We grew up differently.

We chased butterflies, stuck our arms elbow deep into sand and stacked alphabet blocks. "I was out playing hopscotch," says Leslye Schaefer, Scholastic's senior vice president of marketing.

Today's preschoolers are bombarded with flashing lights, buzzing sounds and even CD-ROMs.

With the industry repeating the age compression mantra (kids are getting older younger), one would think the preschool category, at least, safe. Not true, says Schaefer. "I wish I could say that was the case. Kids are spending more time on the computer particularly if they have siblings and working parents. They have a familiarity with technology, (although) not to the extent as teens and tweens," she explains.

This trend is troubling to Brio's president, Peter Reynolds. He has kids and recently tried out a CD-ROM aimed at preschoolers. The software program applauded correct answers but emitted a cacophonous "aaanh!" in response to a wrong reply. "How positively reinforcing is that?" he asks rhetorically. "It devastated me. How must (a preschooler) feel?" He hid the program.

It is an understatement to say the computer changed everything. "Kids are on the computer by age three and spend less time playing with traditional toys," says Melissa Bernstein, co-owner of Lights, Camera, Interaction! "The market starts at 0 now and goes up to age 4, max."

"The younger the child, the more critical the play (especially in the 0- to 1-year-old range) because of rapid development," Reynolds says. A toy at this age, he adds, must benefit the child to some degree. More precisely, it must have value in the hands of a child. "Children that get toys that don't enhance their lives are endangered in the developmental sense, though not in the safety sense." He worries that some of the electronic products in the market may be overwhelming to young children, whereas something like a puzzle, no matter how simple, teaches routine and focus.

Learning Curve President John Lee sees a bit of backlash, however, from consumers who are more savvy now about the bells and whistles manufacturers build into their products. "There's a sense that (early on) these features were slapped on, (whereas) LeapFrog's features are thoughtful," he noted, referring to the interactive educational toy developer whose Leap Pad was a consumer favorite during the last holiday season.

"Technology is okay only to the extent that it provides real value," Lee says. Learning Curve's Octotunes, for example, is what Lee calls "low tech to the max." Each soft, colorful tentacle of the octopus plays a different note when squeezed (in fact, the notes comprise an eight-tone scale). Kate Tanner, owner of Kidstop Learning Fun in Scottsdale, Ariz., adds that many parents look for the "do" part in a product, complaining that their child, "plays with a toy for a day and then forgets about it."

Today's more astute parents know the difference between integrated features and those that are merely tacked on. "We're not going to do it if it doesn't make sense," says LeapFrog's director of marketing of infant, toddler, preschool, Kathleen Campisano. Today's manufacturers must also take pains to be innovative with children now, as Campisano says, "desensitized" to techie products. Consumers look for a product that will challenge the child without being frustrating, she says. Putting 'A, B, C' on a product "translates to the consumer as limited, so we have the whole alphabet. Is a 6-month-old ready for the whole alphabet? Probably not, but what about a 9- or 12-month-old? We are also careful not to test or quiz too early on."

Tali Ben-Ezer, president of Maya Group, which is the North American distributor of Tiny Love infant toys, agrees that children should not be 'pushed' into the next stage of development before they have had a chance to mature in the stage they are in. For that reason, Tiny Love develops toys that promote maximum "enhancement of developmental stages," she tells PLAYTHINGS .

Toymaker Chicco, in fact, has divided its products according to stage of development into infant and preschool categories. The two categories are divided further into subcategories with interaction and 'technology' added according to developmental stage. The infant toy group includes the First Discoveries line for ages zero to 12 months, the First Contact line for ages three to 24 months and the First Friends line, which is designed for children who have started to recognize objects in their surroundings, for ages three to 36 months.

Chicco's preschool category also includes three separate lines of toys divided according to development. First Preschool for 1- to 4-year olds is designed to develop motor coordination while the Preschool line for 2- to 6-year olds is geared to develop physical skills, intelligence and creativity. Chicco Sounds for children aged three and older include a range of interactive musical toys designed to develop musical skills. The company's Preschool toy line also includes the Casa Garden line for a wider age range.

Driving the push for electronic products are parents looking for an edge for their kids. "We're talking about blue collar families" who want to give their kids every single opportunity, says Arnold Maggi, vice president and divisional merchandise manager of imaginarium.com.

