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Märklin Holding GmbH

Stuttgarter Strasse 55-57
D-73033 Göppingen
Germany
Telephone: ( +49) 7161 608-0
Fax: ( +49) 7161 608-550
Web site: http://www.maerklin.com

Private Company
Incorporated: 1888 as Gebr. Märklin
Employees: 1,460 (2004)
Sales: EUR164.4 million ($206.4 million)
NAIC: 339932 Game, Toy, and Children's Vehicle Manufacturing

Marklin Holding GmbH is the management company of Germany's number one model train manufacturer. From the imperial train of German emperor Wilhelm II to modern high-speed Intercity Express trains, Märklin has built a true-to-life model of the most famous locomotives and the most mundane wagons imaginable. The company makes the whole range of locomotives and rolling stock for all common gauge sizes. The detail-rich, all-metal historical and modern trains of the upscale and expensive Märklin brand have found a loyal following among mainly male railroad enthusiasts in Germany and abroad. Nuremberg-based subsidiary Trix makes gauge N-sized mini-trains which are marketed under the "Trix" brand name. Märklin also makes a small number of limited edition models of cars, ships, and vintage toys. Märklin puts out about 300 new products each year, ranging from $175 two-train starter kits to limited editions of collector's items made of precious metal that cost tens of thousands of dollars. Headquartered in Göppingen near Stuttgart, the company has manufacturing plants in Germany and Hungary and sales subsidiaries in Switzerland, the Netherlands, Belgium, France, and the United States. Exports account for almost 30 percent of total sales. Märklin is still owned by descendants of company founder Friedrich Wilhelm Märklin and his later business partners who established the firm in the second half of the 19th century.

Toys for Boys and Girls in the Late 19th Century

In 1859, tinsmith Theodor Friedrich Wilhelm Märklin started a toy making business in Göppingen, a city in the German state of Württemberg, where he had lived and worked since 1840. His product line consisted of miniature cooking utensils and other accessories for dollhouses made of lacquered tinplate. His second wife Caroline Hettich, whom he had married in the same year, played a crucial part in the business. While Friedrich Wilhelm skillfully crafted the toys, Caroline took on the role of the traveling saleswoman, a rare task for a woman at the time. She traveled extensively through southern Germany and Switzerland and brought in so many orders that only a few years after its foundation the business had to move to larger premises. However, her husband's sudden death after an accident in 1866 left Caroline running the family business just by herself for the next twenty years. Although she remarried two years after Friedrich Wilhelm's death, her new husband did not lend her the support she had hoped for. Despite her determination, high energy, and organizational talent, it took continued hard work and extreme hardship to keep the business going until her three sons were old enough to take it over.

When her sons reached the critical age, none of them—it seemed—was interested in the family business. After her second husband had died in the 1880s, Eugen Märklin, one of her sons who had a well-paid position in another business, decided to take over the toy workshop as a side line. In 1888, he and his brother Karl established the unlimited trading company Gebr. Märklin & Co., which included their mother's business. Three years later, Märklin took the opportunity to acquire the Ludwig Lutz toy factory in Ellwangen, which had gained a reputation for beautifully crafted technical tinplate toys. Many of the factory's highly skilled workers accepted Märklin's offer of continued employment if they moved to Göppingen. Besides miniature kitchen utensils for doll houses and toy ovens, the company's product range now included tiny merry-go-rounds, doll carriages, wagons, carts, and boats. However, it was a model train Märklin introduced at the 1891 Leipzig Spring Fair as a novelty that determined the company's fate for the next century. Caroline Märklin died three years after this fateful decision that put the business she had run for over two decades on the track to lasting success and worldwide fame.

Model trains were nothing new at the time. However, Märklin's clockwork-driven wind-up train ran on a sectional track whose shape could be changed. The company was also the first manufacturer to introduce a standardized gauge size that made it possible to continuously add pieces such as additional wagons or track to an expanding system. Märklin's train was a major attraction at the fair and positioned the company as a leading manufacturer in the evolving model train market, which proved relatively stable even after the heyday of the railroad had long passed. While the Märklin brothers worked on finding the right balance between detail-rich handmade models and low-cost mechanical mass production, the company's range of technical toys for boys expanded at the cost of the traditional line of toys for girls. As with the latter, the company emphasized a wide variety of accessories. In 1892, another business partner, Emil Fritz of Plochingen, joined the firm. Three years later, the business moved to a new location, which it outgrew within five years.

