As retailers close the books on a grim back-to-school shopping season, the message on what to expect from the holidays is already coming through loud and clear: pain and then a little more pain.
 
Early forecasts are predicting the weakest holiday sales in years, and America's retailers are honing strategies in an effort to capture their portions of a shrinking consumer budget.
 
People are planning to spend on average $781 on holiday shopping this year, 7 percent less than they expected to fork over in 2007, according to the CNBC/Portfolio.com Wealth in America Survey. The share of respondents planning to spend more than $1,000 fell to 25 percent from 33 percent at the same time last year.
 
(For a look back at strong holiday performers in recessions past, see Portfolio.com's slideshow.)
 
Heading into retail's all-important fourth quarter, rising unemployment and high energy prices continue to depress discretionary spending, while recent turmoil on Wall Street is dragging consumer confidence ever-lower.
 
The National Retail Federation has predicted that total sales will rise 2.2 percent for the November and December period, their slowest pace since 2002.
 
TNS Retail Forward sees holiday sales for 2008 as growing a paltry 1.5 percent from 2007, which would make this holiday shopping season the worst since 1991; consulting firm Deloitte is slightly more optimistic, forecasting a 2.5 to 3 percent increase.
 
But unlike last year, when sluggish holiday sales caught retailers off guard, National Retail Federation senior vice president Ellen Davis says that this time, retailers are going into the holiday season ready to react. They are girding for a challenging environment by controlling inventory and costs, pulling back on holiday staffing, and also finding ways to reach out to financially constrained shoppers.
 
"This year, from a consumer standpoint, everything takes a backseat to price," says Davis. "We expect to see deep promotions and retailers promoting gift ideas that don't cost as much. We're also seeing retailers let their website play more of a role in marketing, as high gas prices have people checking the internet before they head to stores."
 
Home furnishings are expected to be one of the hardest-hit categories, and growing uncertainty in capital markets has the luxury industry wary of conservative spending amongst affluent shoppers.
 
Of course, even in the gloomiest of holiday seasons, certain items always manage to outperform the norm—this year, as more and more Americans look to save money by getting entertainment at home, consumer electronics are expected to thrive as holiday gifts.