American Girl: Rise of a Toy Classic

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A kids' birthday party at New York City's American Girl Place costs $30 a head. Ditto for a ticket to the doll retailer's in-store musicals. Twenty smackers will cover a new hairdo for your doll at the store's salon. But if you want to buy a doll, you'll have to shell out four times that. Despite such hefty prices, the three-story doll emporium that opened in midtown Manhattan last month is mobbed. So too is Chicago's five-year-old American Girl Place, which ranks as the Magnificent Mile's top-grossing store. Many of its visitors have no doubt come planning only to browse but end up leaving — as Karen Cardinal, 37, of San Francisco did last week — with $100 worth of accessories. Add a doll, she says, "and you can spend 200 bucks in the blink of an eye."

Even so, the American Girl stores are teeming with strangely serene mothers and grandmothers who don't seem to mind being dragged around by their bouncing, panting, ranting offspring, who beg and plead for a $70 miniature tepee or $38 Victorian commode. The genius behind American Girl's high-end products is that moms feel good about dropping a lot of cash on low-tech, wholesome Americana. Most of the dolls depict 9-year-old fictional heroines at various points in American history, including Kaya, a Nez Perce tribe member in 1764, and Josefina, a Latina on hand for the opening of the Santa Fe Trail. The company also sells six novels about each of the historical dolls, which offer more depth than your basic Barbie.

"American Girl doesn't push girls to act older," says Ellen Brothers, president of Pleasant Company of Middleton, Wis., which launched the American Girl brand via catalog in 1986. "We're saying, 'Find a friend, and learn everything you can about her and that pivotal point in history.'" This has proved to be a lucrative proposition. To learn everything about, say, Samantha, American Girl's Victorian-era doll, you can buy her complete collection — her books, furniture, clothing and accessories — for $995.

American Girl, which was acquired by Mattel five years ago, has so far sold more than 8 million dolls. And that's without deigning to peddle these 18-in. beauties at other stores and without running a single ad. Through its catalog, website and Chicago store, American Girl managed to rack up $350 million in sales last year alone.

American Girl's success as both a direct marketer and an experiential retailer may be a harbinger of things to come. Mattel, the world's largest toymaker, may begin to follow a similar business model with other brands it owns, relying more on direct-to-consumer marketing to avoid the retail price-slashing wars that have rocked the industry, says Oppenheimer analyst Linda Bolton Weiser. Mattel's Fisher-Price division is already sending out its own catalog. Can Hot Wheels bumper-car birthday parties be far behind?