Retail's Inventory Data Gap Is Costing an Estimated $1.7 Trillion a Year

Global retailers lose an estimated $1.73 trillion a year to out-of-stocks and overstocks, according to research firm IHL Group. That is about 6.5% of worldwide retail sales. Part of the problem is basic: the stock counts in retail systems often do not match what is actually on shelves and in warehouses.

What the IHL study estimates

IHL Group's latest study, reported by Chain Store Age on 10 September 2025, calls the combined cost of out-of-stocks and overstocks "inventory distortion." A summary published by planning-software vendor Board, which promotes the study, splits the total into about $1.157 trillion from out-of-stocks and $572 billion from overstocks.

IHL identified supply chain disruption as the largest single contributor, at $301 billion a year. Organised retail crime and theft accounted for $379 billion, and personnel issues for $248 billion. Asia-Pacific had the largest regional losses at $642 billion, or 37% of the total, while North America's losses were $415 billion.

IHL also said that tracking accuracy remains compromised by shrinkage at store, warehouse and supply chain levels. The firm reported that fewer than one in four retailers have successfully rolled out AI or machine-learning tools in the areas most affected.

One caution on the figures: IHL's own product page also cites $1.77 trillion for 2025, a number that matches an earlier edition reported by trade press. The sources reviewed do not reconcile the two, so this article uses the $1.73 trillion in the study summaries. These are modelled estimates, and the full report is behind a paywall.

How records drift from reality

Academic research suggests inaccurate records are common. A 2008 study in Management Science examined nearly 370,000 inventory records from 37 stores of one retailer and found 65% were inaccurate. The authors identified auditing practices as a mitigating factor, and store complexity and distribution structure as aggravating ones. The data come from a single retailer and are more than 15 years old.

Supply chain handoffs add errors. A 2017-18 study by Auburn University's RFID Lab and GS1 US, covering more than 1 million items from five retailers and eight brands, found that 69% of orders shipped and received without RFID contained data errors, according to trade coverage of the research. IHL separately says 70% of retailers struggle with accuracy because of their own returns processes, with returned items miscounted, misplaced or lost.

The consequences reach customers. IHL president Greg Buzek said in a statement that as sales channels expand, accuracy matters more, because staff sent to find an item the system says is in stock can erase the margin on that order.

What the evidence says about fixes

RFID is the most studied remedy. In a field experiment published by Auburn researchers, RFID-enabled visibility cut record inaccuracy by about 26% across 13 stores of a global retailer. A second experiment across 62 stores and five categories found results ranged from no statistically significant improvement to 81%, depending on the category.

The Auburn and GS1 US study, as reported by an Australian RFID vendor, found average inventory accuracy rose from 63% to 95% and out-of-stocks fell by half where RFID was used. IHL names RFID as the single technology with the highest impact on reducing distortion and expects deployment in retail supply chains to grow 291% over the next two years.

IHL also reported that 76% of retailers using AI or machine learning for demand planning and forecasting saw positive results. It said leading retailers rely on integrated platforms rather than separate tools.

Limits of the evidence

Much of the data comes from analyst firms, vendors and RFID-focused research groups with an interest in the technology. Several figures are secondhand, and the key academic studies predate today's omnichannel operations. The sources reviewed do not give a verified, current figure for how much of the $1.73 trillion comes directly from inaccurate records, as opposed to theft, supply chain disruption or forecasting errors.

What to watch next

IHL has tracked inventory distortion for eight consecutive years, so a further update is likely. Readers should watch whether its estimate keeps falling, and whether RFID and AI adoption rates rise as projected. In the nearer term, the 2026 holiday season will test how well retailers' stock data matches shelves, particularly in North America, where IHL cited theft, tariffs and supply chain pressures. Whether retailers publish more inventory-accuracy figures of their own is also worth following.