No, don't expect to see windmills and solar panels -- consumers are leaning toward a different kind of green this holiday season: cash. Rather than hit their credit cards, shoppers will only be spending money they have (and can see and touch). Seventy-one percent of consumers are looking to cash and debit cards as their primary form of payment for holiday shopping this year, which the National Retail Foundation pegs as the highest level since 2005.

This could be a problem for the retailers.

Sure, you'd think that the merchant fees on credit cards make cash more attractive to the sellers. But, Ellen Davis, a spokesperson for the NRF, says that most retailers have found they can talk credit card buyers into up-sells more easily. That leads to a bigger basket size and more revenue. Done successfully, it should comfortably absorb the impact of merchant fees. James Roberts, a marketing professor at Baylor University, adds that using plastic makes consumers more likely to buy at all, let alone more.

Okay, so we all know retailers are looking for every holiday edge this holiday season. Consumer spending's been down, and the sprint to Christmas offers the last chance to pump up those Q4 numbers. They are trying out new ways to reach and engage shoppers, particularly via social media. But, the most effective way to bring new customers into the fold -- and keep them around for a while -- may be to pick up the shipping tab. It's pretty old fashioned, but it's best by test.

Once considered a bonus, a special effort, free shipping isn't really optional any more. If a shopper has to pay for shipping from one retailer, he may move on, knowing that plenty of others aren't charging for it. Rebecca Lieb, vice president at Econsultancy, a digital marketing news publisher, notes, "You're delighted the first time you get free shipping, but you expect it the second time."

And, free shipping shouldn't come with any strings attached, according to Shop.org's eHoliday Study (Shop.org is the e-commerce division of the National Retail Federation). Five years ago, 25% of retailers didn't charge for shipping during the busiest shopping day of the year. This year, however, 57% are planning not to hit their customers up for the extra cash, making this cost just another expense associated with running the business during the holiday season.

What's on your Christmas wish list? If the National Retail Federation is right, gift cards are probably holding a respectable place toward the top of the list. These little pieces of plastic are requested most this time of year, and they have the added perk of allowing people to get what they want instead of money wasted on presents that sucks. This trend may give retailers a hand this year, as they'll be able to keep their inventories down.

If shoppers are slow with the cash, retailers won't have to resort to just slashing prices as they had to last year to move product out the door. When the stuff on the shelves is cheap, gift cards aren't as attractive because there's a deal to be had! This year, if inventories are kept down, gift cards are more likely to move.

Traditional retailers haven't exactly embraced online sales channels. Sure, they all have websites, and they sell varying amounts of merchandise through them, but they've been slow to tap into the potential. When I was watching the space as an analyst at a major consulting firm (admittedly, back in 2007), many retailers equated a website to a new store opening. Finally, however, this industry is starting to see the potential of this venue, particularly when it comes to tracking consumer behavior.

When the CEO of Macy's (NYSE: M), Terry Lundgren, says that online sales are only good for 6% of last year's total sales, it's a hint. The translation: "We focus on where the revenue is" is much different from "We focus on where the revenue could be." Aeropostale (NYSE: ARO), on the other hand, sees the upside of playing in the online space, which is where it saw revenues spike 85% last year. Aeropostale has seen increases in traditional venues too, but nothing like what it's realized on the web.

So, maybe there's something to this internet, after all.

It's going to get worse before it gets better, according to Stone & McCarthy Research. Early 2010 has "the more troublesome outlook," as the economy will have to walk on its own, the research firm says. This year, it's had a pair of crutches: tax credits for first-time home buyers and the cash-for-clunkers program. So, if the stimulus hasn't taken hold by the end of the year, the first quarter could be a bruiser.

The firm adds that "continued growth in aggregate demand" is needed, bringing the discussion back to consumer spending . . . which is where it will always land. We're likely to see the 3.2% growth rate from July through September drop to 2.4% at the end of the year because the crutches will have been gone. And, let's not forget that unemployment is expected to break the 10% level next year.

Consumers are finally spending more, with September posting the first gain in more than a year. The International Council of Shopping Centers and Goldman Sachs (NYSE: GS) found that retail sales inched 0.1% higher last month. It doesn't seem like much, but a gain when you anticipate a fall is good news magnified. But, it came at the expense of great deals and other tools to entice somewhat hesitant customers into stores.

Kohl's (NYSE: KSS) and Limited Brands (NYSE: LTD) reported sales increases in September for stores open more than a year. J.C. Penney (NYSE: JCP), Macy's (NYSE: M) and Target (NYSE: TGT) posted declines, but they were better than expected. Delayed school openings thanks to a late Labor Day helped push to September sales that might have occurred in August otherwise.

Of course, all eyes are on the coming holiday season. The National Retail Federation forecasts U.S. consumer spending of $437.6 billion – up only slightly from $433.7 billion four years ago. So, we still have a lot of ground to make up before we can celebrate a recovery. As long as the situation is staying steady, though, we'll at least have a solid starting point.

We all know that this Christmas is going to be particularly tough on retailers. Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Sears (NASDAQ: SHLD), and Best Buy (NYSE: BBY), as well as hipper competitors Abercrombie & Fitch (NYSE: ANF) and Gap (NYSE: GPS), will be fighting it out at the mall Mad-Max style the next several weeks.

It's not going to be pretty. With comps and cash flows on the line, these chains will be looking to extract as much discretionary money from consumer wallets as is heavenly possible. But there's a troubling sign with respect to a popular gift option this year.

