A person wears a face mask while carrying shopping bags in Columbus Circle on November 28, 2020 in New York City.

Noam Galai | Getty Images

Shoppers have shown an eagerness to spend on new clothes, electronics and jewelry, in recent months — and retail analysts are betting that splurging will fuel the holiday season.

Holiday forecasts from three different firms have predicted a sharp jump in year-over-year spending. Sales in November and December are expected to grow 7% compared with a year ago and reach $800 billion, according to Bain. Deloitte sees holiday retail sales climbing 7% to 9%, better than the 5.8% increase it tracked in 2020. A forecast by Mastercard SpendingPulse said holiday retail sales should rise 7.4% from a year earlier and climb 11.1% on a two-year basis, fueled by a rebound in in-store shopping and persistent consumer demand.

Retailers echoed similar expectations. Home Depot, for instance, said it sold out of an early release of Halloween decorations — an indicator that shoppers may have a big appetite for Christmas decorations, too.

Dick’s Sporting Goods said Monday it would hire the largest number of seasonal associates in the company’s history for the 2021 holiday season.

Walmart CEO Doug McMillon said the pandemic may inspire families to look forward to the holidays even more. The big-box retailer said early this month it would hire 20,000 supply chain employees, such as freight handlers and lift drivers, to keep up with demand during the busy shopping season and beyond.

“Customers, families want to celebrate Christmas,” McMillon said at a virtual conference hosted by Goldman Sachs. “They want to have a Thanksgiving, and if this situation with the virus enables it — or maybe even if it doesn’t — we’re going to see strong demand through the rest of the year.”

Here’s an early look at what shoppers and retailers may see this holiday season, based on CNBC’s interviews with retail analysts and comments from industry executives:

Supply chain complications will lead to delays

Businesses, meantime, are trying to ensure there is enough merchandise on hand to meet the predicted heightened holiday demand. Most categories of goods, from consumer electronics to toys to sneakers, are being impacted in some way.

Gap chief financial officer Katrina O’Connell said Thursday at the Goldman Sachs Global Retailing Conference that the apparel company expects the supply chain issues to persist deep into 2022.

“We’ll do our best to get units here as fast as possible,” she said. “The inventory might be lumpy.”

Lululemon‘s solution has been to charter extra air freight in an attempt to avoid backlogged ports. This is a strategy a number of retailers are employing, but it adds to transportation costs.

Salesforce estimates the costs of goods sold for U.S. retailers will rise by more than $223 billion this holiday season from a year ago, driven by jumps in freight, manufacturing and labor costs. 

Hiring challenges will compound retailers’ woes

Retailers want to move goods quickly from ports to stores to customers’ homes, but that will be hard if they’re not fully staffed. Aaron Cheris, head of Bain’s Americas retail practice, said the tight labor market is the single-biggest factor to watch this holiday season.

There are about 10 million job openings in the U.S., roughly 1 million more than unemployed people in the U.S., according to data from the Department of Labor and job placement site Indeed. Several million workers have stayed on the sidelines for reasons that range from child care challenges to a lack of needed skills.

Across the entire supply chain, companies will be stretched thin as they try to limit out of stocks and speed up delivery times, Cheris said. That means they will be in a tough spot if shoppers insist on getting goods delivered or have a strict timeline.

An employee outside a Target store in Clifton, N.J.

Adam Jeffery | CNBC

“For the last-minute purchases that I really wanted to get before Christmas, am I going to bother if you tell me the delivery window is eight days and it’s 3 days before Christmas?,” he said. “They may say, ‘Forget it. I’m not going to bother.'”

Retailers will miss out, too, if they don’t have salespeople available to find or suggest items and make sure popular purchases are quickly replenished in aisles, he said.

Deals? Don’t expect to see as many

At the Goldman conference, Macy’s chief financial officer Adrian Mitchell said markdowns have been lower than historical levels this year, in part because of rising costs due to inflation.

Macy’s said it is less concerned about having enough stock in jewelry, beauty items and home goods during the holidays. But it is being more cautious about apparel and footwear, due to sourcing constraints.

Shoppers are heading back to stores

Hurricane Ida could be a spoiler

Hurricane Ida flooded homes and damaged cars. AccuWeather estimates the storm caused more than $95 billion in damages, which makes it the seventh-costliest hurricane to hit the U.S. since 2000.

For some families, that extreme damage will mean thousands of dollars of unplanned expenses that range from repairing a roof to replacing washers and dryers. In the near term, the purchases could boost sales at home improvement retailers, such as Home Depot and Lowe’s, or appliance sellers like Best Buy. But Bain’s Cheris warns it might bust the budget for holiday gifts.

“That’s another place where my dollars are going to go where they may not have normally gone,” he said.

Shoppers may also put their money toward other channels, such as booking trips and hotel rooms at a higher rate, he said. Travel websites and hotels are reporting that the pace of bookings for December has been robust, and in many cases it is outpacing the levels seen in 2019. People are planning far in advance, which could drive up prices for procrastinators. The stepped up spending on travel could mean less money on tangible items.

Shoppers will be disappointed: Successful retailers will figure out how to manage through it

Shoppers are more likely to face headaches such as impossible-to-find items, weeks-long shipping delays and unattended cash register this holiday season, and that will shape how they feel about retailers, according to Bain’s holiday report.

Cheris said companies must find a way to turn around a frustrating or disappointing experience, so they don’t permanently lose a customer. They can also try to get ahead of those moments to blunt the impact, such as broadening a delivery window to leave buffer time to having substitute items to suggest if popular ones are unavailable.

“Those are sort of the moments of truth that really matter,” he said. “Those are the emotional moments that if you can find a way to do better on those, that’s what makes a big difference.”

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