Retail Inventory Crisis Persists Despite $172 Billion in Improvements - IHL Group Study shows $1.73t in lost sales

The global retail industry continues to hemorrhage $1.73 trillion annually due to the cost of out-of-stocks and overstocks according to IHL Group.

NASHVILLE, TN, UNITED STATES, September 10, 2025 /EINPresswire.com/ -- The global retail industry continues to hemorrhage $1.73 trillion annually due to inventory distortion (the cost of out-of-stocks and overstocks), according to new research from analyst firm IHL Group, despite implementing $172 billion in improvements over the past year. The study reveals a widening performance gap between retailers embracing AI-driven inventory management and those clinging to traditional approaches.

The comprehensive analysis of worldwide retail operations shows inventory distortion now represents 6.5% of global retail sales, down from previous years but still equivalent to South Korea's entire GDP – a truly staggering amount.

"We're witnessing a fundamental transformation in how successful retailers manage inventory," said Greg Buzek, President of IHL Group. "The data shows a clear bifurcation emerging: retailers deploying AI and machine learning are achieving sales growth 2.3 times higher and profit growth 2.5 times higher than competitors. It's becoming an existential issue – evolve or get left behind."

The Technology Acceleration Gap
The research identifies unprecedented technology adoption rates that are reshaping competitive landscapes:

• RFID deployment is expected to grow 291% over the next two years
• Computer Vision and Image Recognition adoption is projected to explode by 8,143%
• AI/ML implementations show positive results for 76% of retailers in demand planning and forecasting

However, less than one-fourth of retailers have successfully rolled out AI/ML in areas most impacted by inventory distortion, creating what researchers term "AI Haves and Have-nots."

Regional Performance Disparities Intensify
Asia-Pacific continues to lead global losses at $642 billion (37% of worldwide distortion), yet shows promising 19.1% improvement trajectory. Europe, Middle East, and Africa achieved the strongest improvement rates at 31.1% since 2020, while North America's $415 billion in losses reflect unique challenges from elevated theft rates, tariffs and supply chain pressures.

"The regional variations tell a compelling story about different approaches to modernization," noted Buzek. "EMEA's rapid adoption of advanced inventory management technology and coordinated supplier practices is paying dividends, while North America continues to battle the whack-a-mole game of solving one crisis only to have another emerge."

The Theft Crisis Compounds Technology Challenges
Organized retail crime and theft jumped to $379 billion globally. While showing improvements with more stringent prosecution in 2025 in the US, the research shows that despite technological advances, ground-truth accuracy remains compromised by shrinkage at store, warehouse, and supply chain levels.

Specialty hardgoods retailers face the highest overall inventory distortion costs, while food and grocery segments demonstrated exceptional improvement performance with a 43.5% improvement rate – the strongest across all analyzed segments.

The study identifies supply chain disruption as the largest single contributor to global inventory distortion, accounting for $301 billion in annual losses. Geographic chokepoints including the Suez Canal and Panama Canal continue creating cascading effects, while tariff uncertainties force retailers into complex inventory positioning strategies.

Personnel issues contribute an additional $248 billion globally – equivalent to Costco's annual revenue – highlighting the human capital challenges compounding technology implementation efforts.

The Path Forward: Integration Over Isolation
The research emphasizes that retailers achieving superior performance demonstrate systematic data management capabilities and integrated technology platforms rather than point solutions.

"The future belongs to retailers who view clean, integrated, real-time inventory visibility as table stakes," Buzek concluded. "But simply having visibility isn't enough – you need scenario planning capabilities and the organizational discipline to act on the insights. The next decade will see technology advancements that rival 30 years of previous innovation in retail supply chain operations."

The independent research study is available for free thanks to a distribution partnership with title sponsor Board.

Gregory J Buzek
IHL Group
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