"Retailers are going to have to be very aggressive on price and create more of an emotional connection with their brands."
Wal-Mart Stores Inc. is starting holiday sales by slashing the prices on popular toys. KB Toys also recently said it was cutting prices on more than 200 toys to $10 or less to "allow consumers to stretch their dollar in these challenging economic times."
"We hear [consumers] are nervous about the economy," said Wal-Mart spokeswoman E.R. Anderson. "They're shopping earlier, spending less and buying less expensive items."
That's why the sale rack has become so popular at Double Dutch. The owners expect flat sales this year, something they say they're happy with, given the economy.
"I think [shoppers] are coming with an intent for what they need, as opposed to: 'I'm going to look around and just get what I want,' " said Megan Luther, co-owner of Double Dutch. She has also noticed that shoppers are using more cash and debit cards instead of credit.
Annabelle MacNeal, a stylist browsing the racks at Double Dutch recently, said she's shopping more at thrift and second-hand stores. But she still likes to window shop and will buy something if it's good quality.
She avoids stores selling cheaper fashions that might not last as long.
Carey Williams, 27, of Hampden, was shopping at Double Dutch for a birthday present for herself. She said the economic slowdown hasn't affected her paycheck.
But she knows friends who have been laid off, and that's making her spend less.
"I'm definitely buying cheaper clothes," she said.
Retail experts said psychology is affecting shoppers as much as real-life financial problems.
"I suspect a larger percentage of [consumers] will be more careful than they might otherwise be as a result of the fear-mongering," said Douglas Ober, a money manager and chairman and chief executive of closed-end mutual funds Adam's Express Co. and Petroleum & Resources Corp. in Baltimore.
Retailers are finding ways to adapt to the change in shopping patterns.
Cupcake owner Lisa Schatz had sales increases of 20 percent in some months last year, but sales are flat this year. She cut back on inventory and is paying attention to what shoppers want, such as dresses for special occasions. She's also renting space to a hat retailer.
