There's good news and bad news. The good news is the government reported Americans spent freely in January; retail sales jumped 2.2% according to the Commerce Department, the best showing since late 1999. Consumers took advantage of the warmest January on record by using their left-over gift cards, money they didn't have to spend on heating and end-of-year sales to scoop up clothes, furniture and cars.

Though the National Retail Federation remains cautious in its 2006 forecast, predicting retail sales will increase 4.7% from last year (2005 increased 6.1%), it seems there's light at the end of the tunnel.

The bad news is housing starts are soft, so home furnishings stores could lose some momentum in sales, and competition is getting stronger.

Think you're immune to the competition? Think again. We aren't talking about the furniture store down the street or the other store in town that does in-home design or even the funky specialty shop that carries lamps that are sort of like yours. We're talking department stores, big boxes and the world's largest retailer.

But, you say, my customer doesn't shop department stores and wouldn't be caught dead in a Wal-Mart. Really? Department stores don't offer anything different than other stores and Wal-Mart is low-end. Really? Pay attention.

Federated Department Stores, you know, the one that owns Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, The Jones Store, Macy's and Bloomingdale's, is reinventing itself. It's increasing the amount of one-of-a-kind product. In 2004 alone, about a third of Macy's sales of $13.6 billion was generated by exclusive or limited distribution merchandise; that's up about 25% from 2003. The company also is investing money, to the tune of $130 million, in Internet sales over the next two years. Though the bridal segment is the major online sales driver, home furnishings and apparel round out the top three categories.

Then there's JCPenney. The company has Chris Madden, along with her line of home furnishings, has just introduced Studio (a complete home furnishings collection) and is setting up a temporary store in Times Square this month to coincide with the Academy Awards. Visitors to the 15,000-sq.-ft. JCPenney Experience will find an assortment from the spring collections of the company's private and exclusive brands via interactive kiosks. The One Times Square building at 42nd Street and Broadway will be transformed into a big red box modeled after the retailer's signature trademark. The store will be open March 3–26.

Target (who seemingly pioneered the temporary store concept) continues to bring style to the masses with its Global Bazaar section, among other trendy, designer-oriented products. It's doing such a good job, it's got Wal-Mart rethinking its marketing and merchandise mix, though I'm sure no one at the Bentonville headquarters would admit to that.

Have you seen a Wal-Mart ad lately? You probably have but didn't realize it because the irritating price-slashing smiley face is gone. Instead Wal-Mart ads are beginning to feel like Target ads with a focus on lifestyle and image. Wal-Mart is going after a more affluent customer with store redesigns, bigger ticket items and retooling their marketing and advertising. The mega retailer hired an auto-industry veteran, Julie Roehm, as senior vice president of marketing communications this year after promoting John Fleming to executive vice president and chief marketing officer last year. Fleming had spent 19 years with Target in merchandising.

All of these retailers are competing for consumers' hard-earned cash, and that's just in the retail industry; let's not forget the auto and travel segments that also vie for their slice of the pie. Consumers have a lot of choices and as everyone knows, while they may be making more money, they also are more conscious of how and where they spend it. Even affluent shoppers get a thrill out of getting more for less; it's a challenge.

The big guys are on the move; they're remerchandising, seeking out private label product and changing the way they approach consumers. What are you doing to stay in the race?