* Small second-hand retailers thrive in recession

* Optimism even in recovery if savings culture takes hold

DALLAS/PHOENIX, Oct 5 (Reuters) - The recession has taken its toll on many large U.S. retailers but smaller ones catering to the second-hand market are flourishing as the cash-strapped seek the holy grail of the American consumer: a bargain.

In August the National Association of Resale & Thrift Shops (NARTS), which claims to be the world’s largest resale trade association, said a survey of its membership about second quarter sales in 2009 compared to the same period in 2008 showed increasing turnover in the second-hand sector.

“Of the 263 stores that responded, 64.1 percent said sales increased -- with an average increase of approximately 31 percent -- 11.5 percent said sales were about the same and 24.4 percent had a decrease in sales,” it said.

Dallas-based Half Price Books, a privately-held operation that mostly trades and sells used books and magazines, has seen its sales rise and has plans to open new stores.

It has opened four new stores so far this calendar year, with more due to open in the fall. It currently has 106 stores in 16 states.

“We are buying more books than ever before so people are selling ... It started last year with people coming in and selling books for gas money,” said Kathy Doyle Thomas, executive vice president for marketing and real estate.

“I think people are okay with buying used ... it is also part of the growing culture of recycling,” said Doyle Thomas.

Such success is rare amid a financial crisis that has thrown millions of Americans out of work and made many think twice before they shop, which is almost a national obsession.

Macy's Inc M.N said in January that it was closing 11 stores that were performing badly in the recession and Dallas-based diamond and jewelry retailer Zale Corp ZLC.N has been closing stores -- just two of several examples.

Sales for Half Price Books’ last fiscal year (July 1-June 30) showed an increase of six percent to around $200 million in same store sales and a rise of 10 percent for total sales including the new stores.

Kathy Gropper is a regular.

“Whenever I finish books I bring them back and get more. I do the same with clothes,” she said after bringing in a box full of books and magazines to the retailer’s main store in Dallas.

“For me it’s a recycling thing. We also did it before the recession but we are even more careful now,” said Gropper, who is a stay-at-home “home-schooling” mother.

The chain’s origins were modest. It was started in 1972 by green activists in a converted laundromat in Dallas with 2,000 books from the founders’ own libraries

SECOND-HAND CLOTHES ARE CHIC

Other smaller and privately-held second-hand retailers with humble beginnings are also enjoying success, at least in part because of the recession.

My Sister’s Closet is a chain of 10 stores across the Phoenix metro area selling what they describe as “recycled designer apparel.” It is run by founder Ann Siner and her sisters Jenny and Tess.

The business began in 1991, with a store in Phoenix, which offered good quality clothing for women, replacing the dark and dingy feel of most second stores with a brighter, more boutique-like feel.

“Typically you can find retail items brand new at 50, 60 or 70 percent off, so we had to take it a step further,” said founder Siner, adding that quality and pricing are key.

“Our items are typically used, so we have to say ‘We’ll give you a really good deal if you come shopping with us.’ Say you bought a blazer that retails for $100, in our store you are going to get it for between $9.95 and $19.95,” she said.

Siner and her sisters have parlayed the success of the first store catering to women into a store for kids, called Small Change, and another selling consignment furniture, My Sister’s Attic, and a store for men, called Well Suited.

In the current downturn, where many shops in Phoenix valley strip malls have shut their doors, Siner is opening her eleventh store, this one selling furniture.

“I’m almost embarrassed to say this, but we are growing phenomenally. We’ve always had good growth, but this year we’re 20 percent up on last year,” Siner said.

“We’ve always had good growth, but the down economy is, I think, telling people to bring their things in to sell when they normally might have given them away, or given them to the maid ... Also (people) are seeing used items are very good and can give great savings,” she said.

One customer said shopping for work clothes such as slacks and shirts made perfect sense in the recession.

“I think everybody is realizing that spending big money now doesn’t really make sense,” said banker Robert Maggs, 37, as he shopped at Well Suited, the consignment store for men. “It’s cheap and everything is good quality.”

But does Siner think that business will still be good when the economy picks up?

“We think it will continue, just because people will have learned it’s an easy way to make some money, and the savings are so appealing.”