It has been years since a new product pulled buyers into stores as Furby, the saucer-eyed creature that spoke in a high-pitched gibberish and created a stir in 1998, or Tickle Me Elmo, the doll that led to fights in store aisles after comedian Rosie O'Donnell praised it on her talk show in 1996.
"Without a fad, people don't go to toy stores," said Ken Hakuta, who made $20 million from an octopus-like toy that slithered down walls, the Wacky Wall Walker. "You need that Cabbage Patch Kid or Pokemon to bring you in. If you can't find it, you'll stay and look for something else."
The dominance of Wal-Mart and other discounters, with smaller toy sections than the major toy chains, is partly responsible for stifling the development of potential new hits, some industry experts contend. Toy manufacturers are hesitant to devise products that won't find their way onto store shelves, while oil prices have driven up the cost of plastic.
"The toy manufacturers tend to stick with things that have a proven success or that they think are going to be a success," said Gary Ahlert, president of Creative Group Marketing, a Connecticut toy licenser that is organizing a contest to stimulate new toy ideas. "It's a big investment for them. Why not go with something that's been a proven success?"
Some of the industry's big names struck back this season at Wal-Mart, which surpassed Toys "R" Us as the top toy seller, by offering some items exclusively to Toys "R" Us. The New Jersey-based chain said last summer that it's considering selling its 1,500 toy stores to focus on its Babies "R" Us stores that sell merchandise for infants. Toy makers such as Hasbro and Mattel distributed Hokey Pokey Elmo, a 5-foot-tall construction set and some other products solely to Toys "R" Us to give it a boost.
Not everyone thinks the ills facing toys are terminal.
"It's not hemorrhaging," said David Riley, a senior manager with the NPD Group. "The industry is not going anywhere. Is there a shakedown? Maybe. But we're not seeing doom and gloom."
Some smaller independent toy makers and retailers, without the profit-margin pressures of big chains, have had success.
"The electronics are a very easy sell; the kids certainly want it. But we've found a niche and have a nice local following," said Chris Desch, who with his wife runs aMuse, a toy boutique in Fells Point and Belvedere Square. They routinely invite neighborhood kids into the store to see which toys attract them.
But even recent successes reveal the industry's Achilles' heel.
The American Girl Doll series is the second-most-popular after Barbie. Mattel Corp. bought what began as a mail-order catalog line from creator Pleasant Rowland for $700 million in 1998 and has expanded it. But the pricey and elaborate characters with costumes from historical periods are as much a hit with mothers as with kids and are seen as "heirlooms" or collectors' items as much as toys.
The Bratz, another popular new doll line, has become a favorite of preteen girls. However, the dolls, with exaggerated pouty lips, short skirts and punk-glam outfits, also reflect how fast little girls are growing up - and how small the window has become for the purveyors of child's play.
"They have way too much attitude," Allison Simmons, a Windsor Mill mother of two, said of the dolls. She refuses to buy them for daughters Jaylyn, 6, and Jordan Elizabeth, 4, and is happier to see the girls jump rope and play hula hoop.
Tourism, not play
FAO Schwarz, the famed toy seller begun by Baltimore merchant Frederick August Otto Schwarz in 1862, reopened its flagship store last month on Fifth Avenue in Manhattan after having closed in January.
But it's even more tourist experience than toy store than it used to be. Kids can create their own Hot Wheels cars for $20. Ice cream sundae concoctions cost as much as $100. A kid-sized Jaguar goes for $15,000.
Kids have been playing with toys since stone yo-yos entertained Greek children 3,000 years ago, so some people don't yet count out basic toys.
"Toys are important in a child's development. All the elements of learning are found in this industry, and there's still a lot of kids out there," said Gale Jarvis, the president of the Alexander Doll Co., whose dolls have been popular since Maurice Alexander opened the first "doll hospital" in New York City in 1895. "There are still kids out there, and they're still playing with toys."
1862: German immigrant Frederick August Otto Schwarz opens the FAO Schwarz toy chain in Baltimore before moving it to New York a few years later.
1901: Joshua Lionel Cowen, 22, creates a battery-powered train engine as an animated advertisement for products in a store display window. After customers clamor for the train and not the products, Lionel Trains is created.
1952: Banking on the idea that children like to play with their food, Hasbro introduces Mr. Potato Head.
1965: Stanley Weston creates a doll for boys based on a new television show called The Lieutenant. The GI Joe becomes more popular than the show, surprising toy manufacturers who were convinced that boys wouldn't play with dolls.
1972: Magnavox creates Odyssey, the first video game machine, featuring a primitive form of paddle ball.
1986: Artist Xavier Roberts introduces into the mass market the Cabbage Patch Kid, a doll he created in 1977. Three million are produced, but demand exceeds supply and leads to fights in store aisles over the doll.
2003: FAO Schwarz's parent, FAO Inc., files for bankruptcy twice, blaming intense competition by Wal-Mart and other discounters and children's changing play patterns. Sources: HistoryChannel.com, Forbes.com
Next in series
Tomorrow: For a legion of small merchants across the country, this time of year is hard on the nerves.
Tuesday: In the maze of coupons, markdowns and in-store discounts, who knows what constitutes a good deal?