Saturday, September 30, 2006

Mike Wolf Interview

Mike Wolf & Standard Gauge Trains

What can I say about Mike Wolf that hasn’t been said at least a thousand times before? He’s probably one of the most savvy business men I have ever spoken with and he is absolutely one of the most passionate participants in the toy train world I have ever met. One of the things I did get from speaking with him is that there is definitely a difference between building toy trains and buying/playing with them. I know that I am stating the painfully obvious however the differences are still apparent.

Understanding the demographics of the toy train industry today and the toy train industry over 50 and 100 years ago is no small task. All train collectors of old toy trains own some piece in their collection that is at least 60 to 100 years old. Maybe even older. Everyone that buys toy trains thinks they understand the market based on what they’ve seen and heard, usually from the collecting community. It’s part of the lore that was created in the early days of Lionel, American Flyer and Ives catalogs. It is an ingrained part of our culture; the need to look forward to an exciting new invention or product while looking back with nostalgia.

Manufacturing and spotting market trends today is vastly different than in the early part of the 20th Century; however the demographics aren’t as different as we’d like to think. In talking to Mike Wolf, I heard a guy that is very close to the process of building and selling trains. The depth and knowledge of the market can sometimes be overwhelming and not just from Mike but from anyone who has been in it for over a quarter of a century and relies on it to make a living and pay the bills.

I am going to go through the interview with Mike Wolf using my own verbiage and periodically quote him. To say the least, Mike is a storehouse of knowledge. When I was speaking to him, he had so much to say that it actually became hard for me to keep up. If I actually just listed what he said it would take up three blogs and not just mine. In most areas I have to paraphrase what he said; not because I don’t want to quote him word for word (I do as much as I can) but because the amount of information he has just couldn’t fit into an article and be readable. I had to make some decisions because one hour with Mike is like 4 hours with any other serious train collector.

The other impediment I had to get past was my own biases. I thought I knew something about making toy trains based on my experiences working for companies that make other mass volume consumer products plus the fact that I have been an insane train $&%&@* my whole life. I was wrong. The bulk of our discussion was new news to me.

In the beginning…. No, that sounds too ominous.

When I picked up the phone and called Mike, his secretary put me through to him right away. Typically when I speak to executives in my own company or others, I have to wait for them to make a grand appearance; either in person or on the phone. His promptness is really only the beginning of a first impression but it is important to mention because I believe that focus comes along with being timely. Time is finite, so being on time speaks volumes.

To coin a really cheesy phrase: Mike’s focus is like a laser. If you haven’t spoken to Mike Wolf before and you have the opportunity, I highly recommend it. Even if you hate the guy (which you really can’t after you speak to him and I certainly don’t) you will respect him after you speak to him.


It is glaringly apparent after speaking with him that his knowledge of trains comes not just from running a company or selling the trains; he actually has the wisdom that comes from the guy that has put them together, painted them and then boxed them up and shipped them out. It’s called “working the line”. His perspective is rare; it reminded me of some of the discussions I had with other people that have made trains for many years such as Dick Mayer and Jim Cohen. Both Mr. Cohen and Mr. Mayer are well respected low volume train manufacturers and are rapidly nearing retirement (both are over 70 years old). (By the way Joe, I respect you as well, you just ain’t over 70!)

His overall standard gauge volume is vastly different than any other manufacturer, even Lionel in its’ heyday. He also does a great job addressing some of the critics that are “purists” for antiques and he is neither glib nor arrogant about his place in toy train history.

His knowledge of the industry is vast and it goes back to the very beginning. He can quote pages about early toy train production by chapter and verse right out of books like Ron Hollander’s. His perspective is unique because his company has built a diverse portfolio of standard gauge items and has been exposed since day 1 to people that shape how toy trains are made, bought and sold. MTH is more diverse in standard gauge manufacturing than any manufacturer on the planet at any point in time.

Key:
SGB = Standard Gauge Blog
MW = Mike Wolf

We started out with the litany of questions I received from the blog readers:

SGB: “Can you make xyz?”
MW: “Remember, standard gauge is a niche, not the whole market.”

SGB: “That might be true, but is it a profitable niche? Is it a niche where the customers are loyal?”

MW: “For MTH it is profitable but it is still a niche nonetheless. It is important to remember that the demographic for standard gauge isn’t the same as for O gauge. The average age of a standard gauge purchaser is 52 years old.”

SGB: "52? But I know guys younger than that in the hobby that are actively purchasing all kinds of trains."

MW: “The average age of most purchasers for O gauge and Standard gauge is 52 years old. The prime difference being that standard gauge is a smaller niche than O gauge however the standard gauge enthusiast spends more on trains per year than an O gauge enthusiast.”

That was actually some real news to me. What this says to me is that our particular fascination for this gauge may present a conundrum to most manufacturers. If they cater to us, the risk is that they won’t sell their gear, the payoff is that we spend more money on our gear, period.

SGB: “How does MTH compile its’ customer metrics on Standard Gauge? How do you know what to build?”

