Spending it All on the Kids

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And though they may hide the shopping bags, well-off parents are also finding their way into discount stores when shopping for their children's everyday wear. There they will brush shopping carts with parents of moderate budgets, who are able to find stylish and durable kids' clothing for every occasion. In the past several years, Wal-Mart and Target have gone to great — and successful — lengths to improve the quality of their private-label children's wear. Jill Rice, 34, a stay-at-home mother in Atlanta, says that while she prefers to shop for church or special-occasion clothing for her 21-month-old daughter Lilly at higher-end stores, where a dress might cost $60 to $75, she occasionally shops at Target for Lilly's less formal needs.

Discount chains have done a good job of seizing licensing opportunities. Target, for example, carries clothing emblazoned with Hello Kitty and Barney, while Wal-Mart has SpongeBob SquarePants and a line designed by Mary-Kate and Ashley Olsen. The chains have been savvy in their marketing, particularly to Hispanics, who have surpassed African Americans as the largest minority group in the U.S. According to Susan Porjes, a retail analyst based in Honolulu, Hispanic parents spend a higher percentage of their income on children's clothing than other ethnic groups do. That helps explain why Target has licensed characters from the Nickelodeon show Dora the Explorer (whose title character is Latina) and why Kmart has signed the Mexican pop singer Thalia to develop a line of clothing.

But it seems that nothing is more powerful than the buying reflex of a grandparent. Jan Burton, 52, has two grandchildren, Grace, 2, and James, 6 weeks. "My heart just glows when I see them wearing something so cute," says Burton. Her last impulse buy for her granddaughter was a $50 bathing suit patterned like a strawberry, with fake leaves sprouting from the shoulders. No doubt Grace will outgrow it before next summer, but you don't want to get in the way of a grandparent intent on grabbing.