Welcome to another year of Rambo retailing - a game of survival of the fittest, where winners have the most muscle, the least fat and the fastest knives.

"It's cutthroat competition out there," said Willard Brown, retail analyst at Dean Witter Reynolds, a New York-based brokerage firm. "I've been watching retailing for 20 years and there's more pressure on the small retailer now than I've ever seen before."Although retailers are expected to show modest sales gains later this year, the consumer buying binge of the mid-1980s appears to be over. It was a casualty of a number of forces: rising interest rates boosting the cost of credit, customer resistance to sharply higher prices for apparel and other imported goods, accelerating inflation sapping gains in personal income and growing public uncertainty about the nation's economic future.

But the U.S. economy could be a winner even if retailers lose the battle to turn the growing ranks of browsers into buyers.

Many economists say a moderate slowdown in consumer spending is a healthy development for a nation overburdened by huge private and public debts. Modest setbacks for retailers who cater to domestic demand could be overshadowed by the gains of exporters catering to foreign consumers.

A touch of austerity on the part of U.S. consumers, so the argument goes, could be the first step toward repaying $600 billion owed to foreign creditors and another $600 billion in installment credit that consumers owe to banks and other lenders.

Although credit-card interest rates haven't changed recently, the rising cost of other debt, such as mortgages and home equity loans, means consumers have less spending cash.

However the deceleration of retail sales works out for the economy, the consequences for merchants couldn't be clearer.

The strongest players - regional and national department store chains with plenty of financial muscle - are slicing fat from the payroll, paring unprofitable operations and deploying staff to react quickly to the changing whims of shoppers.

The strategy includes ordering multimillion-dollar facelifts of aging stores, promoting private-label fashions that compete head-to-head with designer labels sold at specialty shops, and stepping up services for consumers who demand more for their money.

The smaller players - apparel chains such as the Gap, the Limited and Espirit de Corps and independent, local mom and pop retailers - are hard-pressed to produce fast-growing profits and build up financial reserves to make counterstrokes against the burgeoning ranks of rivals.

These days, big retailers have clear advantages over smaller rivals. In a period of fluctuating currency rates, a chain the size of Wal-Mart can demand a guaranteed price on apparel ordered from an overseas supplier, noted Brown of Dean Witter Reynolds.

Because large department store chains subdivide their floors with boutiques that offer apparel once sold only in specialty shops, smaller retailers increasingly are at a disadvantage when consumer demand goes flat and import prices rise, Brown said.

And the dollars are harder to get.

First-quarter retail profits rose 1 percent, far short of a 4 percent-plus inflation rate. At specialty apparel firms, net earnings actually declined 3 percent in the same period.

"We have been in a retail recession," said Walter Loeb, securities analyst at Morgan Stanley, a New York investment banking firm.

On Madison Avenue, one of Manhattan's hottest retail strips, chi-chi shops selling apparel, art and antiques have folded or fled to less fashionable neighborhoods in recent months, as single-digit gains in sales failed to match double-digit increases in commercial rents.

Economists say the retail slowdown hasn't rippled through the economy yet because other industries, chiefly manufacturing and raw materials suppliers, are expanding in response to an export boom. The same decline in the international value of the dollar that raised apparel costs for clothing importers has made U.S. goods cheaper in other countries.