Target (TGT), the fifth-largest U.S. retailer last year, will announce Monday plans to give customers a 5-cent discount for every reusable bag they use to pack their purchases.

The move comes within days of drugstore giant CVS' (CVS) plan to give participating CVS customers $1 cash bonuses on their CVS cards every four times they buy something but don't request plastic bags.

The programs come at a time retailers are feeling heat from advocacy groups, lawmakers and customers to take actions on environmental issues.

A team of designers at Saks Fifth Avenue envisioned "a piece of modern art" and hired a renowned graphic artist to create it. Their counterparts at Lord & Taylor demanded five prototypes, even traveling to a Korean factory to oversee manufacturing. Over at Bergdorf Goodman, staff members held secretive deliberations that stretched late into the night for nine months. The focus of all this scurrying was not this fall's couture line or next spring's resort collection. It was shopping bags.

Once a flimsy afterthought in American retailing - used to lug a purchase home from the store, then tossed into the trash - the lowly, free store bag is undergoing a luxurious makeover. From upscale emporiums to midprice chains, retailers are engaged in a heated competition to make the most durable, fashionable shopping bags. They are investing millions of dollars in new flourishes like plastic-coated paper (Macy's and Juicy Couture) and heavy fabric cord handles (Abercrombie & Fitch and Scoop).

Behind the battle of the bags is a significant shift in behavior that has turned consumers into walking billboards for stores. In cities like New York, Chicago and Los Angeles, customers have begun treating shopping bags as disposable purses that can be reused for weeks, if not months, to carry laundry to the cleaners, books to the beach or lunch to the office. But only the best bags make the cut. So stores, sensing a marketing opportunity, are racing to transform bare-bones bags into lavish, thick ones that will become free advertising. "It's an unspoken goal," said Terron E. Schaefer, senior vice president for marketing at Saks, which just redesigned its bags to be sleeker and heftier. "We want people to keep the bag."