Doing well in bad times

Some small retailers were able to change course before holiday, head off economic crisis

Being small also comes with some disadvantages. Larger retailers are often better able to negotiate lower prices with vendors because of volume. Larger companies also keep more cash reserves to be able to buy new inventory. Smaller business often must sell most of what is in the store to make cash to buy new inventory, Zhang said.

"The small retailers are more likely to be tied to cash and tied to liquidity problems in this type of environment," Zhang said.

Specialty bakery CakeLove has watched sales plummet by half since last year, even as it has cut staff, introduced lower-priced cakes and run specials on gift certificates. The company - which has seven stores, including one in Canton in Baltimore - introduced a two-layer cake for $25 and is offering free cupcakes with every dozen or half-dozen bought. It cut employees by 25, to 75.

But baked goods are something many people are deciding that they can do without this year or opting to make on their own.

"Everybody I know has cut back on spending," said Warren Brown, owner of CakeLove. "As a luxury item, we're definitely feeling what's going on with the economy."

Carroll said Smyths shoppers are also cutting back on what they spend by buying less-expensive jewelry.

"People are being more cautious," she said. "They're spending $2,000 instead of $10,000."

But the company has seen a surge in sales in the days before Christmas. And while it might not be enough to save the season, it has definitely helped the sales numbers.

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For developments on the economic crisis go to baltimoresun.com/business