Although it has very few nice shops on the order of Lima, Cusco, or Arequipa, Puno is one of the better places to load up on inexpensive woolen and alpaca goods, including hats, gloves, scarves, shawls, and blankets. They are cheaper here than in those cities, although you might not encounter the quality found at some upscale shops. The open-air market just beyond the railroad tracks (btw. Jirón Melgar and Avenida Titicaca) has a couple dozen stalls specializing in alpaca and woolen goods. There is a cluster of souvenir and clothing shops along Jirón Lima, the pedestrian-only main drag, as well on Jirón Grau (just off Lima). A place worth seeking out is the nonprofit Fair Trade Store (La Tienda de Comercio Justo) in the patio of La Casa del Corregidor, Jr. Deustua 576 (tel. 051/365-603). Fifty percent of the purchase price of alpaca and wool scarves, ponchos, and the like here goes directly to the artisans (identified by name on the garments) in rural communities (decidedly not the case in most transactions). It's open 10am to 6pm daily but does not accept credit cards.
Note: This information was accurate when it was published, but can change without notice. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.