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The appeal of the original American Girl dolls were that they were a selection of historical characters with a variety of traits that could appeal to just about any sort of kid. The stories/characters fell right into that highly appealing "you pick YOUR character and then everyone around you will buy you all sorts of shit related to YOUR character" niche. Each character had multiple books, "friends," paper doll sets, and accessories both for you and the doll in question. The colonial girl had colonial dresses and a butter churn and stuff like that, etc.
The original AG products were very high quality, hence the higher prices. When Mattel bought the brand, they cut a bunch of the historical characters and began producing lower quality accessories, sets and dolls. For instance Mattel uses cheap ass eyes compared to the original AG eyes.
Nowadays? I have no idea. I don't know of any kids who are interested in the new stuff Mattel is doing, which is generic "Make your own American Girl doll that looks like YOU!" style with the historical dolls now lower-quality and thrust into the back burner.