“I’ll wait. It will be at least 50% off next week.”

These were my prophetic words regarding Halloween decorations while out shopping last weekend. This week, I realized that while I was right, the retailer had doubled-down and included Thanksgiving and Christmas decorations to the shelves. They were 25% off.

As a consumer, I am one of many who bemoan the earlier and earlier introduction and merging of holidays. However, as a consultant, it is an opportunity to track patterns and trends; and see what the almighty 4th quarter delivers. There are many predictions for this holiday season.

The Consumer Perspective

According to PwC, holiday spending is expected to reach its highest point since the Great Recession¬—the 19-month world economic decline that started in December 2007. In 2016, retailers are estimated to see a 10% increase in holiday spending compared to the 2015 holiday season – or an average of $1,121 per person. Consumers who are more optimistic about the economy as well as those who shop both physical and digital channels are driving this surge; holiday digital sales are anticipated to increase by roughly 25% over 2015.

One of the other interesting findings was that “from hipsters to higher-income households to socially and environmentally conscious consumers, niche retailers are stepping in to respond to the call for new and different holiday gifts.” This aligns and supports our recent insight, “What Retailers Can Learn from Flamenco,” where these niche retailers are able to successfully deliver individualized and unique experiences that are not realistic in most larger retail environments. Local retailers and independent brands yield considerable power this season as consumers seek shared values and a sense of community—almost 75% of consumers plan to shop locally, while 56% will seek independent retailers. It should be noted that the 2016 holiday outlook survey asked consumers about their current and future holiday spending plans, as opposed to retailers.

The Retailer Perspective

From the NRF, we can look at the 2016 holiday spending forecast based on an economic model using several indicators including consumer credit, disposable personal income and previous monthly retail sales releases. The NRF anticipates holiday sales to increase by 3.6% ($655.8 billion), which is significantly higher than the 10-year average of 2.5% and above the 7-year average of 3.4% since recovery began in 2009. Consumer confidence was once again pointed to as the primary driver, citing rising wages, low loan rates and readily available credit. Notably last year, holiday sales fell short of the NRF’s predicted 3.7% forecast, only coming in at 3.0%, with holiday sales reaching $626.1 billion. Poor consumer confidence and bad weather were key reasons shoppers stayed at home last year. Performance influencers for this year include geopolitical uncertainty, the presidential election outcome and unseasonably warm weather.

Key Holiday Initiatives

By both sources (and many others) we should see a robust growth in holiday spending, even though there are mitigating factors that could greatly change the final percentage.

So what are retailers doing – or should be doing?

Digital Infrastructure

The increase in digital sales is motivating many retailers to invest in new promotional capabilities (e.g., via social media channels) and in strengthening their eCommerce supply chain. There is obvious hyperawareness of these during the 4th quarter as many consumers are looking for and expecting the best prices of the year and that purchases will arrive on time— with free shipping. These investments are long-term commitments that can help improve retailers’ bottom-line year round, by remaining top of mind after proving their value during the holiday season.

Of course, mobile is a huge topic today and should be on every retailer’s list of priorities – especially for the holiday season. In a recent Parker Avery point of view, “Enhancing mCommerce Capabilities and Customer Experience,” we talk about some key tenets for a successful mobile presence and user experience. Underlying systems, technology infrastructure and support organizations should be thoroughly tested and in place so that mobile apps and sites can handle the expected volume.

Seasonal Hiring

Retailers are also ramping up their workforce to prepare for holiday expectations, which is not a new development. However, like the early holiday assortments, retailers are hiring much earlier in the year. Causing a cog in the wheel is the shortage in available labor. The unemployment rate is down, and while this is good news for the economy overall, it makes for an even more competitive landscape for retailers when it comes to hiring. One way retailers are combating this is by establishing smaller fulfillment operations closer to urban centers, thus taking advantage of more labor opportunities and proximity to consumers. Such initiatives address both the increased need for labor, as well as fulfillment efficiencies.

In light of staffing up for the holidays and the increased competition from digital channels (in particular the mobile channel), retailers need to ensure their staff training is up to date and being effectively delivered – particularly for customer-facing roles. Holiday stress is a common theme, and training (even temporary employees) absolutely should include handling all varieties of customer issues. An assessment of roles and responsibilities should also come into play. To expedite transactions and ensure customer satisfaction amid the frenzy that accompanies the holiday season, retailers should consider empowering cashiers with the authority to make decisions that will quickly quell any rising customer concerns (within appropriate boundaries, of course). Having to “call the manager” over a minor price discrepancy with a long line of shoppers waiting to check out can wreak havoc on customer satisfaction and possibly lead to cart abandonment and lost sales – not to mention increased recovery needs.

Inventory Management

Another key area of focus must be on inventory management. While it’s too late in the year to do much with existing systems, employees should be intimately familiar with using both internal systems and consumer-facing systems like mobile sites, apps, self-checkouts and kiosks. Staff must also understand system limitations and how to address stock-outs, inventory accuracy issues and fulfillment options. If the system is not in real time, business processes or “workarounds” should be in place so that inventory visibility is as transparent as possible and associates can communicate this to shoppers when necessary. An informed store associate who can provide a customer with the location of an item or assurance about when products will be delivered and / or restocked is a highly critical asset. Policies and procedures for handling inbound and outbound products, as well as staging, stocking, returns and recovery must be in place and adhered to with acute precision.

It’s no doubt a lot to consider. However, retailers who take these steps – even in small doses – will be much better positioned to cruise through the holiday 2016 season with better results, as well as strengthened customer loyalty and higher employee satisfaction.

While I did end up only buying Halloween decorations on last weekend’s shopping trip, I had also been looking for a remote-control outdoor extension cord for some patio lights. Knowing this item was in a typical retailer’s holiday assortment, I quickly found one amid the holiday string lights display as the store associates were unpacking their newly delivered boxes. So despite my angst at seeing the holidays once again rush at us much to quickly, I was happy that I found this item so easily – and also secretly a bit pleased to have unintentionally begun my contribution to retail’s “most wonderful time of the year.”

Courtney