Changing Tracks

Model railroading has always been a family affair for Stacey Walthers-Naffah.

But instead of a train set in the basement, things were a little different at her household.

In 1932, her great-grandfather started Wm. K. Walthers Inc., known in the model railroad business as Walthers.

Today, Milwaukee-based Walthers is the largest distributor of model railroad equipment in the world. It also carries its own line of trains, track, scenery and accessories, and publishes several reference books, which have come to be known as the bible of the model railroad industry.

Walthers’ branded products are primarily in the HO scale, but the company distributes every model railroad scale. 

Stacey’s grandfather, Bruce Walthers, and her dad, Phil Walthers were passed the leadership of Walthers, and helped grow it into the business it is today, with about 160 employees and a 114,000-square-foot facility on Milwaukee’s northwest side.

“My dad used to come in on weekends and we used to go into the distribution center – I can remember (my siblings and I) running our hands on the rollers in there,” Stacey said. “When I was in high school, I would work here half of the summer. And when I was in college I would stock shelves and help with our catalog and other publications.”

Stacey is the first member of the fourth generation of her family to join Walthers – she was named the company’s consumer marketing manager in early May.

From 2002 to before she joined Walthers, Stacey worked in advertising at People magazine in Chicago. At People she handled major national accounts such as Best Buy, McDonald’s, Kraft, Procter & Gamble and Target. She worked previously at Reader’s Digest and J. Walter Thompson, a global advertising agency.

Each of her employers exposed her to global brands with billions of dollars in annual revenue.

“The equalizer with all of the places I’ve worked is that you have to have the customer in focus,” Stacey Walthers said. “No matter what you’re selling, you need to have a deep understanding of who your customer is.”

Her clients have ranged from beauty to food to traditional packaged goods, allowing her to see best practices from successful brands in a wide range of industries.

“These were best-in-class marketers, and they turn so much (product) that they need to keep themselves in front of the customer and maintain their message,” she said. “You constantly have to come up with a reason for people to buy your brand instead of the store brand.”

While she worked at People, Stacey earned an MBA from the Northwestern University Kellogg School of Graduate Management in 2005, with majors in entrepreneurship and nonprofit management, with an emphasis on marketing.

“When I started my MBA, in the back of my head I was thinking I would have a lot of options but if I choose to come back to the family business, I would be qualified and I would have earned it on my own,” she said.

When her grandfather, Bruce Walthers, passed away in 2007, something he told Stacey years before sparked a desire to return to Walthers someday.

“He made the comment that one of the most meaningful experiences in his life was to work with his father and later with his son,” she said. “To have such an opportunity is such a rare one.”

Stacey and her husband, Chris Naffah, who have two young children, were also pondering where to move their growing family as their Chicago home was getting cramped. A move to Milwaukee started looking like it made more and more sense.

“(The Milwaukee area) is a wonderful place to raise a family,” Stacey said. “It’s also close to our families, and it gave us a chance to contribute to the family business.”

She was also looking for the next chapter of her career.

“I loved my time at People and in the agency world,” she said. “When I got my MBA, I took family business courses and my dad pitched ideas at me a number of times. I thought ‘Why wouldn’t I try it?’

“When I was quitting People, I told my publisher that it was my family’s business and my opportunity to touch many angles of the business and make an impact. I find great meaning in working for the family business.”


Earning a place

The Walthers family has always expected family members to earn a place in the family business, if they have a desire to work there.

“My parents chose to keep the company separate from home – it didn’t live at the dinner table. It was important to my parents to maintain a balance,” Stacey said. “We were encouraged to follow things that were of interest to us. But it was understood that if we were interested there would be opportunity here for us.”

“The (family’s) message has been ‘Get your own success, your own knowledge and if and when this makes sense we can put something together to make it work,'” said Phil Walthers. “When (Stacey) started we let her siblings know she was coming on board, and that just because she was, it did not preclude them from coming on board. The response was, they want to have this opportunity available to them in the future.”

Stacey’s experience at People, Reader’s Digest and J. Walter Thompson is bringing skills and viewpoints to Walthers that the company did not have before, Phil Walthers said. Her MBA coursework included studies on entrepreneurship, which took her more than three years to complete, and Phil had talked with his daughter about joining the family business over the past five years.

“She didn’t just decide on Jan. 1 that she was going to come here,” he said. “She’s been setting herself up and taking steps for 10 years to get to the point where she would make this move. She’s really ready for it. Her experience with major brands puts her in a unique position to understand the importance of branding, which is one area we want to improve. There is so much more we could do with it, and she brings a lot of that to the table.”

And while she and her father talked about joining the family business for years, the pair never negotiated about her position, salary or qualifications. Instead, she was interviewed by Cheryl Farnsworth of Succeedia, a Milwaukee-based coaching and recruitment firm that Phil Walthers hired to help rebuild the management team at Walthers.

“Cheryl assessed my strengths and where I could fill a need here,” Stacey said. “My dad was removed from the process. I was not in direct negotiations with my father. That’s been really important to the way this transition has gone smoothly. He’s positioning the company for growth and sustainability. Getting a strong management team in here is really important for the long-term viability of the company.”


