A Boom In Toyland?

Economists say the recession's over, but retailers still predict a lackluster holiday shopping season with little improvement over last year's disaster.

If there's one category where families are doing their best to avoid scaling back, it's toys for the kids. It's just easier for mom and dad to cut out the extravagances on each other than to exacerbate a tight-fisted Christmas with sulking kids.

Four in 10 chief marketing officers recently polled by BDO Seidman named toys the expected top seller this year, well above the 24% that cited electronics, 14% naming household goods and 10% that said apparel or jewelry. "It's logical," says Ted Vaughan, a partner in BDO Seidman's retail and consumer products practice. "Christmas is for children."

Not that it'll be all rosy for toy sellers. Margins figure to be razor thin, thanks to price pressure from Wal-Mart ( WMT - news - people ) that will likely prod Toys 'R Us and other retailers like Target ( TGT - news - people ) into promotional pricing mode. The giant discounter is already featuring a "Toys for $10" section on its Web site. Classics like Play-Doh, Battleship and Monopoly can all be snapped up for 10 bucks. Other potentially hot items are being rolled back as well, including the Fisher-Price Power Wheel Kawasaki all-terrain kids bike (to $178 from $199), and a Star Wars Lightsaber product (to $15 from $21.65).

"Wal-Mart is going to war on Toys 'R Us, just like they're going to war with Amazon on books," says Britt Beemer, chairman of America's Research Group.

Other findings from the survey: Companies will save on advertising by leaning toward cheap promotional vehicles like in-store promotions and e-mail marketing for online deals. And most chief marketing officers see gift cards accounting for only 5% of overall holiday purchases this year, down from 12% in 2008. That's generally a negative sign, since recipients often use gift cards to augment larger purchases, which translates into more cash for the stores.

And while parents should be buying a lot of toys, sellers expect them to stick to the basics. Expensive videogames and other interactive toys are out, fashion dolls and play sets are in. Among the items being pushed by toymakers this year are Spinmaster's Liv doll line ($19.99), a lineup of dolls targeting girls ready to graduate from Barbie, and Mega Brand's buildable room play set of popular cartoon character Ni hao kai-lan ($29). With cheap toys all the rage, volume is key, which Vaughan thinks will be helped by price specials coming earlier in the season than they used to.

"There's a push to extend the holiday season," he says. "Easier for shoppers concerned about unemployment to make their purchases spread out over time."