MW: “Since MTH’s inception, we’ve been putting these little cards into all of our products. Product feedback cards. We really do look at them and we track trends over a period of decades. It’s one huge advantage MTH has. Our customers have been giving us feedback for years. It’s probably some of the best market research we could have bought.”

MW: “We know with a high degree of certainty who’s buying tinplate products and the mix we need to offer. It really hasn’t changed much since the early days of standard gauge and tinplate. If you check in Ron Hollander’s book it is quite clear that the demographic, even when production was substantial in the 30’s, was focused on an older age demographic. The dollars just make sense. We don’t have 4 year olds buying or playing with this stuff, the bulk of it is focused on an older crowd.”

One thing Mike did say is that MTH will be making more 2 7/8 gauge product. That’s probably not going to happen in the short term (not in the next year for sure).

SGB: “Not all of standard gauge goes to an aging demographic though. Isn’t it our job to recruit younger people?”

As a side note, this is something Mike is very passionate about. He has very strong ideas on the direction of the TCA as well as other clubs and events. He very strongly believes we need to get more people into trains. Not just kids but grownups as well.

MW: “We do need to get substantially more people into trains. I don’t see the audience changing for trains anytime soon. The most successful endeavor we’ve had with recruits for standard gauge comes from our starter sets. Customers buy them and put them in a Christmas Garden or around a tree and end up playing with them much more than they thought.”

MW: “We also should think about modifying some of the rules and regulations for getting into clubs like the TCA. The environments for creating toy train enthusiasts can’t be limited or it will shrink.”

SGB: “Won’t different and new trains like a Hudson (Creswell 600E) bring customers into the hobby?”

MW: “We’ve thought of quite a few different designs and options for our standard gauge trains. We tried the Articulated 400E and it just didn’t happen. We just didn’t see the orders. Even with our traditional standard gauge, the best selling items are the classics. The items that are in the traditional form and colors.”

SGB: “How about all of the new paint schemes you have tried?”
MW: “Even the new paint schemes don’t sell as well as the traditional colors. For one reason or another they key into the psyche of the operator/collector.”

SGB: “What is your favorite piece of standard gauge?”

MW: “The 400e. It was a big risk to make the first time and I remember that. Also it is the best looking engine in my opinion and it is why it is incorporated in our logo.”

SGB: “So you’ll never make something out of the ordinary? Everything has to have been done before?”

MW: “Hold on there, we aren’t closed to ANY idea. But there has to be a market for it. Keep the ideas coming; we are a company that will always listen to our customers!”

SGB: “What is your best selling standard gauge item?”

MW: “The 200 Series Freight cars.”

SGB: “How about the wrinkle of Contemporary vs. Original?”

MW: “Contemporary outsells original 5 to 1. Much of that is because of the newer motor technology. It just pulls more cars efficiently. Much of that is unlocking all of the Protosound 2.0 Sound Effects and capabilities. Our standard gauge products can just do some things that the originals cannot touch.”

SGB: “But does it work better? Is it in the spirit of the original?”

MW: “Yes. There are purchases that are impulse and then there are purchases that are strategy. Protosound is part of a layout and operating strategy. It’s all about how you enable the trains to be used now and in the future. For instance, the Leland Monorail in Contemporary form has outsold the Traditional product. That is going to really be great to watch, it is a terrific product. Protosound really makes an operating difference.”

SGB: “How are you evolving Protosound for tinplate operators?”

MW: “We have quite a few ideas for DCS. We are trying to prioritize them and define which one’s will be most viable for the market. We just released an upgrade that has some fixes and some new features. DCS is only going to get better over time.”

SGB: “I’d like to see the DCS interface evolve a bit. Do you have anything on the horizon?”
MW: “I can’t discuss specifics; we have quite a few opportunities and options we are looking at.”

SGB: “I’d love to see the interface simplified a bit. I love the old ZW.”

MW: “You should look at our Z-4000 coupled with DCS. It has an excellent interface and is something everyone is used to yet delivers more power consistently than any of our competition.”

SGB: “Let me switch gears a bit and talk about eBay. Does it help or hurt the standard gauge market to have your gear available on eBay at all sorts of prices? Is it dumping?”

MW: “No, not at all. We need more people in the hobby and eBay is a good way to recruit folks that might not be interested otherwise. The more people that get involved, the more track that gets put out in layouts, the better off we all are.”

SGB: “So eBay is not a threat to your business?”
MW: “Nope. It’s a way to pull in more customers. It isn’t a bad thing at all.”

We had a substantial and long discussion about DCS. More than I’ll print here because there are many folks out there that aren’t DCS fans and there others that swear by it. I’ve had DCS since day 1 and it has come a very long way since its’ inception. All of my MTH purchases are Proto enabled and I have never been disappointed by the product.

