Leading retailers meeting here pinned the blame for sluggish sales largely on themselves and indicated that specialization and increased service may be the way to pep up consumer spending.

Faced with mounting competition for consumer dollars that ranges from specialty stores to the highly promotional automobile industry, conventional department store retailers acknowledged that they must make changes quickly if they are to remain major players in the business.

"I don't remember a time when retailing was more open to new approaches than it is now," Stanley Goodman, former chairman of May Department Stores Co. of St. Louis, said at the national Retail Merchants Association annual convention here.

The search for new retailing solutions comes at a time when economists and industry experts are predicting slow growth in the years ahead. The double-digit year-to-year sales increases will slow to an average annual growth of 4 percent for the industry over the next five years, according to Management Horizons, a retail consulting firm. Adjusted for inflation, that growth amounts to just under 3 percent a year.

Cut-rate promotional loans being offered by automobile dealers are having an adverse affect on the growth rate of retail sales. These loans cost the industry about one percentage point of Christmas sales increases, calculated Kurt Barnard, publisher of Barnard's retail marketing report.

Given the increased economic pressures facing the industry today, Barnard predicted substantial layoffs and consolidations within the industry in a major effort to control costs.

Over and over again, retailers called on specialization to be that new approach. "Specialty stores will be more successful than department stores," predicted Thomas M. Macioce, chairman of Allied Stores Corp., the parent company of Garfinckel's.

"Microspecialization will be the buzzword of the 1990s," added William R. Howell, chairman of J. C. Penney Co. With society becoming increasingly segmented, "Specialty stores that fill a niche, especially those that offer services to busy time-conscious customers, will continue to flourish," Howell asserted.

The off-price-store phenomenon -- highly touted as the industry's future two years ago -- no longer represents a good avenue for growth. Even off-price retailers agreed, noting that many of the large store chains that had entered the business two years ago already have dropped out. "The outlook is really bleak and dismal," said Monroe Millstein, president of Burlington Coat Factory. Although the industry will continue to grow and good off-price companies will continue to prosper, Millstein said he expects few new entrants and more competition than ever from existing discounters as well as department stores.

In an unusual display of self-criticism, many retailers acknowledged that their current competitive and economic predicament was largely a result of their own making. In short, many privately concluded that the overstoring, overpricing and underservicing of many stores has turned off shoppers.

To compete with the newcomers as well as with the off-price discounters, many retailers have engaged in a rash of promotional activities, slashing prices constantly to the point that many consumers no longer buy anything that's not on sale.

The lack of service also turns away customers, retailers say. "We've got to stop irritating our customers," said May Co.'s Goodman. "It is a killer."

To Goodman and other retailing executives, increased service and specialization is the answer to winning back consumers. Yet just what specialty remained unclear. While some retailers suggested more emphasis in the mail-order business -- and in discount mail order in particular -- others suggested that retailers specialize in children's wear, noting the new wave of births. Still others highly recommended the new warehouse concept being offered by Price Co. and Pace Membership Club in the Washington area.

No matter what the specialization, however, industry officials made it clear they had no time to waste. "We've got to provide additional innovation to buy, and we've got to do it quickly," said Walter K. Levy, president of the consulting firm of Walter K. Levy Associates.