The decline in tourism may actually have had an unexpected positive impact in the local retail sector. The past year and a half has seen a remarkable concentration of retail upgrades near the Queen Street and Reid Street intersection.

First came Aston & Gunn, owned by the The English Sports Shop (TESS Limited) which was renovated in November 2001, next came The Lemon Tree Cafe on the site of the former English Wool Shop. In January of this year, the new management of the Bermuda Bookstore completed a refit and this week a new A.S. Coopers Mens Store opened up just round the corner on Front Street. "It's a revival," says David Hamshere of the TESS group which owns Marks & Spencers, Cecile, the English Sports Shop and the Colony Club. "In the current situation with all this economic disaster that they are forecasting, it's wonderful to see that people are continuing to invest a lot of money in their infrastructure."

The fact that several shops have focused on upgrading indicates that retailers are refocusing on the local market, says Mr. Hamshere. "Bermudians are extremely fashion savvy and if we don't offer the latest fashion lines, they will go overseas to get them." Consequently, there has been a trend towards specialisation and quality. In Aston & Gunn's case, they moved away from trying to cater to tourists and reinvented themselves as a high quality men's store with a strong European influence.

"With the fall off in tourism, we were neither fish nor foul. We were trying to please everybody and what we did was narrow our focus down to quality fashion merchandise." Aston & Gunn has stopped stocking "resorty" fashions for tourists and is concentrating more on high end European designers such as Hugo Boss.

"Most retailers are focusing on upgrading and updating to consider local customers," agrees Sam Simmons, chief executive of Trimingham Brothers, who have also recently completed an upgrade of their home department.

"You cannot be entirely dependent on tourism, you have to balance it." Asked why stores would decide to spend money on refits despite the gloomy economic forecasts, Mr. Simmons says: "You must keep upgrading otherwise you become stale and flat. Shopping is a form of entertainment." This does not appear to have been the policy at Smiths, however. Nobody from Smiths was available for comment at the time of this article.

Failure to keep up could lead to loss of market share, says Mr. Simmons: "Shoppers are voting with their feet every day."

Not all shops need to renovate, however. One example is The Irish Linen Shop, also on Queen Street. "They do what they do extremely well." says Mr. Hamshere. "In my opinion, it's the only place on the Island to buy towels and dinner napkins."

For the larger stores, the biggest issue remains a lack of space and as well as renovating old properties, some are in the market to acquire new sites.

"For us to grow we're constrained by space. We're always looking for the right property; but they don't come open very often." says Mr. Simmons. Peter Cooper chief executive of AS Coopers says that they too are looking for new space in addition to their swanky new men's store which opened last week. "We've been looking for other space because the Coopers building is to be renovated to seven storeys once we get approval. 60 percent of the building will be office and only 40 percent will be office."