"My daughter," says Michelle Fitts, LeapFrog's marketing brand manager "knows how to draw her letters and numbers going into kindergarten. Oh, my gosh! That's what I learned in kindergarten." It's a case, she adds, not only of children learning more at an earlier age but of parents feeling more pressure to get their children at least up to speed. "In focus groups, parents say, 'They're kids. I don't want to be drilling my kids. But I want my kids to be prepared for school.'" The tech stock plummet not withstanding, parents acknowledge the important role education will play in a child's potential to succeed in an increasingly technological marketplace. Moreover, Fitts adds, many parents are recognizing their need to be involved in this education.

To that end, companies aim to combine fun with learning. "If you can teach them while they're having fun, then you've got a good item," Maggi explains. "The product should be fun," agrees Fitts. "Learning should be accidental." LeapFrog's Imagination Desk seizes on preschoolers' love of coloring and chimes in with phonetics, music and sound effects via a touch-sensitive surface. (Parents can print out replacement copies of the coloring pages from the company's Web site, leapfrog.com.) Simple coloring becomes an immersive, multi-sensory experience. "Anytime a manufacturer can engage all of the senses makes for a memorable experience," says Campisano.

Of course, a toy doesn't have to be electronic to be educational. Brio's Reynolds stands by traditional toys. Kids, he says, "don't need a lot of toys. They don't need expensive toys. They need good toys." The 'value over price' dictum is one he repeats frequently during the course of a recent conversation with PLAYTHINGS . "Children are very serious about their play; give them time," he stresses. Susan Oliver, the newly appointed executive director of Playing for Keeps, a not-for-profit organization focused on informing parents and educators on the importance of constructive play patterns, is even more emphatic. "Play is how kids explore the world; that is the way a child learns," she says. It is especially critical, she adds, during the first three years of a child's life when his/her brain develops very rapidly.

Traditional toys in classic categories, such as preschool, have been a boon to an industry in a bear market. People don't want to skimp on early development of their child. They'll skimp on something else. There are, after all, says Bernstein, "very few children who go through childhood and don't do a puzzle."

A few years ago, Kate Tanner's husband asked her why she kept bringing home toys from out-of-the-way stores. "You can't get these anywhere in town," she replied. Today she owns Kidstop Learning Fun. The infant area is the backbone of her 2-year-old store and a professor of child development at a local college visits every so often to critique the products. "We hold activity days for toddlers which brings families into the store," she says. Mothers network among themselves, and the "word of mouth is tremendous."

Like with most categories, keeping product out for demonstration purposes can make for an easy sale. "If a child is playing with it—if it grabs (his/her) attention, then the parent will buy," says John Erysian, owner of Circle of Knowledge in St. Louis, Mo. Even without a child present, he adds, the customer can visualize the child playing with it. "It's a vicarious experience. The better products—you can tell right away." (Ravensburger's Junior Colorino and Small World's Busy Box are two of his top sellers.)

Philip Wrzesinski, vice president of Toy House and Baby Too in Jackson, Mich., simply looks for toys that push children "to think and do for themselves." To this end, he stocks puppets, wooden blocks, Playmobil and Lights, Camera, Interaction's Puzzle World. Retailers consider LCI's Cutting Food Box a relatively hot item (wooden fruit slices fit together via a hook-and-loop system). The Latches Board develops motor skills by hiding pictures behind wooden doors secured by brass clasps and latches. (Both are part of the company's new Melissa and Doug's Classic Wooden Toys line.) "Stay away from novelties that have all the action themselves," Wrzesinski adds, preferring items that foster interaction between children and their imaginations.

"The look of the character is extremely important," says Schaefer. "It needs to be bright, warm and huggable." With non-character product, retailers say bright colors and simple designs work best. They list Lamaze by Learning Curve, International Playthings, Neurosmith and Manhattan Toy products among their top sellers. A plus with International Playthings, notes Steve Dillon, owner of Out of the Blue in Albuquerque, N.M., is that the company codes its boxes with ages in large type. Imagiix's product boxes in its Milestones line include a description of the skills the toy can help develop. These relatively minor details, retailers say, help parents choose. Imaginarium and its Web site have implemented a learning values system for similar effect.

