Webkinz fad fades: Web-linked stuffed toys aren't hot stuff anymore

When children write their letters to Santa this year, many will be skipping last year's hot item: Webkinz. The stuffed animals were so popular last holiday season it was hard for retailers to keep the toys on their shelves. The plush dolls appealed to children and parents by linking the physical toy with a virtual world, where kids play with online versions of their personal stuffed animals and spend virtual cash to clothe and feed them.

Since then, demand has fallen off a cliff. According to The NPD Group, sales for Web-connected play toys have plunged 41% this year through August, marking the biggest decline among the 13 categories tracked by the market research firm, which provided its data to DailyFinance. The drop-off was so stark that at least two retailers disclosed the dwindling sales of Webkinz as drags on their performance in recent earnings calls.