"In times like this, you have to have product that people must have," said Schatz, a former executive at the much larger clothing retailer White House Black Market. "Overall we're seeing flat growth, but I've been around long enough to know how to manipulate inventory to make sure you stay profitable."
Schatz expects to discount merchandise during the holiday season to compete with other retailers doing the same thing.
Mitchell Pressman, the owner of Chesapeake Wine, remembers another financial squeeze during the dot.com bust from 2000 to 2002. At the time, Canton was rich in technology companies, but many went out of business. He said his strategy is to cut back on some inventory and focus on less-expensive wines.
"Having lived in business through a few other recessions, what I don't want to do is overreact," Pressman said. "Most of the people we are selling to are affected by the economy but not desperate. People are watching their budget, but they're still consuming."
Pressman doesn't use revolving credit to buy inventory and to help keep the business going. He spends only what he brings in.
But a study by accounting and consulting company BDO Seidman, LLP, found that 41 percent of chief financial officers at U.S. retailers have experienced a tightening of credit by their lenders. More than a third said they were reducing planned inventory purchases for the year because of it. Some may have to lay off workers because of the problem, the study found.
"Banks are getting more conservative, and at the same time you've got consumer-based businesses like retailers suffering because consumers aren't spending as much," said Doug Hart, a partner in the retail and consumer products division at BDO.
He doesn't expect consumers to notice the difference during the holiday season.
"Is that something consumers will see in stores - empty shelves?" asked Hart. "No. The last thing retailers want to do is make stores look understocked and understaffed during the holiday season, because that is the most promising selling time for them."
SmartReply, which provides mobile marketing and advertising services to retailers, said its clients are also considering cutting inventory purchases but haven't yet felt the credit squeeze.
He said retailers hope the federal government's bailout of financial institutions will help improve the economy.
"Retailers are embarking on solid strategies to attract customers and retain the ones they have, and consumers will hopefully be buoyed by both the presidential election and a resolution on Wall Street," said Mike Romano, executive vice president of SmartReply.
Gotta Have Bags in Hampden had a steady stream of shoppers one recent afternoon. But owner Levitas still worries about a sales decline this year.
She has already noticed shoppers are looking to spend less.
Levitas, who doesn't use revolving credit, has been adjusting her spending so it's in balance with sales volume.
She hopes her reputation will help her survive these tough times.
"We'll get through this," she said. "I'm very optimistic."
frosty forecast
Holiday retail sales this year are expected to rise 2.2 percent. That would be half the average yearly increase from 1998-2007 and the slowest pace in six years.
