Still, experts, who predict this year's overall holiday shopping period will be the weakest in decades thanks to an overall contraction in spending, caution that this year's sales growth may be hard to sustain.

Also complicating matters is a shorter buying season - 27 days between Black Friday and Christmas - instead of 32 last year.

Market Info

Christmas shopping typically begins on Black Friday, the day after Thanksgiving, and nearly every year certain "must-have" toys emerge that spur parents to camp outside stores and then, at the crack of dawn, to stampede inside for a chance to snag the coveted plaything for the Christmas tree. Think Cabbage Patch Kids, Tickle Me Elmo, and Nintendo's Wii. This year, as many consumers watch their homes and 401(k) accounts shrink dramatically in value, the must-have toy may go the way of the dodo, say analysts such as Howard Davidowitz, chairman of retail consultancy Davidowitz & Associates. "The customer is so pressed for money, so scared, and so in debt," he says. "They are so focused on price that the huge must-have toys are gone."

Parents will still buy toys for their children, of course, but they may not muster the energy and funds spent in years past. "The toy industry is not recession-proof (BusinessWeek.com, 11/19/08), but historically it is more recession-resistant," says Julie Livingston, a spokeswoman for the Toy Industry Assn. "This year parents might buy fewer of the special high-end toys, but they won't give up toys for their children." Market research firm TNS Retail Forward surveyed 4,000 shoppers in October around the U.S. and found that a third planned to buy toys this year, down from 38% in 2007. Those that plan to buy toys will spend 12% less than they did last year.

When retailers can't count on pent-up excitement and demand for the "hot" item, they turn to one-upping each other with promotions, says Mandy Putnam, a vice-president with TNS Retail Forward. "Retailers have anticipated that toys might not be as popular this year so they're going to have to promote the heck (BusinessWeek.com, 11/11/08) out of what they have to get shoppers through the door."

Classic Toys Still Conquer

Trudy Lonegan, a mother of two boys in Chapel Hill, N.C., is one of the many parents scaling back on costlier items. In previous years, Santa brought her sons popular gifts like a Nintendo Wii or a Razor USA scooter. This year she's steering clear of high-end gifts. "We're planning a frugal Christmas," says Lonegan, 39, who works in sales for a human resources consulting company where her pay is variable because it is commission-based. To economize on her holiday gifts, she will go to Costco (COST) to get iPod Nanos for her sons or shop online where she can compare prices. Her husband, a woodworker, will also make gifts for their sons like hat racks and shelves for their sports trophies.

Certain classic toys such as Hot Wheels, Barbie, and Play-Doh will still be popular this year, but customers are likely to trade down within brands, predicts Eric Johnson, a management professor at Dartmouth and a toy industry analyst. Parents will go for the $10 Barbie instead of the Barbie Dream House or Jeep, he says. "We don't have anything like the Furbies that generated fistfights when the Wal-Mart opened on Black Friday a few years ago. There is nothing in that category."