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Lea Frederick ’s task seems paradoxical: Shrink the product but keep it substantial.

In the three years she’s run the niche-gift creation company All Wrapped Up, Frederick has offered two sizes of gift baskets: The $65 Triad basket and the smaller, $45 Greensboro basket.

This year, she’s working on a $25 version as well.

Her rationale is simple: “I’m looking at the climate,” she said.

Spooked by economic uncertainty and job insecurity, many consumers have shut their billfolds. Personal spending dropped 0.3 percent in September, the biggest decline since June 2004, according to a report from the U.S. Commerce Department. That followed flat readings in both July and August, contributing to the worst quarterly performance in 28 years .

Merchants have taken note. As the holidays approach, many local retailers said they are shuffling their merchandise mix to include lower price points, responding to customer demand and the realities of a down economy.

“People are looking to spend less this year,” said Barbara Haralson , the co-owner of Wild Birds Unlimited. When ordering holiday items for her store this year, Haralson said she looked for more merchandise in the $15 to $20 range, down from the $25 to $30 range she stocked last year.

Customers plan to spend an average of $832.36 on holiday-related shopping, up just 2 percent over last year’s $816.69 , according to information from the National Retail Federation. The slim increase is the lowest since the federation began the survey six years ago .

Bad economy or not, some things buyers may deem worth the price. If a customer is looking to buy a pair of designer jeans, they may plunk down $150 to $200 because that’s something that will be worn over and over, said Rebecca Byrd , owner of the contemporary women’s boutiques Perch and Rebecca & Co.

But if the customer is looking for a top to wear just for one night, a $150 blouse may be more than they want to spend, she said.

Keeping with the times, Byrd has added more lower- priced lines to her stores. “If we have tops for $60, people will pick it up for something extra,” she said.

But that doesn’t mean buyers want flimsy. And merchants, likewise, aren’t willing to sacrifice quality — or their reputation — just for a low price.

Merchants said they’ve taken pains to make sure less expensive items still reflect quality. “It’ll still feel special and on target with what’s going on in the fashion world,” Byrd said of some of her new lines. “They still represent the fashion that we want to show in our store.”

National retailers are also trumpeting their lower-priced offerings this year. For instance, Build-A-Bear Workshop has signs in the window announcing more $10 animals than ever before, and Kmart has already started advertising its early Black Friday sales.

“It really all starts with the price point,” said Kathy Grannis , a spokeswoman with the National Retail Federation. “We’ve noticed that retailers have been very aggressive with their promotions and sales already this holiday season. We do expect to see that continue.

“To be that aggressive now speaks to how retailers are anticipating a challenging holiday season and are recognizing the fact that their shoppers will put everything second to price this year.”

The Associated Press contributed to this report.

Contact Lanita Withers at 373-7071 or lanita.withers@news-record.com