J.C. Penneys and Kohl's battle for midstream holiday dollars

The mall store outside the mall -- Kohl's Corp.(NYSE:KSS)-- is set to do battle with J.C. Penney Co. (NYSE:JSP) this holiday season. The fight has already begun, of course, as last Friday -- a week ago today -- set off the retail buying frenzy headed into such holidays like Christmas, Hanukkah and Kwanzaa.

Who is winning? Well, both retailers seem to be marketing directly to the moderate-income shopper now more than ever as all dollars are up for grabs. While Kohl's stores are more keen on suburbanites than city dwellers (it's location strategy echoes this), J.C. Penney still sticks to the larger malls and the traffic patterns that emerge from mass visitations from paying shoppers.

While some think that Macy's and Dillard's are just too expensive, retailers like Kohl's and Penney's continue to recruit -- and keep -- those shoppers who feel like they need very good quality and a pleasant shopping experience, but who don't want the higher prices of the expensive department stores in the mall.

Where do Kohl's and Penney's sit in the minds of consumers? Above Wal-Mart and Target but below Dillard's and Macy's, that's where.