Early predictions call for fewer deals, delays

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

Industry-wide supply chain challenges that include factory shutdowns, chip shortages and port congestion are expected to last through the holidays and well into next year.

The pressures threaten to spoil the holiday season for families that don’t shop soon enough. Many phases of the manufacturing and delivery processes are taking longer than normal. Consumers can expect packages to take more time to get to their doorsteps, as delivery carriers including UPS and FedEx work through their own bottlenecks.

Hiring challenges will compound retailers’ woes

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

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.”