Playing for Keeps' Oliver encourages retailers and manufacturers to focus on products that have "links to later life skills." Marbles rolling through tubes, for example, "builds muscles later used in reading," she says. Crayons and doll dressing develops motor skills needed for writing.

Mom is generally the purchaser, says Fisher-Price Brands President Neil Friedman. "Toys have to have a major, significant benefit to the child." Dillon adds that with parents working more, they want kids' time spent playing to be as constructive as possible.

A key indicator the infant and preschool categories are still fertile is the growing number of companies and SKUs. Even MGM Consumer Products is gearing up to launch an array of books, plush and bedding based on Personalibees, a new property from Crank2 (progenitors of She's Charmed and Dangerous).

The colors are soft pastels and the designs simple, something Marja Kerkhof, managing director of Amsterdam-based Mercis bv, which holds the Miffy license, recognizes. "Preschoolers are very often over(estimated). People think they can handle more than they can," she says. Kerkhof cites what could be any page in the 90-plus Miffy books penned by Dick Bruna: "Four lines in rhyme and an illustration is exactly what they can handle. Miffy illustrations are almost like pictograms: very clean, not cluttered." The character (which, Kerkhof is eager to point out, predates Hello Kitty) is getting a push in the United States in the form of books by Kodansha and plush by Prestige.

Another venerable book series, Clifford, is getting a big boost from Scholastic with a TV series (25 new episodes are set to air in February in addition to a U.K. premiere) and line of CD-ROMs for 3- to 6-year-olds. It has performed exceedingly well on PBS Kids, which should encourage Scholastic to continue growing the brand. "We anticipate doing something for infant and baby, but that's sometime down the line," says the company's senior vice president of marketing, Leslye Schaefer.

Writer and illustrator Norman Bridwell created Clifford in 1962 to be the "kind of dog I would've liked as a child. He's not perfect; he makes mistakes, and children relate to that." In the show, Clifford talks for the first time (voiced by John Ritter), though only to other dogs. "John Ritter is a very likable person," says Bridwell. "It comes through in his voice."

Classic Clifford products were shipped to retailers earlier in the year to prime consumers for the pooch's new TV friends, Cleo (a purple poodle) and T-Bone (a yellow bulldog). Throughout the next year, expect to see a variety of product especially at JCPenny and FAO Schwarz, where a permanent Clifford boutique was recently constructed. Although a presence in a mass outlet like JCPenny will scare some specialty retailers away from the license, Kidstop Learning Fun's Tanner still keeps the nearly 40-year-old Clifford on her shelves because of its 'classic' status. Toy Island, Sidekicks and Madame Alexander are bowing plush and collectibles, while Basic Fun and Warren Industries put Clifford and his doghouse on key chains and puzzles, respectively.

Lil' Iguana has been developing a cast of characters to teach safety to kids and now offers a 13-inch plush, bean bag plush and CD-ROM. James Tomaszewski created Lil' Iguana to spend more time with his kids. The company of the same name has grown the Lil' Iguana brand from t-shirts Tomaszewski made through his printing business to music (in the form of Lil' Iguana's Safety Songs) and videos (26 new episodes were produced this year). Lil' Iguana also created a safety curriculum for educators and parents.

Following the success of its Buzzy the bug character on a range of infant products, Infantino is developing a new character, Oliver, who will be featured on everything from bedding to mobiles. A plush version of the dinosaur will hit stores before the year is out. The new line will include over 70 toys.

There's also no shortage of new, non-branded product. Category giant Fisher-Price's new Baby Playzone line is anchored by Crawl 'n Cruise Playground. "Everybody's done sight, sound, smell and touch. Nobody's done physical development," says Friedman. Pioneering? "That's a good word," he quips. The playground encourages babies to crawl, pull themselves up and even dance. In the meantime, Fisher-Price's popular Rescue Heroes team is bolstered by Aiden Assist, a disabled EMT developed with the help of the National Lekotek Center, an organization devoted to play patterns for disabled children.

As more manufacturers enter the mix, churning up greater numbers of SKUs, the final arbiter, says Reynolds, is value. "What the child brings to the play situation is much more important than the product."