Why not shop for kids at thrift stores? Garage sales? I've seen garage sales with nothing but kids clothes. My friend gets clothes for her and her daughter through donations given to an organization she is involved with. She hasn't spent a penny on her daughter's clothes in four years, and the child has a very nice wardrobe.
I buy new clothes sometimes, but use thrift stores as well. If I need something specific, like a pair of running shoes or sandals, or a good rain jacket, I'll buy new. And sometimes I'll buy new because it's easier and don't want to take the time to go through all the racks at thrift stores. I can try on 30 pairs of pants at a thrift store and not find one that fits. But when I do take the time, I find some items that I really like.