Battle of the Bottom Line: Retailers Go Head to Head for Holiday Shopping Dollars

In a competitive market, stores are trying to get holiday sales in the bag earlier than ever.

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In the battle for holiday shopping dollars, the early bird gets the worm. And with spending expected to rise more than 4 percent this year according to the National Retail Federation, retailers are doing everything they can to draw in consumers and build loyalty before this year's holiday shopping melee.

And there's a lot at stake—according to some estimates, the holiday season accounts for as much as 40 percent of total annual sales with many retailers still in the red before shoppers descend on their local malls on Black Friday (the day after Thanksgiving).

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But times are changing. Despite improving confidence in the economy, consumers might still be feeling a bit wary about opening up their wallets and going overboard this holiday season thanks to sluggish economic growth and the fact that millions of Americans remain unemployed.

That's meant retailers have had to get much more creative when it comes to pitching their wares to consumers, running advertisements and establishing holiday displays earlier than ever. By mid-October, Target had already started running its holiday commercial, a move that the industry hadn't seen before.

"Black Friday ads have been leaked since September, and this year Black Friday ads have been officially announced weeks earlier than last year," says Dan de Grandpre, CEO and editor-in-chief of consumer news website dealnews.com. "Everything is just moving up in general—retailers are tweaking and planning and seeing just how early they can open before people say 'I just want to sit down and digest my food and watch a football game.'"

The lucrative holiday season has also ignited increasingly tough competition among retailers whose market spaces haven't traditionally bumped up against one another, further fragmenting the pie of holiday shopping dollars stores vie for. Home improvement stores, drugstores, and grocery stores have made stronger efforts in recent years to "insert themselves into the conversation" when it comes to holiday shopping, says Kathy Grannis, spokeswoman for the National Retail Federation, carving out space to display holiday decorations and other festive knick-knacks.

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"Drugstores, for instance, used to be just for body aches and pains," Grannis says. "Now they have prominent displays of holiday trees and gift sets."

Sensitive to the tight financial situations of many American households over the past few years, several retailers have also revived nearly obsolete layaway programs and temporarily eliminated or lowered fees they used to charge for financing customers' purchases over time.

The terms of layaway programs have become yet another marketing tactic for retailers in their pursuit of holiday shopping dollars, with mega-stores such as Sears, Toys R' Us, and Wal-Mart going head to head, according to a recent USA Today report.

"Retailers know there are a limited number of holiday spending dollars and they're looking to get those dollars early and often," says Sheri Petras, CEO of consumer insight firm CFI Group.

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As much as more time is beneficial to consumers when it comes to paying for their holiday hauls, time is also money for retailers. An increasing number of stores are choosing to forgo observing the Thanksgiving Holiday this year and keep their cash registers humming for shoppers looking to get a head start on Black Friday madness. Target announced Monday it will open its doors at 9 p.m. on Thanksgiving Day, following similar plans by other retailers such as Wal-Mart.

But the move could ultimately backfire on retailers trying to pad their profits if the employees working at stores on Thanksgiving would rather be dishing up their second helping of turkey than dishing out products to holiday shoppers.

"A critical part of the shopping experience is customer service," Petras says. "If the associate doesn't want to be there, the customer experience suffers."