Gift cards have been soaring in popularity over the years. Not only do they make great presents, but retailers love them because they represent a little insurance policy: if the Christmas quarter isn't as strong as a retailer would like, then redemption of gift cards will theoretically help the bottom line in the next quarter. The card purchases do not get recorded as a sale until they are redeemed. So it's like a squirrel putting food away for the long, cold winter.

Unfortunately, we have some bad news on this front: gift-card sales are expected to be down 6% this season. That's not what retail investors want to hear. It's just another reason for traders to short this sector.

The National Retail Federation recently announced a dismal forecast for the upcoming winter holiday shopping season: it will be the slowest since 2002, with total sales of $474.5 billion. Try telling that to high-end apparel designer and retailer Guess? Inc. (NYSE: GES), which reported a month ago record 2Q FY2008 revenues of $388 million, up 48%. Guess? is looking towards a dynamite holiday clothing sale season, with the biggest increases coming from international markets. Just over half of Guess?'s revenue presently comes from North American markets, which posted sales increases of 16% for the previous quarter, the lowest sales increase of any geographic region. Total sales in Europe rose 121%, that's correct, a triple digit increase, to $108 million. Just in the previous year, sales in Guess? Asian market, especially South Korea, have increased 75% to just over $57 million. Worldwide licensing revenues are up 51% to $21.5 million.

Unlike many retailers in the U.S., Guess? Inc. finds itself in the enviable position of not being primarily dependent on the U.S. holiday shopping season to post big gains. Despite tightening of much consumer shopping in the U.S., driven by housing concerns and a credit crunch, Guess? Inc. has posted earnings growth for 16 quarters in a row. Clearly the retailer has the right mix of higher-end apparel and edgy advertising that appeals to younger, affluent consumers whose buying habits have yet to show signs of slowing down.

Guess? Inc. recently raised its FY2008 guidance to reflect a revenue forecast of $1.56-$1.6 billion, with diluted EPS of $1.79-$1.84. Guess? Inc. also rasied its dividend to $0.08 per share. The stock will take investors for a ride. It began the year trading at $64.70, rose to a high of $85.19 on 13 March before splitting 2-for-1, and has risen more than 23% since the split, to close Wednesday at $50.75, up another $0.25 with no reason to expect a downturn anytime soon.

The National Retail Federation expects 2007 holiday sales to be up only 4%. That would make for the lowest gain since 2002. According to The Wall Street Journal "The NRF forecast follows a similarly gloomy one issued this week by TNS Retail Forward, a Columbus, Ohio, consulting company that predicted an increase of just 3.3% in fourth-quarter sales this year."

Anyone surprised by the news must have been living under a rock for the last two months. Mortgage defaults and falling home prices have made the US consumer feel as poor as a church mouse. If oil stays above $80, home energy and gas prices will begin to rise. There will be coal in the stockings this Christmas.

The prediction of slow retail sales during the most important season of the year leads to the question of whether a recession is upon the US economy and how deep it will be. Even as business spending has slowed, consumers have been willing to run up debt to continue to make purchases. Now, large retailers like Wal-Mart (NYSE: WMT) will have to face a customer who is tired of shopping.

But the consumer is beset by anxiety over the future of his earning power, the value of his home, and the direction of the economy. Ebenezer Scrooge cannot be far away.

Douglas A. McIntyre is a partner at 247wallst.com.

Yesterday, Brian White blogged about unused gift cards. Millions of people receive gift cards during the holidays, and many of these cards end up sitting in purses, pockets and desk drawers, unspent. This represents an enormous profit for retailers, who keep the payments for the cards without having to part with any merchandise. What an easy way to make money!

According to a recent AP report, Best Buy (NYSE:BBY) claimed $43 million in profit from gift cards sold but not used in two years or more. Limited Brands (NYSE:LTD), the owner of Victoria's Secret, claimed $30 million.

Gift cards are very popular. The National Retail Federation estimates that retailers will sell over $25 billion in cards this year. Somewhere between 5 and 25 percent of the cards will not be used. Interestingly, rates of use vary according to the kind of store the gift card is from. Cards for basics, such as food, get used quickly and in full. Less essential needs such as entertainment have higher rates of disuse.

I hate the idea of just giving money to retailers -- although I know there are a few gift cards in my desk drawer. So let's all make a vow to use those gift cards that come in this year. Make the stores earn their money!

I know it is way too early to begin thinking about holiday shopping, but not in the retail world. Two large retailing trade organizations has issued their forecasts for the holiday shopping season. The news isn't bad, it's just not all that good. National Retail Federation forecast 5% growth in retail sales for the 2006 holiday season over last year's holiday season sales of $435.6 billion. The average increase for each of the past ten years has been 4.6%.

So 5% is looking okay, as long as the downward trend in the housing market does not accelerate at the same time as gasoline and energy prices increase while consumers move into the colder months. Much of holiday retail spending is based on the psychological state of consumers. More negative news, such as Ford offering to buy out 75,000 employees, will put consumers in a defensive frame of mind. Preservation of capital will become widspread. Holiday spending accounts for 20% of all retail spending throughout the year.

Retail Forward Inc., another large retail trade organization, has issued its preliminary holiday shopping forecast of 5.5% increase over 2005, which was a banner holiday shopping period. Retail Forward has based its assessment on stable interest rates, a slowing housing markey and moderate increases in energy prices. This holiday shopping season is forecasted to be good for supercenters and discount clubs, while sales at higher-priced department stores will continue to lag. Retail Forward will provide a more detaled holiday shopping forecast via Webinar on Wednesday, 27 September 2006, beginning at 11 A.M. EDT.

Holiday shopping online is forecast to increase 23% from $27 billion in 2005 to $33 billion in 2006. While this may sound like a great deal of money, online sales account for just 3% for all retail sales.