There are many places where you can shop for handicrafts and local curios in Manali. Make a trip to the colourful Tibetan Bazaar at the extreme south end of Manali sells Kullu shawls, caps, and other woollen clothes, and a good range of Tibetan souvenirs that includes thangkas (Buddhist paintings on cloth, see Arts & Crafts of HP for more), silver and turquoise jewellery, and music cassettes.
Check out the Tibetan Carpets Centre at the Gadan Thekchokling Gompa for rugs, carpets and handicrafts. The New Shopping Centre (NAC Market) behind the bus stand has some stalls that sell souvenirs.
The Mall trip offers many options to those interested in the serious business of shopping. Try the Government owned Charitable Trust Tibetan Handicrafts, or any of the cooperatives run by local women, such as Kullu/Kashmir Shawl Emporium. For shawls Bhutico is good too, and so is Himachal Handicrafts on Circuit House Road.
If you're looking for postcards to send back home, walk into Bookworm at the NAC Market, which also has a good collection of paperbacks. Roadside stalls spring up in the evenings, especially around Cozy Restaurant and the bus station. Do try some locally made pickles, jams and juices. Natural oils for massage and shampoos are available from a shop on the Mall that sells nothing else.