Part of ‘The Next Generation’

Walthers’ sales have fallen over the past 12 months, as the global recession has chipped away at hobbyists’ pocketbooks.

“The hobby industry in general is seeing a little slowdown, but not the same that other (industries) have seen,” Phil Walthers said. “I’ve been in this business for more than 35 years, and this is the first recession I’ve ever seen from a business standpoint.”

However, he remains optimistic about the company’s future, because of a new leadership team the company has assembled over the last 18 months, including new vice presidents in sales, marketing and operations, as well as a new chief financial officer. Stacey, the company’s consumer marketing manager, reports to Jim Glasford, the company’s vice president of marketing, who was hired about 18 months ago.

“The horsepower (we have now) is significantly more than we had two years ago,” Phil Walthers said. “(Stacey) fits into this new leadership team and brings a skill set that we don’t currently have.”

However, the new team will take some time to hit its stride because of the complexity of Walthers’ business.

“It takes easily five years to really understand the heart of this business – the company and the industry we’re in,” Phil said. “Our company is exceedingly complex. Our primary customer is hobby shops, but we also sell to the consumer and we sell to national chains. We publish what is considered the bible of the (model railroad) business. And all of that work is done in house. All of the advertising and packaging is done in-house.”

Walthers is both a manufacturer and a distributor. The manufacturing work is done in China, but packaging work is done in Milwaukee.

The company also handles a significant number of imported goods, whether they are its own products made in China or the several lines of European trains and accessories it distributes.

“We go into just about every channel there is,” Phil Walthers said. “We’re a business of lots of transactions. In terms of the number and kind of things we do, we’re in a small 1 to 2 percent (of the companies) that do as many things as we do.”

Putting experience to use

Many of the lessons Stacey learned working with clients such as McDonald’s, Procter & Gamble and Best Buy may help her expose Walthers to a new generation of customers, even though they are in dramatically different industries.

“With model railroading, people are creating little worlds,” she said. “Whether they are historical or fantasy, we bring something to the table that people need now. My dad always said, ‘We sell fun.’ And this satisfies that filter – we’re not selling stuff that’s boring.”

In her new role with the family business, Stacey aims to maintain Walthers’ relationship with its existing customers while reaching new audiences. Part of that expansion could be through social media.

“There is that sense of community among railroaders, how they segment themselves and the way they share ideas would lend themselves to social media,” she said. “My role is looking at our brand and our company and making sure our customers know that we want to keep bringing them great products and making their dreams come true within the hobby, while helping get others to know about the hobby.”

Although economic conditions have caused some softness in sales for Walthers and its dealer network, the company believes it has bright prospects because people are spending more time with family and friends today.

“The sense of community couldn’t be more important right now,” Stacey said. “And model railroading is based on time together, family fun. My son is four years old and he’s crazy about trains. I see guys who are 50 years old who look the same way when they’re around trains. Who doesn’t want to feel young again?”

Although Walthers does sell direct to consumers through its web site and a retail store at its headquarters, most of its sales are through local hobby and specialty shops. Part of Stacey’s role will be continuing to work with Walters’ network of dealers to promote its products through those stores.

“Our dealers are hugely important to us – we want their businesses to thrive,” she said. “We want to help them sell (our products). It’s imperative that we get it right with them.”

Stacey also believes that Walthers can leverage its 2005 acquisition of Life Like Products LLC, an East Coast manufacturer of model railroad equipment, slot cars and other toys. Life Like’s trains are sold in sets through traditional “Big Box” retailers and are sold at a lower price point than other sets – making them an attractive price point for those new to the hobby.

“We’ve always had sets, but with the acquisition we’re into channels we have not distributed through before,” Stacey said. “They sell through Toys ‘R’ Us and other retailers, where the Life Like brand goes to the mass market.” 

Timeline

  • 1932 – William Walthers begins making signaling and electronic products so modelers could improve their model railroads, creating Wm. K. Walthers Inc.
  • 1935 – Walthers, Al Kalmbach and Frank Zeidler form the National Model Railroad Association in Milwaukee.
  • 1946 – Bruce Walthers joins his father’s company.
  • 1960 – William Walthers retires, passes Walthers to Bruce Walthers, who expands the company into a full-line distributor of model railroad products and moves the company to 1245 N. Water St. in downtown Milwaukee.
  • 1969- Walthers moves to 4050 N. 34th St. in Milwaukee.
  • 1972 – Phil Walthers joins the family business.
  • 1976 – Walthers moves to 5601 W. Florist Ave., Milwaukee
  • 1984 – Phil Walthers is named president of Walthers.
  • 1985 – Walthers introduces its “Great Circus Train” line in HO scale, based on equipment at the Great Circus Museum in Baraboo.
  • 2005 – Walthers acquires Life Like Products, its seventh acquisition.
  • 2009 – Stacey Walthers-Naffah, the fourth generation of the Walthers family, joins the management team ofthe company.

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