In the competitive retail landscape, maintaining quality isn’t just a best practice—it’s essential for protecting revenue and customer loyalty. Yet, many retailers are unaware of the true impact that poor quality has on their bottom line. The Cost of Poor Quality (COPQ) represents the significant hidden and visible expenses associated with defective products, inefficient processes, and dissatisfied customers. From direct costs like product recalls and warranty claims to indirect costs affecting brand reputation and customer retention, COPQ can account for as much as 20-30% of total revenue in the retail industry.
This infographic sheds light on the areas where COPQ accumulates, highlights real statistics on its impact, and illustrates how improving quality can boost efficiency and profitability. With insights into prevention, appraisal, and failure costs, this resource empowers retail leaders to take actionable steps in reducing COPQ and strengthening their competitive edge.
Transcript
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20-30% of Total Revenue: The Real Cost of Poor Quality (COPQ) in Retail
Summary
The Cost of Poor Quality (COPQ) is the total of direct and in-direct costs associated with defective or substandard products or services that don’t meet quality standards, as well as the resources required to correct defects, address customer complaints, and remedy issues. These costs are both visible and hidden and incurred throughout the product or service lifecycle, impacting profits, efficiency, customer satisfaction, and competitiveness in the marketplace. This at-a-glance infographic will reveal tangible costs associated with the COPQ in retail.
Cost of Poor Quality = Internal Failure Cost + External Failure Cost
(stats ribbon)
15-25% of retailer revenue is lost due to bad data (MIT Sloan)
20-30% of total revenue is lost due to delivering poor quality products (SinglePointQMS)
30% of online purchases are returned in the U.S. (Commerce Tools)
76% of online shoppers in the U.S. want free returns from retailers (Commerce Tools)
15-30% of COPQ losses can be mitigated by moving up one Six Sigma level (Buthmann))
Poor Quality Impacts Resulting in Direct Costs
Prevention Costs
Costs associated with reducing failure costs
Quality Planning
Training
Preventative Maintenance
Housekeeping
Appraisal Costs
Costs associated with meeting conformance
Testing
Inspection
Audits
Surveys
Internal Failure Costs
Pre-delivery non-conformities or poor processes
Scrap
Rework
Downtime
Re-inspection
External Failure Costs
Costs identified after delivery due to deficiencies
Product Recalls
Returns
Warranty Claims
Lost Sales
Hidden Costs of Quality
Redesigning poor quality products
Process changes
Software changes
Downtime
Cost of errors in support processes
Ancillary indirect charges, i.e. space charges
Strategies to Minimize the Cost of Poor Quality
Develop a Cost of Poor Quality (COPQ) Plan
Implement tools like Lean Six Sigma, 5s Workplace, Value Stream Mapping
Identify, track, and monitor all potential costs associated with poor quality
Create mitigation plans to reduce or eliminate these costs
Regularly review and adjust the COPQ Plan for effectiveness
Work with a trusted quality engineering consultant with experience in the retail market
Sources:
Buthmann, Arne. “Cost of Quakity: Not Only Failure Costs,” February 26, 2010. ISixSigma.com.
CommerceTools.com. “Reimagining Retail Commerce in 2024,” N.D.
Faciane, Matthew. “Reducing the Cost of Poor Quality: A Manufacturing Case Study,” July 2018. Walden University.
More, Ashwin. “What is COPQ (Cost of Poor Quality)? Complete Guide for 2024,” N.D. AshwinMore.com.
Rodriguez, Diego. “What is Cost of Poor Quality (COPQ)?,” August 6, 2024. InvensisLearning.com.
Verma, Eshna. “Cost of Poor Quality: Definition, Types, Benefits, and Examples,” October 6, 2023. Simplilearn.com.
Uncover hidden costs impacting your bottom line. Request a COPQ Assessment to see how much your retail business could save by improving quality standards.
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