Retailers should see an uptick in holiday sales in stores and online this year, according to Deloitte’s annual retail holiday sales forecast.

“We anticipate a modest increase in sales growth as economic fundamentals that boost spending improve further,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Consumers have ramped up their spending this year on the back of a strong labor market. We also expect slightly higher growth in disposable personal income during the upcoming holiday season compared with last year. Consumer confidence also remains elevated, despite some fluctuations in 2016. Additionally, households have been drawing down their savings, and therefore spending has been healthier than would normally be expected given the rate of income growth. While attention toward presidential elections may be a temporary distraction in the early part of the holiday shopping season, it should not have a negative impact on sales, and retailers may benefit from a pickup in postelection consumer spending.”

Deloitte’s Retail and Distribution practice expects total holiday sales to exceed $1 trillion1, representing a 3.6 to 4 percent increase in November through January holiday sales (excluding motor vehicles and gasoline) over last year’s shopping season. Additionally, Deloitte forecasts a 17 to 19 percent increase in e-commerce sales, reaching $96 to $98 billion during the 2016 holiday season.2

“We anticipate that marketplace fragmentation–more than e-commerce–will be the major disruptor this holiday season,” said Rod Sides, vice chairman, Deloitte LLP and retail and distribution sector leader.

“Retail competition won’t come from the big box down the street or major e-commerce players,” Sides noted. “It’s likely to be the small and midsized retailers that focus on niche products and experiences. This group has been collectively stealing share from large, traditional retailers to the tune of $200 billion in annual sales over the last five years. The retailers that compete on differentiated products and experiences should be better positioned to outperform those who try to compete on low-price, value and convenience, or continue to rely on conventional sales events and promotions.”

Deloitte forecasts that digital interactions will influence 67 percent, or $661 billion3, of retail store sales this holiday season. This figure reflects the amount of traditional brick-and-mortar retail sales impacted by shoppers’ use of digital devices including desktop and laptop computers, tablets, and smartphones.

“The trend to watch is the way that online, mobile, and store channels influence each other,” added Sides. “Large e-commerce players and digital platforms such as Facebook and Pinterest are shaping what people think a great shopping experience is–a fast, highly-curated assortment with access to visuals, information, and buying sources. Since these bigger platforms are more connected to the customer than the tradition retailer, it is important that they are part of retailers’ digital marketing campaigns this holiday season.”