is who eats the losses and who sidesteps them. IHL found that retailers running AI and machine learning on inventory grew sales 2.3 times faster and profit 2.5 times faster than rivals still doing it the old way. The firm has a name for the split: the "AI Haves and Have-nots."

Adoption, though, is thin in exactly the places it would pay off. Fewer than one in four retailers have put AI and machine learning to work in the areas inventory distortion hits hardest. The technology is available. Most of the problem still sits beyond its reach.

The Top Performers Consolidate Onto One System

IHL's read on the leaders is blunt. They treat clean, real-time inventory visibility as the starting point, then layer on the ability to test scenarios and act fast on what they find. That's a break from the tangle of spreadsheets and single-purpose apps a lot of smaller retailers still run, where every file tells a slightly different story about what's in stock.

Platforms built for real-time, AI-driven inventory control, like Fishbowl, fall into the first group. For small and midsize businesses, the pitch is one live picture of stock across every location instead of a dozen files that never quite agree. Closing that visibility gap is what puts a retailer on the winning side of IHL's split.

RFID and Computer Vision Adoption Are About to Jump

For shoppers, inventory distortion is why a product reads sold out online one week and turns up in a clearance bin the next. For retailers, it increasingly sorts the field into winners and everyone else.

IHL expects the next decade to bring supply chain technology change on the scale of the past 30 years, with RFID deployment growing nearly 300% in the next two years alone and computer vision adoption climbing far faster than that. Retailers without a real-time handle on their own stock will be watching that shift from the wrong side of a $1.73 trillion problem.

This content is provided for informational purposes only by the contributor and contains links to third-party websites or services that are not owned or controlled by the publisher, Lee Enterprises. The views, thoughts and opinions in this contributor content belong solely to the writer. Any claims, recommendations or errors related to AI are the contributor’s own. Readers are encouraged to carefully review terms and evaluate all products and services. Once added and unless Nat identifies something, approved.

Lee Enterprises newsroom and editorial were not involved in the creation of this content.