Dive Brief:

• Due to ongoing wage stagnation and millennials’ focus on experience-related spending rather than acquisition of goods, holiday spending will likely be muted this year, according to several holiday forecasts so far.

• Meanwhile, many retailers are facing a major overstock problem, which will continue to put pressure on prices and their ability to connect with shoppers, according to research from retail data firm IHL Group.

• Overstocks lead to $471.9 billion in lost revenue each year due to forecasting failures ($170.2 billion), spoilage ($80.5 billion), supplier issues ($42.5 billion), weather related issues ($39.8 billion), and improper marketing ($38.4 billion), according to the report.

Dive Insight:

Overstocks are a complex and expensive problem that retailers will find complicates their holiday sales, according to this research from IHL Group, conducted by data firm Dynamic Action. 

Meanwhile, the holiday forecast from PwC underscored the importance of meeting shoppers where they are — including on mobile — and providing differentiated merchandise and a shopping experience that draw them to purchase. Otherwise, consumers continue to expect deals at the holidays, in part because they are wary of the economy and in part because retailers themselves have conditioned them to expect discounts.

“Customers’ desires for seamless shopping experiences in every channel have never been higher than they are this holiday season,” Ron Offir, founder of OFFIR Consulting, said in light of the IHL report. “Yet, retailers continue to struggle with connecting and taking action on their cross-channel data to deliver to these heightened expectations. Retailers who will lead, heading in to 2016, are those who can overcome the challenges of overstocks, out-of-stocks and returns and deliver both excellent experiences to their customers and increased profits to their shareholders.”

The IHL report also underscores the disconnect retailers have with understanding their customers, which are also highlighted in reports from PwC and the NPD Group. That is interfering with their merchandise efforts, leading to overstocks that in turn help depress prices and are tangible evidence of the disconnect. 

“As retailers gear up for the holidays, I see a few trends still emerging. They are focused on mobile-first interactions, customer-centric programs like personalization, and implementing prescriptive analytics to ensure they are meeting their customer expectations on every step of the buying journey,” DynamicAction CEO John Squire said in a statement. “Consumers are now accustomed to the ‘on-demand’ economy created by Uber, AirBnB, Starbucks’ mobile ordering and Amazon’s same-day delivery. Retail is no exception, and the category leaders are those who have their data connected and technology in place to answer customer’s demand for immediacy.”