Still Playing With Toys?

Cabbage Patch Dolls, Tickle Me Elmo, Razor Scooter. Toys that set the toy world on its ear and made consumers rush the stores. But lately, the products coming out of the toy industry seem, well, boring. Where has all the innovation gone?

To start, 2001 wasn't a great year for the toy industry. Though $25 billion in sales meant an increase of 1.7 percent over 2000, that's a downer in an industry that's used to 3 to 4 percent increases. September 11 depressed toy sales during the fourth quarter, which constitutes 50 percent of the industry's annual sales, says the Toy Industry Association's Diane Cardinale. Nor was there a blockbuster movie last spring to spur sales of licensed toys for the first three quarters.

It's no surprise that the industry is now looking for safe bets. "There's been a big return to classics and basic toys," says David Niggli, president of FAO Schwarz in New York City.

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So how do innovation-prone entrepreneurs fit in to today's market? We've found three cases where the answer is "Quite well, thank you."

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