NEW YORK (AP) – The dust collecting on gently worn Prada shoes and designer overcoats is a sign of the times at the nation’s secondhand shops.

“A year ago I would have bought that coat,” said Allison Billingsby, 40, as she pointed to an embroidered design priced at $250 at Manhattan-based Encore on a recent Saturday. “Now, I am going to wait for a bigger sale. I want to pay less and get more.”

Resale shops, which sell consumers’ castoffs – sometimes unworn, with the tags still attached – for two-thirds or more off retail, enjoyed robust sales as the economy started wheezing. Since the financial meltdown last fall, however, many thrift and consignment shops have been hurt not only as people are shopping less but because those who remain are being pulled away by 80 percent off signs at the mall.

“People are buying less frivolously,” said Peter Kabcenell, the manager at Manhattan-based consignment shop Encore. The chain’s sales fell in November and December for the first time in its 55-year history, before rising in January from the same month a year ago.

Shoes from such names as Chanel, Prada and Manolo Blahnik that retail for $700 to $1,000 at regular stores used to sell almost instantaneously when priced from $125 to $250, Kabcenell said. Now, with upscale stores slashing their prices on new merchandise, they aren’t moving after a month at that price. One item at Encore – a Chanel jacket – hadn’t had any takers in three months and was on its third markdown to $85.

“There is no frenzy. There’s nothing that they see that they must have,” Kabcenell said.

At some of the nation’s thousands of secondhand stores, sales are still strong, just not growing as fast as they have. Thrift stores sell donated goods to benefit nonprofit causes and tend to cater to lower-income customers – though many draw the same shoppers as consignment shops. Overall, the industry’s annual sales are in the billions, according to the National Association of Resale & Thrift Shops.

As sales shrink, resale shops are starting to cut prices, seeking more practical merchandise such as children’s wear and throwing special events to pull customers back from the sales racks at the malls – and sometimes back into the shopping scene as a whole.

Keeping up with retailers’ discounts has become a challenge. If regular stores are discounting new items up to 80 percent, how can resale shops compete if they typically sell used goods at just two-thirds off retail?

Encore customer Lisa Fleischer, 45, from Voorhees, N.J., said lately she’s been getting deals just as good or better at retail. Consider the Tahari suit she got at Loehmann’s, a discounter also experiencing rough times, for $40.

Greg Selig, owner of Encore, hopes the discounting at major retailers is temporary.

“They are not going to be able to survive at 70 percent off,” he said.

Bonnie Kallenberg, owner of 25-year-old Finders Keepers, which operates three consignment shops in the Atlanta area, each with a different focus, said she has thrived in past recessions but now she’s feeling pinched.

“I have never seen discounts on this level,” said Kallenberg, who hopes her sales this year will be even with last year. The year is not off to a good start – business was down 5 percent last month. That’s after enjoying average annual growth of 8 percent to 10 percent in recent years, she said.

“I have never had to compete on this level, and never had seen people holding onto their money as tightly as they have.”

The most financially strapped customers at her store that focuses on family basics – where the average price is about $10 – have “dropped from the radar” in recent months, she said.

The Salvation Army, which operates 1,300 thrift stores across the country, said that last year’s sales growth of 2 percent to 8 percent was in line with previous years. But it’s grappling with decreasing sales of big-ticket items like furniture and up to a 10 percent drop in donations, according to spokeswoman Melissa Temme.

Goodwill Industries International saw sales growth at its established locations slow from 9.8 percent in October to 7.1 percent in November to 4.6 percent in December, compared with the same periods in 2007.

“The broader economy is reflected in those numbers,” said President and CEO Jim Gibbons. “We have more shoppers than we have before, but people are buying less.”

He added that if donations continue to soften, “our sales will decrease dramatically.”

Thrift stores are struggling with declining inventory because more people want to sell their items instead of donating. But consignment shops – which typically pay sellers for their inventory after the goods are resold – are seeing the economy hurt their offerings as well. As people stop shopping, there’s less in their closets that they want to get rid of.

They’re also seeing more desperate people wanting to sell their personal items. Georgie Yost, owner of Chicago-based Leahey & Ladue Consignment shop, which has a generous assortment of designer merchandise, said she’s pained to see more elderly people trying to sell old garments.

“It’s sad stuff,” Yost said.

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