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The Medina in Hammamet is a maze of narrow streets filled with shops (souks) selling everything from clothing to local handmade items including carpets, pottery and leather goods.
The souks appeal mostly to tourists and although much of the merchandise may be overpriced, bargaining is generally expected and accepted and expected and definitely the way to go when comparison shopping. Make sure you're haggling for something you really want to buy. The locals can get upset if you walk away without making a purchase after engaging in a long bargaining session. It's also good to have a price in mind, what the item is worth and what you're willing to spend, before you begin.
Give only one third of the asking price whatever it is, this is the norm.