Rise of the Hipster, Millennial Shoppers, Give Way to Expected Increase in Holiday Retail Spending

Editors' pick: Originally published Oct. 13.

A recent study by PricewaterhouseCoopers (PwC) forecasts that the 2016 holiday shopping season will be the best that retailers have seen in many years. Similarly, retail trade groups such as the National Retail Federation (NRF) remain positive about the potential of this year's consumer holiday spending.

The NRF predicts that holiday sales for 2016 are expected to reach $655.8 billion, a 3.6% increase over last year, which far outpaces the 7-year average of 3.4% since the economy started to recover from the recession in 2009. An all-time high amount is also expected to be seen in this year's Halloween spending, which is estimated at $8.4 billion, according to NRF's annual survey conducted by Prosper Insights.

According to PWC, a number of factors are at play in the increased expected holiday spending: including the rise of the millennial shopper, increased mobile orders and a generally more healthy economy.

So with that expected bump in holiday sales, retailers of all shapes and sizes are gearing up and hiring large amounts of seasonal holiday workers.

Amazon.com (AMZN) became the latest to do so, announcing Thursday that it plans to hire 20% more seasonal workers for its U.S. warehouses this holiday season as some competitors have kept hiring steady. Macy's  (M) , Target  (TGT) , Costco Wholesale  (COST)  and WalMart  (WMT) will also bring on swaths of seasonal workers.

"Consumers have seen steady job and income gains throughout the year, resulting in continued confidence and the greater use of credit, which bodes well for more spending throughout the holiday season," said Jack Kleinhenz, NRF Chief Economist.

"Shoppers told us they plan to spend 10% more this holiday season; an average of $1,121 each. And consumers with annual household incomes less than $50,000 will increase their percentage spending levels even more than consumers overall," wrote PwC in a report released Oct. 4. "Hipsters-upwardly mobile, college-educated millennials in enclaves such as Austin, Brooklyn, Oakland, and Portland-will spend $500 more this season than consumers overall."

The kicker, "hipsters" will spend about 33% of their budget on themselves, according to PwC.

Big retailers eager to lock in temporary holiday workers have started recruitment as early as October. According to NRF, retailers are expected to hire between 640,000 and 690,000 seasonal workers this holiday season, in line with last year's 675,300 new holiday positions.

Macy's announced their plan to hire 83,000 employees back in September, an increase of 3,000 jobs compared to last year. Target is looking to hire an additional 70,000 seasonal team members across the country and 7,500 team members for their distribution and fulfillment facilities. Toys 'R' Us, while refusing to disclose a national figure, said it will hire tens of thousands of seasonal team members to staff their stores and distribution centers across the country.

While companies are looking to hire, its not always easy to find employees to work the holiday season especially if there is competition for these employees. Some, including Toys 'R' Us and Yankee Candle, are offering seasonal employees perks such as higher pay, bigger merchandise discounts, more flexible hours and access to online schedule systems. Some have even broadened the pool to include people with criminal backgrounds.

"People that are searching for jobs during the holiday season should be aware that so many of these jobs are actually in the back room. Order fulfillment, processing, transportation, it's not only customer service but also people that are good with operation and very organized," said Andrew Challenger, vice president at Challenger, Gray & Christmas, a Chicago-based outplacement consulting company.

Finding the right staff to handle the significant volume and customer interaction during the holiday shopping season is especially important.

"One piece of advice I can give to every retailer out there is to communicate as much as you can across the departments so that everyone understand what is going on, so that everyone is well prepared to serve the customer," said Kevon Hills, vice president of research at StellaService, a customer service analytics company.

While the general positive outlook for the all-important holiday shopping season signals a return of consumer confidence in the American economy, brick-and-mortar retailers face challenges and competitions posed by their e-commerce counterparts, in particular, the one-stop online shop for everything from TV sets to baby diapers - Amazon.com. For customers who value convenience, price, speed and variety at their fingertips, other fast-growing e-commerce sites such as Wal-Mart's Jet.com also present a challenge to the rosy expectations of retail merchants.

Still, there are risks that may present themselves between now and the holiday season.

"Increased geopolitical uncertainty, the presidential election outcome and unseasonably warm weather are the main issues at play with the greatest potential to shake consumer confidence and impact shopping patterns," Kleinhenz, the NRF Chief Economist, said. 

Costco is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells COST? Learn more now.

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