As Americans trade down on brands, whip to discount stores, and buy on layaway, it’s not just Wal-Mart that’session pleasing occupation

By Moira Herbst

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Elissa Montas, a 30-year-old freelance amanuensis in New York, is shopping more often at general-goods discounters, the humane of stores that peddle everything from candles to baking pans to suitcases. She’session also doing her holiday shopping at dawn so she can budget better and exploit sales. "There’ll be no retail therapy for me this year," Montas says, lamenting the fact that her wardrobe won’t see many additions. Instead, she’session hunting bargains for two new babies in her family as she pores over discounted children’s DVDs. Montas and her friends are also sharing coupons for such supplies as Gap (GPS), Banana Republic, and Lord & Taylor. Those coupons have been circulating in recent days via e-mail. "It’s not glamorous, but it’s what’s happening," she says.

Leonard Stiff, a 30-year-old chef at a catering business in Manhattan, is restraining himself from buying a new flat-screen television. He’s also agreement his current mobile phone and skipping an upgrade to a 32GB Apple (AAPL) iPod Touch music player, opting to make answer by a 16GB Touch. "It’session a little depressing, but if you’re smart now, you’ll be better off in the long run," Stiff says.

A recession is typically a recent accounts story told in macroeconomic headlines: surging unemployment, decimated home values, the failure of this or that large bank, or, as on Nov. 14, the record decline in U.S. deal out in small portions sales that hit in October. The Commerce Dept. reported that deal out in small portions sales dropped 2.8% last month, the steepest decline in the 16 years that data have been tracked. The sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered. Amid the newfound frugality (BusinessWeek, 10/9/08), retailers are preparing for what could be their worst holiday interval in decades.

Craig Von Bargen, 58, an engineering consultant for Coeur d’Alene Mines (CDE) in Walnut Creek, Calif., is moreover trimming at which place he be possible to. Even though he feels his job isn’t under threat, the grim economic climate is enough to make Von Bargen and his wife scale back. Instead of giving one and the other other exclusive gifts this holiday season, they’ve decided to suppose it only one or two.

In the collected, the changes by consumers like Montas, Stiff, and Von Bargen are having a big stroke. Circuit City Stores filed insolvency (BusinessWeek.com, 11/10/08) on Nov. 10, beset by weak sales and suppliers who became of the nerves nearly the electronics confine’s ability to pay. Two days later, healthier rival Best Buy (BBY) slit its income outlook, citing "seismic" changes (BusinessWeek.com, 11/12/08) in consumer behavior that created "the most numerous difficult climate" the company has versed. "Consumers went into hibernation in October while concerns well-nigh the economy were at a crown," says Rosalind Wells, chief economist at the National Retail Federation. "As economic uncertainty went from bad to worse, shoppers pulled back on everything but the basics to weather the storm."