Who’s actually going shopping these days?

Apparently the list of customers is pretty short. Most major retailers are feeling top-line growth pains, negative comps, and pinched margins from heavy markdowns, as shoppers are holding off on expanding their wardrobes these days.

But while you might not buy yourself the latest fall fashion trend, can you really deny your kids new clothes this year? Are you willing to dress little Bobby or Cindy in hand-me-downs or thrift-store finds, or are you afraid of your child becoming the latest middle-school laughingstock?

Recession = deprivation
That’s what parents everywhere are left asking themselves. Despite studies indicating that children’s retail typically fares well even through recessionary periods, analysts are estimating that parents will be spending 48% less on their kids through the coming holiday season.

Parents have long been known to sacrifice in order to give their kids the extras they want. However, new, brand-name clothes at any price may not be the latest style this season, as the frugality that our parents and grandparents valued so strongly is back in style again. That’s right, bargain-rack shopping is the newest fashion fad, and retailers are left deciding whether to jump on the bandwagon.

The new kid on the block
Which heightens my interest in the newest entry to the kids’ clothing retail space: American Eagle Outfitters (NYSE:AEO). The company launched its 77kids retail concept online last week, competing for those pesky, but potentially more value-focused, kid consumers.

The online sales venue isn’t a bad place to start. After all, Internet-based sales are one of the few bright spots for many retailers these days. But considering the competitiveness of kids’ retail today, I’m just not sure that the 77kids offerings will deliver the value that consumers are looking for these days.

As I strolled through the mall recently, I found a wealth of bargains across the board in kids’ retail. The Children’s Place (NASDAQ:PLCE) is offering great deals on kids’ clothes right now, and I’m always getting coupons in the mail for Gymboree (NASDAQ:GYMB). Sears (NASDAQ:SHLD) is offering increased value pricing on its premium Lands’ End offerings, while TJX (NYSE:TJX) continues to grab up name-brand products for its TJ Maxx and Marshalls stores, where I spotted half-off kids’ Timberland (NYSE:TBL) and London Fog fall and winter jackets. Even The Gap’s (NYSE:GPS) Baby Gap has offered two-for-$20 pants and long-sleeved tops this fall, an unusual move for a company that typically doesn’t veer into “value-priced” products.

That said, the 77kids concept is a little lacking as far as I’m concerned. American Eagle has been offering discounted pricing on its flagship offerings. Meanwhile, 77kids is drumming up hoodies and jeans in the same price range as the discounted American Eagle offerings. (Basically, now you can buy a $29.50 hoodie for yourself and another for your 3-year-old.)

The premium pricing may come with a “77-wash guarantee,” but I’m not sure I really get the claim. The tots I know are lucky to get 17 wears in before they grow out of their clothes. It’s a nice idea that the clothes are tough, but this notion certainly doesn’t fit into the typical customer’s overall value proposition, which is becoming increasingly important these days.

A case of bad timing
In any case, this is one heck of a tough time to start any new retail idea, particularly one that requires premium consumer dollars. Folks just aren’t sure that they want to buy anything right now, whether it’s stocks, electronics, or something as simple as a new sweater.

For the sake of investors, I hope that American Eagle can come up with an overall corporate success strategy. Usually companies offer discounts on brand offshoots to drive initial business and awareness. American Eagle has done the opposite, featuring higher prices on its Martin + Osa and now its 77kids brands while discounting its flagship American Eagle clothing.

Unlike its new 77kids clothing, American Eagle’s stock price is super-cheap these days, with a P/E of less than 6. The company has no debt and a dividend yield of 4% -- all attractive stock traits. I know this is a tough retail environment, but American Eagle has to decide where it wants to go with an overall retail approach before investors start shelling out for its stock again -- even at a bargain-basement price.

For related Foolishness:

American Eagle Outfitters is a Stock Advisor selection, and the Fool owns shares of American Eagle. Gap is a Stock Advisor pick as well, and Sears has been recommended by Inside Value. Looking for more advice in a topsy-turvy market? Give any of the Motley Fool’s newsletters a try free for 30 days.

Fool contributor Colleen Paulson does not own stock in any of the companies mentioned in this article. The Fool’s disclosure policy has always been a trendsetter.