As businesses gear up for the holiday season, they are optimistic about sales and predict growth for the next quarter and into 2017, according to the American Express Holiday Growth Pulse, a survey of 1,502 small and middle market businesses across a variety of industries. Specifically in the retail industry, nearly six in ten (59%) small business retailers think holiday sales will be stronger compared to last year, and 34% think they will be roughly the same as last year. Small business retailers (companies with fewer than 100 employees and annual revenues of $250,000 or greater) are not alone in their positive outlook – 81% of middle market retailers (companies with $10 million to $1 billion in annual revenues) also feel sales will be stronger than last year.

Retailers See Growth Potential in 2017 as Contingent on Successful 2016 Holiday Season
Small Business Saturday often marks the start of the busy holiday shopping season for small retailers, and holiday sales are a significant indicator of future growth for many of these businesses. Nearly six in ten (59%) small business retailers see their potential for growth in 2017 as being contingent on a successful holiday season. Middle market retailers feel even stronger about the importance of the holidays, with 89% saying their potential for growth in 2017 will be contingent on a successful 2016 holiday season. To ensure they can meet demand, the majority of middle market retailers (77%) plan to hire additional staff for the holidays, while less than one third (31%) of small business retailers plan to add staff.

“Retailers are optimistic about the upcoming holiday season and the impact it will have on their growth in 2017,” said Susan Sobbott, President of Global Commercial Payments at American Express. “As small and middle market retailers gear up for this critical season, many are offering promotions to draw customers in, and hire additional staff to ensure quality customer service during the busy season.”

Retailers Feel the Pressure to Discount; Use Social Media to Stand Out
Given the importance of the holiday season, small and middle market retailers are putting a great deal of effort into making sure they see strong results. As retailers of any size look for ways to succeed, many feel they will need to offer sales and promotions. Sixty-four percent of small business retailers, and 88% of middle market retailers, think they will need to be more aggressive in sales and promotions in order to stand out. As a way to raise their company’s profile, 89% of small business retailers will utilize social media this holiday season; of those, the greatest number are using Facebook (81%).

More than two-thirds of small business retailers (67%) say their company will be offering holiday discounts this year. Among those offering holiday discounts:

• 58% will start offering holiday discounts the same time as last year
• 42% will start offering holiday discounts earlier

Small Businesses Plan to Spend More on Gifts and Parties, Middle- Market Companies to Give Larger Bonuses
As small businesses across a variety of industries anticipate a successful holiday season, they plan to spend more than last year to thank current customers with gifts and reward employees with more generous holiday parties. More than seven in ten (71%) small businesses will spend money on holiday gifts for clients or customers this year. On average they will spend a total of $6,700; an increase of $1,330 over 2015. Almost nine in ten (87%) middle market companies also plan to give holiday gifts for clients and customers.

In terms of small business’ plans for staff this holiday season, more than two-thirds (69%) plan to host a holiday party or get together. For those hosting a holiday party, the average amount they expect to spend is $3,000; which is a $900 increase over last year.

Additionally, more than three-quarters of small business owners (80%), and 87% of middle market companies across industries are planning to give their employees bonuses this year. When it comes to the type of bonus they will receive, 54% of small business owners indicate that their employees can expect something equivalent to “a small stocking stuffer” (less than 5% of annual salary), 22% expect to give a gift “too large to fit in the stocking” (5 to 15% of salary) and only 4% will give staff the “gift of their dreams” (more than 15% of their salary). However, 20% say their employees should expect “a lump of coal” (no bonus at all). Middle market employees can expect slightly larger bonuses – 14% will be getting the holiday gift of their dreams (more than 15% of salary), 37% will be getting a gift too large to fit in the stocking (5-15% of salary), and 37% will get a small stocking stuffer (less than 5% of salary).

Despite Expectations for Growth, Holiday Season Is Not Carefree
In the near term, growth overall is the top priority for small and middle market companies across industries. Roughly three quarters (74%) of small businesses and more than nine in ten (91%) middle market companies identify growth as their top priority. As they consider expansion, 59% of small businesses expect their business to grow over the next quarter - with half who say their company will be ‘making gains’ (50%) and nearly one in ten who say their company will be ‘expanding by leaps and bounds’ (9%).

Despite their positive outlook and focus on growth, there are causes for concern during the holiday season:

• Employee productivity (41%) and data security (38%) will be greater concerns during the holidays than during any other time of the year for small businesses from various industries.
• For middle-market companies across industries, employee productivity is the greatest cause for concern around the holidays (24%) and 78% agree that employee productivity will be a greater concern at their company during the holidays than during any other time of the year. Additionally, 76% agree that data security will be a greater concern during the holidays than during any other time of the year.

Survey Methodology
The American Express Holiday Growth Pulse is based on a nationally representative sample of 1,000 U.S. small business owners/managers, defined for the purposes of this survey as companies with fewer than 100 employees and annual revenues of $250,000 or greater, and 502 middle market companies, defined for the purposes of this survey as companies ranging in size from $10 million to $1 billion in annual revenues. The anonymous survey was conducted online among financial decision makers, owners and managers October 4-16, 2016. The survey has a margin of error of +/- 3.1% at the 95% level of confidence for the small business sample of 1000 and a margin of error of +/- 4.4% at the 95% level of confidence for the sample of 502 middle market companies. Sub-samples of small business and middle market retailers have higher error rates.