With a bleak economy, region retailers are facing what could be their worst holiday shopping season in decades but one of the best for consumers with money to spend.

With winter holiday sales normally producing about 40 percent of their annual receipts, poor sales in October and early November would translate into a disastrous season for retailers. But the situation could be the opposite for consumers as stores are doing everything possible to compete for holiday shopping dollars.

Both high-end and mid-range retailers have seen a sharp decline in sales during the beginning of the fourth quarter, with only value priced stores such as Wal-Mart seeing anything approaching normal activity.

Grant Monahan, president of the Indiana Retail Council, said the 2008 holiday shopping season will be "challenging" for retailers because of the poor economy, low consumer confidence and high unemployment.

"All of it could lead to what could be the worst holiday shopping season in the last 20 years," he said. "It's a critically important time for all retailers, which emphasizes the point that they will be very competitive and do everything they can to increase sales and bring consumers into their stores."

That will work well for customers, said Monahan, who predicts Indiana's holiday retail sales will increase by only 1.5 percent to 2 percent above 2007 levels.

"Retailers will perform at their best, be more competitive than ever before," he said. "They'll promote more heavily, offer greater value -- a good merchandise selection -- at a very good competitive price. It will be good for shoppers as they head to the mall."

Research by International Council of Shopping Centers indicates same-store sales for U.S. chain stores likely will increase 1.7 percent during the traditional November-December holiday shopping period.

The 2008 holiday season will be challenging for many U.S. chains, but Michael P. Niemira, the council's chief economist and director of research, agrees that discounters and wholesalers will have a relatively good season as consumers focus on basics and value.

"This year's holiday-season spending will be more modest compared with recent years as the U.S. financial and economic crisis weighs on consumers' willingness and ability to spend," Niemira said. "Not surprisingly, big-ticket purchases are likely to take a back seat to more traditional, basic and value-oriented goods and services."