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Chart of the day: Santa's American elves struggle

David Paul Morris | Bloomberg | Getty Images

America's toy business continues to shrink, as visions of cellphones and iPad Minis dance in tots' heads. Today's parents well know that pulling a string to make a doll talk or passing Go to collect $200 hardly compete with the chortling Angry Birds or sky-gazing with the Star Walk app.

Between 2006 and 2011, about one-quarter of U.S. manufacturers producing mainly toys vanished, according to Census data.

Long the nation's leading toymaker, California operated 98 such factories with more than 7,000 workers in 2011—down 27 percent, or 134, from five years earlier, according to the latest data available.

(Read more: Misfit toy sales may benefit deal-hunting shoppers)

Toy stores have shuttered along with domestic toymakers. Only 1,500 independent shops operate nationwide, down from 2,500 in 2000, according to estimates from the American Specialty Toy Retailing Association. That 40 percent decline is far worse than the 7 percent closure rate of bookstores in the same period, Census data show. (Full-service restaurant locations jumped by 59 percent in the period.)

Astra President Kathleen McHugh said the depressed economy and a spike in online shopping further pressure independent toy stores. So-called age compression, where ever-younger children want to swap traditional toys for electronics and other mature fare, has vexed the industry for years.

"Years ago, all kids wanted was a toy or a game for Christmas," she said. Now, many new offerings seem to be designed to serve as "electronic babysitters."

The domestic toy business still has a couple of silver linings, though, according to research from Christopher Byrne, an industry advocate known simply as The Toy Guy.

"Forty percent of the products on the shelves every year is new product that's never been sold before," he said, adding that innovation is key in toyland.

(Read more: GoldieBlox: Rebeling against the pink princess, toy complex)

The traditional toy industry, excluding video games, is expected to generate about $21 billion in U.S. sales this year, Byrne said. Adjusted for inflation, that pie is about the same size it was 15 years ago, according to his research.

McHugh said many entrepreneurs still dream of running the perfect little toy store. Curating the inventory by hand is a big draw for shop owners.

"They are the places that, if you want to be the cool aunt, that's where you shop," she said.

—Elisabeth Butler Cordova

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