During the holiday season, unhappy customers took to Twitter their discontent about snags in their holiday shopping experience. They used the hashtag #GhostEconomy to mark their tweets where they complained about instances when retailers had failed them: from wrong delivery of items, to difficult returns even in the case of damaged items, to late order cancellations due to stockouts. Ghost Economy is a term used to describe the loss of revenue opportunities because of overstocks, out-of-stocks and returns. A research from retail analyst firm IHL Group reveals that retailers worldwide lose a staggering $1,75 trillion every year –that is, 11,7% of their revenues - to the Ghost Economy. Stockouts are especially problematic for retailers: when faced with unavailable products, 31% of consumers end up buying elsewhere, and 24% will either buy later or not buy at all.
Don’t want to lose over 10% of your revenues to the ghost economy? Then follow our 5, easy steps:
1. Use better aligned systems
Systems problems lose retailers up to $223b every year worldwide. Data is either not being collected, or it is not being shared effectively across the operation –because of a process disconnect, or because the different systems in use in the company can’t talk to each other. By shifting to an all-in-one management system retailers can manage to recapture lost revenue opportunities. An end-to-end retail system guarantees that information will always flow seamlessly throughout the business, allowing managers to have a clear overview of all business operations –including inventory status- from head office, all the time.
2. Have a clear view of your value chain
Returns can happen for many reasons: from defective merchandise, to wrong sizes or items, to price mismatches, to buyer’s remorse, customer returns of merchandise cost retailers 4.4% of their revenue on average. Although not all returns can be prevented, an efficient management system can help decrease the risk of returns, for example by insuring that customers who make an online purchase receive exactly the item they ordered – in the correct model, color and size.
3. Make sure you channels are integrated
Retailers who offer omni-channel shopping need to make sure that their customers’ shopping experience is consistent and seamless. If you offer home delivery or click & collect, make sure that you can always deliver these options efficiently. A system with total omni-channel integration, like LS Nav, can help you prevent the risk of untimely stockouts –for example, discovering that an item is not available after orders have been placed. An integrated system ensures that your online store always contains up-to-date product information, as the e-commerce portal uses the general ledger to pull up real-time stock information.
4. Detect losses and prevent them
Employee and customer theft costs retailers up to 1,1% of their revenue in average. Worldwide, employee theft tends to generate more losses than customer theft. Some retailers have introduced self-service checkouts to reduce staff fraud, and seen positive results. Managers can also reduce shrinkage by implementing a management system including loss prevention tools, which provides warnings in case of suspicious events –like unauthorized discounts or invalid returns – allowing management to take timely measures.
5. Keep the communication channel open
Customer satisfaction can be easily increased with direct and timely communication. If you wait too long before declaring your sale conditions, item limitations or hidden costs, you risk losing your customers’ trust - and business. Engage your customers, give them timely and precise information from the start – about conditions, delivery costs and item description – and drive up customer satisfaction. Inventory inefficiencies and unexpected returns have been eating up a large chunk of retailers’ revenues – but it doesn't need to be so. “Retailers can realize huge gains by addressing opportunities that are in hand and slipping through enterprise fingers,” said Greg Buzek, president of IHL Group. “It requires understanding the root causes of inventory and data disconnects and implementing the technology solutions and operational changes to address these revenue-limiting issues.” From open communication, to a clear business overview, to integrated and aligned system, do you have what it takes to recoup your earnings from the Ghost Economy? [hubspot id="10"]