BUY OR SELL-Which U.S. retailers will be merry?

* Retailers with value or must-haves seen prevailing

* Bet on discounters, online retailers and Best Buy

* A tough season seen for department stores

By Dhanya Skariachan

NEW YORK, Nov 27 (Reuters) - As U.S. retailers pull out all the stops for the holiday shopping season, experts have advice to offer: sell it cheap or make customers an offer they cannot refuse.

Shoppers turned out in strong numbers for Black Friday, the unofficial kick-off to the holiday season, but investors questioned whether the momentum will last. [ID:nN27435919]

To keep customers coming through their doors as unemployment rises and income levels wane, retailers will need to offer everything from hot products and compelling prices, to a good in-store experience and prompt service post shopping, said Michael Dart, senior partner at Kurt Salmon Associates.

"We are seeing a paradigm shift in the way consumer interprets value and what they are looking for," he said.

But in a sea of competing discounts, which retailers will manage to get American customers to open their wallets again?

"Make no mistake, in all segments of retail this season it is going to be a Darwinistic dog-fight. Retailers brace yourselves!," said Lawrence Creatura, equity market strategist and portfolio manager at Federated Clover in Rochester, New York.

POTENTIAL WINNERS

"All the winners will fall in one of two categories. Either they will sell value products or they will sell differentiated products," Creatura said.

That is good news for discount chains like Wal-Mart Stores Inc (WMT.N), off-price retailers like TJX Co (TJX.N) and the dollar stores.

Earlier this week, Barclays forecast a same-store sales growth of 4 percent at Dollar Tree (DLTR.O) and a rise of 1 percent at Big Lots (BIG.N) for the holiday season.

Kurt Salmon's Dart added that "intense value" did not mean just the discount stores.

"We are not just talking about Wal-Mart or Costco (COST.O), but folks like J Crew JCG.N or Aeropostale (ARO.N) who still offer great products, have a keen price point and provide consumers with a great experience," he said.

Most also believe the customer might still be willing to shell out extra bucks if they think the product is worth it.

"If you walk into the mall and look at the Apple (AAPL.O) store, there are no value goods in there... yet it's the most crowded store," Creatura said.

The trend might also bode well for companies like Deckers (DECK.O) -- whose red-hot UGG boots were one of the hottest footwear brands last holiday season.

EBAY, AMAZON BRIGHT SPOT

Online retailers like eBay (EBAY.O) and Amazon.com (AMZN.O) are also expected to have a strong showing as consumers research competitive prices.

While U.S. retailers are prepared for a subdued holiday shopping season, online retail is seen as a bright spot. According to a study by Shop.org last month, 45.8 percent of online retailers expect their holiday sales to rise at least 15 percent from last year.

With electronic readers touted as one of the hottest gifts this holiday season, Amazon.com has cut the price of its best-selling Kindle electronic reader and launched a global version. It has also slashed prices on top pre-ordered hardback books to fight Wal-Mart's online push.

Even eBay's focus on upgrading the overall user experience, getting more listings and adding sellers with a high reputation are resonating with shoppers, Dart said.

"What eBay is currently accomplishing... really fits the paradigm of increase in intense value," Dart said.

Analysts and industry experts unanimously agree consumer electronics chain Best Buy (BBY.N) might be one of the top investment ideas this holiday season.

With Circuit City CCTYQ.PK out of business and local chains curtailing growth, Best Buy almost has an effective monopoly in presenting physical product to the consumer, apart from Wal-Mart.

"Best Buy has excellent strategic position in the bricks-and-mortar side of the business and that's going to be tough to compete against," Creatura said.

NOT A MERRY XMAS?

The holidays might not be bring cheer to retailers selling aspirational brands, experts say.

In addition to the customer's eagle-eye focus on value, there is also a behavioral shift that "you don't need to wear your wealth with your brand on your chest," Creatura said.

That could hurt teen retailers like Abercrombie & Fitch (ANF.N), whose brands are associated with higher prices, and mall-based women's clothing retailers like Charlotte Russe.

Based on his early reads on Black Friday, Todd Slater, an analyst at Lazard Capital, said clothing retailers like AnnTaylor (ANN.N), American Apparel (APP.A) and Bebe (BEBE.O) could be among the losers of the big shopping weekend.

"Any undifferentiated, generic, weaker 'me-too' type concepts with a mid-price point are at risk," Creatura added, saying he was talking about "a good 30 percent of the mall."

Creatura sees a tough holiday season for department stores as "they are not differentiated and they are not value."

Analysts also see price compression in the mass luxury sector as consumers trade down or put off purchases.

Luxury retailers have been realigning their businesses, both in terms of the merchandise they carry and their starting price points, to adapt to a thriftier shopper. (Reporting by Dhanya Skariachan; Editing by Tim Dobbyn)