It's been almost two years since Paul DiMartino has spent much time at Bal Harbour Shops.

Now that his wife's real-estate business has picked up and he has found a stable job, DiMartino is feeling a little more confidence in the economy. But his luxury spending is a lot more selective. His only purchase: a Dior purse at Saks Fifth Avenue for his wife's Christmas present.

``This is what she picked out,'' said DiMartino, 43, a North Dade resident shopping at Bal Harbour earlier this week. ``She worked for it. She deserves it. It's definitely one of the cheaper purses. It's one of the $1,000 ones, not the $2,000 ones.''

While luxury retailers have started to see a boost in spending this holiday season, it's been from cautious customers like DiMartino.

They are likely buying fewer items or looking for lower-priced gifts by their favorite designers.

Even though the worst may be over, many luxury retailers are expected to end the year with double-digit revenue declines. An October survey by the Harrison Group and American Express Publishing found that holiday gift spending by the top 10 percent of U.S. households by income is expected to decline by 15 percent.

THE BOOM DAYS

Stephen Sadove, chairman and chief executive of Saks, realizes there is still a long way to go before business returns to the boom days of 2007.

After a string of losses, Saks reported a profit for the third quarter ending in October, partially because it offered fewer discounts. But sales in stores open a year were down 26.1 percent this month.

``I certainly wouldn't want to raise the flag and say all the tough days are over,'' said Sadove, who was in Miami last month visiting stores. ``What you're looking at is an environment that's stabilizing a bit.

``I would characterize it as less bad, as opposed to good,'' Sadove said. ``When you look at it on a two-year basis the luxury sector is still down close to 20 percent.''

At Bal Harbour Shops, signs of hope started arriving in September when sales trends turned positive after 16 months of declines.

Sales for the month of November were up 7.9 percent compared to the same time last year.

``There's less fear,'' said Matthew Whitman Lazenby, general partner and director of leasing for Bal Harbour Shops. ``There was a stigma attached to spending for awhile. I'm not saying it's gone, but it's definitely dissipating.''

Bal Harbour's sales for the year through November are still down 14.9 percent. Plus, the mall's sales have fallen considerably from the peak in 2007. Average sales per square foot for the last 12 months were $1,630 per square foot -- a drop of 23.5 percent from the previous 12 months.

``These are the most significant declines we've seen in our 45-year history,'' Lazenby said. ``We've been able to escape some of the other hiccups in the road before, but this one was unescapable.''

Industry experts say much of the drop in luxury retail has come from the loss of the upper-middle-class consumer who for most of this decade had been ``trading up'' to purchase luxury brands.

Unity Marketing research found that during the third quarter, luxury spending growth was driven by the 2.5 million households with incomes of $250,000 and above. The biggest drop-off in luxury spending came from the 21.5 million households with incomes between $100,000 and $249,999.

``All those people are now spending more like the upper-middle-class people they are rather than the truly affluent,'' said Pamela Danziger of Unity Marketing, who specializes in luxury consumer research. ``The demographic make-up of the luxury market has changed.''

ROLLER COASTER

At J.W. Cooper in Bal Harbour, owner Todd Rauchwerger has seen that first-hand after he lost many of his ``aspirational customers.'' His sales for the second half of the year have been been like a roller coaster -- up some months and down others.

But Rauchwerger is feeling optimistic for the first time all year. Sales for December are up double digits at the accessory retailer known for its alligator belt and buckle sets.

``We're seeing regular customers buying gifts and they're picking up something for themselves as well because they haven't been in for a long time,'' Rauchwerger said. ``We're selling more expensive pieces than we have been selling all year.''

Part of Rauchwerger's strategy has been to bring in more sterling silver buckles and less gold. The average price of a buckle used to be $850, but has dropped to about $600.

That shift in merchandising is one that many luxury retailers have adopted. Neiman Marcus increased the selection of items in its holiday catalog for $250 or less. At Nordstrom the average price across the board is down about 10 percent.

``It's just another example of our model responding to the evolution of where our customers are wanting to buy stuff,'' Pete Nordstrom, executive vice president, told analysts last month.

Saks has beefed up its lower and moderately priced selection of merchandise while decreasing the amount of its ``best'' merchandise.

``Consumers are not trading down in brands,'' Sadove said. ``What they're doing is gravitating toward lower price points within the brand.''

Unlike last year when those low prices came from massive discounting among luxury retailers, this year it's part of a planned effort. By keeping inventories low, luxury retailers are avoiding slashing prices. That's leaving a silver lining in this holiday season: improved profit margins.

``We're striving toward more and more full price -- regular price selling,'' Neiman Marcus Chief Executive Burt Tansky told analysts earlier this month. ``The promotional activity is geared around bringing people into the store so that we can show them what we have to sell and sell them.''

SHORTAGES

For consumers, that means there's a particular danger of shortages in luxury goods this holiday season -- even more than in traditional retail.

The Neiman Marcus catalog sold out of its 40 Jaguars within four hours, despite the $105,000 price tag.

At Saks in Dadeland Mall, Sadove walked around the store pointing out items that are selling out in every category form shoes to women's apparel.

``Luxury was always about limited distribution and special items with a little bit of cachet that you couldn't get everywhere,'' Sadove said.

Offering unique merchandise that consumers can't find elsewhere may once again be the future of luxury, but industry experts agree that the future is going to be very different than the past.

``The luxury market is not coming back to where it was,'' said Chris Ramey, chairman of the Luxury Marketing Council of Florida. ``There has been a recalibration of values. The affluent today are looking for value for their money. You have to appeal to their values rather than anything that is pretentious or over the top.''