Kristin Masunaga decided this year it would be a good idea to stock scarves in the $30 range – along with the ones her family-owned store carries for $100 or more.

The holiday season, the make-or-break time for some retailers, is especially crucial for independent specialty stores like Masunaga's Madam Butterfly at Pavilions shopping center in Sacramento. Such stores, as well as boutiques, must survive or fail on their own acumen, industry watchers say.

For the second round of a recession-dampened holiday, Masunaga, the store president, has learned a thing or two.

At her women's contemporary fashion store, Masunaga not only expanded her price points, but also reduced inventory, adjusting for an anticipated modest season.

"Last year, we were caught off guard," she said. "We adjusted our buying, and we're prepared for it this year."

This holiday season, shoppers appear to be flocking to discounters, leaving only 18.5 percent seeking out speciality stores, according to the National Retailers Federation.

It's a small slice of the holiday pie, but the ways independent small retailers capture their share are as varied as the kinds of stores they operate, said Daniel Butler, the foundation's vice president of retail operations.

In his view, going into business without a lot of debt, having a passion for your business (instead of fulfilling a family obligation), the ability to quickly adapt (such as closing during slow times) and being blessed with business sense will give independent retailers an edge during hard times.

After the economic slump brought on by the 9/11 terrorist attacks, independent retailers made a comeback by focusing on personal service, he said. In this downturn, independent retailers must think ahead.

At the Paper Garden Boutique at Town & Country Village at Fulton and Marconi avenues,Stephanie Nishikawa isn't planning on the corporate holiday invitation commissions that boosted her first holiday season in business three years ago.

That year, 36 businesses ordered custom-made invitations for holiday events. Last year, only two businesses placed orders.

Nishikawa, who sells all kinds of premium paper stock, including Japanese washi, and printing instruments such as ink stamps, has items that appeal to the do-it-yourself artist who can spend $3 to fashion a homemade gift or card. But she also sells luxury gifts, like a $185 blanket.

"December is our biggest month of the year, usually double what we do every other month," Nishikawa said. She is hoping for the best but is ready for the worst.

She made sure her store is fully stocked but not overrun with merchandise, and she anticipates a heavy do-it-yourself season.

The kinds of occasions that would prompt shoppers to sit in for a class and buy supplies for craft projects won't ever stop, she said. "They can be the Martha Stewart on the block."

Nishigawa is certain that "despite the economy, people are still going to get married, and they'll still have a baby."

And those who still have the wherewithal to make highly discretionary purchases will also be shopping, said Jim Barnes, who owns a midtown art gallery with his wife.

"They're out there," he said.

Susan Barnes paints local scenery in oils, from a lazy bend in the American River to the classic view of Tower Theatre. She and her husband opened the gallery in January.

Art is still selling, from large paintings costing four figures to coffee mugs, reproduction note cards and smaller, original paintings for $100 or less, Jim Barnes said.

Though sales have dropped off, they can rise and fall from one month to the next, he said. The couple are relying on advertising and doing their own mailings to target the right audience.

"The more discriminating will still look for something unique, even if they can't spend a lot," Jim Barnes said.

Recession strategies for higher-end, independent boutique retailers typically involve including more lower-priced inventory, but the retail foundation's Butler warns that stretching too thin could backfire.

"The challenge for independents is to be focused in their buying. You can't be all things for everyone," he said.

At her Petit Chateau at Fountains of Roseville, Debbie Nelson-Motelle sells home furnishings and giftware that evoke European homes in Provence and Tuscany.

Her customers snap up handmade iron beds and Italian bedding with 600-per-square-inch thread count at $2,400 to $3,600 a set.

"We went into business trying to create uniqueness in the community, and we're still committed to that philosophy," she said. "There are parameters that have changed, but that doesn't mean we still don't have high-end clientele. They may not be necessarily looking for expensive products, but they continue to look for uniqueness. That is what is sustaining our business."

Even though she also sells items for much less, such as candles, soaps and handcrafted cookies, everything is selected with that emphasis on uniqueness, she said.

She has also pushed more strongly into her interior design service division because she believes customer service is her most important factor in retaining business.

The payoff could come with a better than anticipated holiday season.

"We cut back dramatically in spring on inventory," she said. "But I am becoming a little more aggressive – not tremendously – because there seems to be a positive spirit."

Call The Bee's M.S. Enkoji, (916) 321-1106.