Article | December 20, 2017

The "Ghost Economy" Of Christmas Past

Source: Radial

By Gregor Purdy, Radial

Christmas Gift

Another holiday peak season is in full swing and customers are buying goods faster than any other time during the year. Your staff is working hard, and putting in the extra hours to fulfill exponentially more orders than usual - if everything stays the course, your company could potentially bring in close to a third of its annual earnings for the year during this busy season alone.

As you continue to review accounts throughout the season, however, the lofty profit margin you expected to find isn’t there. Sure, the gross revenue set a new company record, but the net revenue is far below what it should be. You begin to wonder, “Where is it all going?” It seems as though it’s just disappearing like some stealthy apparition – there one moment, gone the next. As your heart begins to race, you feel knots in your stomach, and you begin to sweat, you realize you are being haunted by…

The Ghost Economy!

Leaving money on the table is a living nightmare that no retail business can afford to experience, regardless of its size. Nevertheless, year after year it’s as though some retailers sit by helplessly as their profits evaporate into the ether. The loss isn’t due to theft or lack of business, though. The culprit is the ghost economy: profit-stealing overstocks, out-of-stocks, and returns. Whether or not you believe in ghosts, it is very real.

The global cost of the ghost economy in 2014 was $1.75 trillion out of a $14.5 trillion global retail economy. According to a report in MarketWatch in December 2016, U.S. businesses alone took in $260 billion in returns. That translates into a 4.1 percent revenue loss for the average U.S. retailer. Putting aside returns, over-stocks and out-of-stocks still account for over $1 trillion in losses.