Big Dolls and Tiny Trains: Forecasts Predict Hot Holiday Gifts for 2010

The holidays will be all about the kids (again) this year. As consumers remain cautious about spending, shoppers are expected to focus on toys and clothes for the kids, perhaps splurging on a few things for themselves.

Most forecasts say shoppers plan to spend a bit more this holiday than last year, but it won't be like the good old days, before the recession and the housing market crash. The National Retail Federation projects holiday spending will rise to $447.1 billion, or 2.3% above a year ago. But while the growth rate is better than the 0.4% growth in 2009 or the drop of 3.9% in 2008, it still puts total spending below the 2007 total, notes Jack Kleinhenz, chief economist of the NRF.

Consumers are spending, but they still feel like it's a recession, so retailers will have to coax them into stores with promotions and offers. Otherwise, they buy only what they need and no more, Kleinhenz explained in a conference call.

But since gifts for the kids are the last thing households cut back on, toys and kids clothes will still sell well, said Sherif Mityas, a partner in the retail practice of consultant A.T. Kearney.

"I think it's going to be a good time for retailers who appeal to folks buying for their children," he said. "You're going to see a strong toy season, a strong children's clothes season."

A Forecast for Toy Trends

Toys R Us, which caught the one big trend of last year's holiday with Zhu Zhu Pets, weighed in with its forecast for what will be hot this holiday: Small collectibles, big dolls, toy trains and foreign playthings.

The toy retailer, also parent of FAO Schwarz, recently released its list of what it expects will be the most popular toys of the season, and found several trends.

Zhu Zhu Pets will remain popular, with the addition of new lines of princess and ninja hamsters. But other small collectibles are also hot, including Squinkies, Zoobles, Sing-a-ma-jigs plush toys and Calico Critters figures.

While collectibles get smaller, dolls will get bigger. Lines such as Disney Princess & Me, Journey Girls, Best Friends Club Ink and the Classic Doll Collection from FAO Schwarz all feature 18-inch-tall dolls. The Princess & Me collection even features matching child-size outfits for the dolls' owners.

And just as dolls are hot, another basic toy will make a comeback: Toy trains. Toys R Us is promoting several train sets, from a starter Road and Rails Set from to a deluxe Tomica Hypercity Mega Station Set and train sets based on the TV shows Chuggington and Thomas and Friends. Adding the Japanese Tomy train line is part of globalization trend in toys; Toys R Us is promoting several other toy lines from overseas, such as the Italian Cicciobello baby dolls.

Clothing Is Always in Fashion

Holiday shopping overall is showing a back-to-basics trend since the recession. Apparel will be the most popular gift category this year, according to a survey by Experian's Pricegrabber.com. Clothing and shoes are the gifts most shoppers anticipate buying, with 54% of men and 76% of women saying that's where they'll spend money. Other practical gifts such as hobby and sporting goods also score high with both sexes.

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Mityas noted that many teen retailers, such as Abercrombie & Fitch (ANF) and Aeropostale (ARO) have moved down the age curve recently, and are selling clothes for tweens and younger children. Those retailers are bound to capture some parental splurging on kids, he said.

"I think it's still going to be pretty subdued at the higher [ticket] levels and what I call more traditional adult gifts," he said. "Any splurging that will occur will be in items like gaming consoles and children's items."

Indeed, while electronics will be a tough category as a whole, the gaming segment is going to come back strong in the holiday season, said Mityas. He noted that, after a slowdown recently because of a lack of new products in the category, stores will have the new Sony (SNE) PlayStation Move gaming console, Microsoft's (MSFT) Natal platform for the Xbox 360 console, and new versions of the blockbuster games Halo and Call of Duty.

Retailers Await a Bounce-Back

Shoppers' holiday plans are showing improvement over the last two years of recession, but concern lingers, said Pam Goodfellow, senior analyst at BIGresearch, which carried out the NRF survey. She noted that 48% of adults polled in September said they've become more practical in their shopping, and that's 11 percentage points over the rate in 2007.

Goodfellow also pointed out that when the pollsters asked consumers in September if they planned to buy certain items, nearly all categories showed higher intent to buy than in August, but all were lower than the same time in 2007.

Kleinhenz wasn't ready to call this a "new normal," but he said it could take years for spending to bounce back, once stronger employment and income figures rebuild consumer confidence. That could take years, so muted spending will be the story at least for another year or so, he said.

"It's a bit of under-the-trend growth, but it is growth," said Kleinhenz. "That should be the thought for the day."