We also had a long discussion about why trains are so popular in Europe and don’t seem to have as much traction at retail in the US. Much of it is cultural and how train companies have marketed to Europeans non-stop over the last 100 years. I pondered the retail presence and the availability of trains to every European. Mike said that European train manufacturers don’t exactly have streets paved with gold (as the recent Marklin sale highlites). Selling trains is a challenge regardless of the locale.

SGB: “Sometimes it is hard to find MTH Standard Gauge items at local hobby stores. Is this something you are going to remedy?”

MW: “We already have. We have some great hobby retailers that are Tinplate Megastations. Western Depot is one of them. There are others out on the MTH website. They are excellent resources for everything we make. Mizell Trains, Brady’s Train Outlet and so on. They stock and carry almost every tinplate (meaning standard gauge and tinplate O gauge) that we make. If they don’t have them in stock they can almost always get them for you. I highly recommend looking to them for Tinplate purchases.”

SGB: “So you’re not considering the direct model? The one that has made Dell famous?”

MW: “No. We need to offer a higher level of service to our customers and the only way we can do that is with trusted business partners in key geographical areas. It’s more than just having product on hand; we need to have service departments that can recognize problems that they can fix vs. sending it back to us and make sure that they are there for customers throughout the entire experience. Remember, it is expensive to stock and inventory everything we make. Even the largest dealers have finite resources; they need to pick the best options for their customers.”

SGB: “I have a question about a rumor I heard that MTH still uses original dies for the standard gauge and O gauge tinplate. Dies that were developed in the 30’s and dies that were developed for the Classics line of another manufacturer.”

MW: “I’d love to know where that rumor came from! We make everything for all of our trains, especially the dies. We are constantly refining and retooling to make sure our products are as good or better than the originals. There is no possible way we could use any old dies from anywhere. Everything we use is our own, developed especially for us from scratch. We don’t use anyone else’s dies, just our own.”

The one interesting thing I detected from Mike was not one ounce of bile or anger about the pending and “resolved” lawsuits. I didn’t engage him in conversation about it because I don’t think it is germane to our discussion. The man is singularly focused on moving forward in a big way. I definitely did get the sense from him that his company was focused on innovating and making quality. I know I can sound kind of like a kiss ass in some of these articles and interviews but a good attitude makes a strong impression on me and I’d rather take the high road.

He didn’t strike me as vindictive, angry or even a little unfocused. His sole job is to make trains and recruit as many people as he can to MTH. Remember, I spoke to him very shortly after his latest legal tussle with another manufacturer. He’s a guy that definitely takes the high road.

SGB: “Do you guys have an archive? Do you keep all of the flavors of every train you make.”

MW: “We do. We have almost all of the tinplate we manufactured from the last quarter of a century. Some of it is missing but only a small amount.”

With that we started to run out of time. I did detect that Mike is a very busy man and since I wanted to honor my hour of time with him, I called it a day. He was very gracious and let me know that if I had more questions I could send them to his staff. I did and he has consistently answered promptly.

So some things are clear from this article and there are other things I’d still like to know. MTH does use its’ customers as a sounding board and takes directions from them. That’s a fact. I’d still like to know more about the nuts and bolts of making tinplate trains. How long does it take, what are some obstacles to making the volumes MTH makes and so on. All told though, the vibe that I received from Mike was that MTH is in the market for the long haul. They are investing substantially in forward thinking with DCS and with tooling. That’s good news for everyone in the hobby, operators and collectors alike. It was good to speak to a guy that was clearly passionate about everything he does. As I said, I have quite a few questions for Mike (most of which require factory info) and I’d love to take a 6 Megapixel camera and a 2 Gig SD card to his factory. My last question for him:

SGB: “What do you think people will think of when they see your collectibles 100 years from now? Do you think they’ll be the hot collectible in 2106?”

MW: “It doesn’t matter to me. I just want people to have fun with the stuff we make right now. That’s all that’s important.”

Amen to that.

A quick note - My buddy Arno said that the fonts were not rendering properly; I have since changed the font to "Times" which should render on any and every system from the last 10 years.

5 comments:

Dave said...

Marc, great interview and write up! I too always wanted to know what it takes to manufacture a train - tinplate or O Gauge. It would be great if MTH put together a blog that chronicles the steps involved in making a piece from planning stage to finished product. I'm sure many would be interested in it.

Standard Gauge Blogger said...

I have to agree. I'd love to see pics and get a virtual tour of the factory as well as know more factory logistics.

Mike seemed kind of tight lipped about how manufacturing gets done and I didn't want to press the issue. Believe me, I'd love to know and see how this stuff gets built.

Marc

J. Schnibbe said...

You did a great job with this interview, Marc! You got the answers to the questions that many of us have been wondering about!

Anonymous said...

Hi Marc! I hope that Mike makes a 1688 Torpedo with the Tin Litho Freight/Passenger Cars someday! Good Interview. Take Care. Keith

Anonymous said...

I wish you asked about the quility of his tinplate changing all the time. I have a 408e that is his earlier run and one that it the secound run years later. There is a big diff. in the paint, metal, trim. You have to own them side by side to see it, but its a big diff.