After two years of higher spending, consumers are battling challenges like rising interest rates, dwindling savings, the return of student loan payments, and credit card debt.

"Call it choiceful, discerning, careful, cautious," Telsey Advisory Group CEO Dana Telsey told Yahoo Finance Live. "It's going to be a cautious [holiday] season."

JCPenney CEO Marc Rosen told Yahoo Finance that its customers, who typically earn a median household income of $75,000, are facing "bills that are $700 more a month" compared to two years ago, "whether that's fuel prices, rent, or food."

Retailers, in turn, are facing slowing sales — unless they break out the coupon books.

Best Buy (BBY), Nordstrom (JWN), Macy's (M), Kohl's (KSS), and Target (TGT) all saw same-store sales decline compared to last year in their latest quarterly earnings, whereas value-oriented retailers Walmart (WMT) and TJ Maxx parent TJX Companies (TJX) saw low-single-digit gains.

Online or in-store, the deals started earlier. Companies like JCPenney, Target, Best Buy, Walmart, and Macy's kicked off Black Friday-type deals in October and early November.

"Across the board, [retailers] are all being highly promotional to make sure that they are earning and keeping their core shoppers and not getting affected by the continued trade-down effect," Julie Van Ullen, Rakuten Rewards chief revenue officer told Yahoo Finance over the phone.

Rakuten, which is a shopping platform that offers cash back for online shoppers, is giving as much as 20% cash back at Macy's brand Bloomingdale's and at more than a dozen other retailers.

Read more: 6 ways to save money on your Black Friday shopping list

On a call with investors, Nordstrom CEO Erik B. Nordstrom said the retailer is using promotions as a lever to increase foot traffic, which "has been down a bit."

Specials like its members-only 5x Beauty rewards are "driving extra traffic” and helping with loyalty program sign-ups, said Nordstrom.

Where there are deals, consumers are responding. From Nov. 1 to Nov. 20, online shoppers have spent $63.2 billion, up 5% from last year, according to an e-commerce report from Adobe Analytics.

Deeply discounted categories include electronics (24% off list price), toys (23%), apparel (21%), televisions (19%), appliances (17%), sporting goods (15%), and furniture (13%).

As a result, online sales for toys are up 76% compared to October, and sales for appliances and apparel are up 30% and 22%, respectively.

That momentum is expected to continue throughout this week. During Cyber Week — the five-day period between Thanksgiving and Cyber Monday — the industry is projected to see $37.2 billion dollars in online spending, roughly 17% of the total holiday season.