Märklin's clockwork-driven model trains were followed by methylated spirit-fueled steam locomotives. The latter ran longer than clockwork-driven models which started off at a great speed but got slower and slower with every round until they stopped when the spring had lost its tension. Spirit-fueled steam locomotives, however, heated up quickly and could not be controlled in any way. They ran very fast until all the fuel was burned and sometimes tipped over in curves. Spilled fuel could then break into flames when it touched the hot body of the locomotive, a security risk that was not appropriate for children's toys. The solution was to build models that could run on electric power. Even before Göppingen's first power station began to generate electricity, Märklin introduced toys that were powered by electricity. In 1895, the company launched the first electric model tram, followed by a number of electric model trains.

Focus on Model Trains: 1920s and 1930s

At the turn of the 20th century, Märklin moved into a brand-new 6,000-square-meter factory building in Göttingen's Stuttgarter Strasse. Around the same time, the dimensions Märklin had used for gauges and model scales were adopted as international standards. To finance the next stage of growth, the company owners decided to invite another partner, Richard Safft, into the business in 1907. One year later, it was renamed Gebr. Märklin & Cie. In 1911, a new office building six-storeys high was added to the factory. By 1914, the company employed about 600 workers.

The early years of the 20th century saw Märklin's range of products expand very rapidly. Eugen Märklin's business partner Emil Friz, who was driven to make the company the world's largest toy manufacturer, added ever more articles to Märklin's range of products. Toy-sized models of the latest technical innovations took a prominent place in Märklin's output. For example, by 1909 the company manufactured as many as 90 different models of steam engines. Märklin also began to put out large catalogues which were mailed to various toy dealers. In 1914, the company launched the first metal construction set for boys, which remained a popular item until the 1960s. The kits were often used to build bridges, cranes, and ramps for their model trains. Because of the cyclical nature of the toy market, the company complemented its extensive range of toys with various household goods and "summer articles." The beginning of World War I in 1914 suddenly interrupted Märklin's growth. The company was cut off from export markets. Many employees were drafted into the military, and the firm was ordered to produce war goods.

The postwar years brought organizational changes. After Emil Friz' death in 1922, Märklin was transformed from an unlimited trading company into a limited liability company. One year later, Eugen Märklin's son Fritz Märklin entered the family business. In 1926, the son-in-law of Emil Friz, Max Scheerer, joined the executive management team. Nine years later, Eugen Märklin retired and was succeeded by his son Fritz.

Because of Märklin's solid position in the domestic market, the company came out of the difficult postwar years fairly well despite hyperinflation, low consumer budgets, and mass bankruptcies. However, to make better use of limited resources, Märklin's range of products was slimmed down. In regards to model trains, the number of gauge sizes was reduced. The company also focused more and more on model trains that were based on actual locomotives and wagons. The new German state-owned railway company Deutsche Reichsbahn, which had been founded in 1920, was Märklin's main source of inspiration. In 1926, the company switched power supplies for electric model locomotives from the German household current of 220 Volts to a 20-Volt system, which was much safer for children. In 1929, the growing popularity of Märklin products was reflected in the size of the company's workforce which—with 900 workers—had greatly exceeded pre-war levels.

Company Perspectives:

True-to-Life and Practical Modeling. With our models we strive to achieve an optimal synthesis between original details and practical robustness, taking the model size into account. This is not a rigid process, but it always results in more sophisticated models, due to improved materials and refined production techniques.

At the beginning of the 1930s, one of Märklin's major competitors in Germany, the Bing company, withdrew from the toy business. When the new Nazi government tightened raw material supplies for manufacturers of consumer products, Märklin's reaction was a stroke of genius. In 1935, the company launched a new line of electric table top model railroads that were half the size of common models, creating the so-called H0 gauge measuring just 16.5 millimeters. The new H0 series not only cut the raw material needed for production in half but also became an instant bestseller. One of the reasons might have been that the H0-sized model trains could easily be set up on table tops and did not require as much space in a child's bedroom. In 1938, Märklin introduced a remote control that made it possible to reverse the direction in which a model train was running. During this time, models made to gauge 1 size, as well as many products not related to model trains, were phased out. With the beginning of World War II in 1939, the production of civil goods was again replaced by war goods.

Innovations Drive Growth after World War II

Märklin's factory was left untouched by World War II. Soon after the war had ended, model train production was taken up again in Göppingen. With many German cities in ruins and buying power severely reduced, the first batches of model trains were shipped abroad. Managing director Richard Safft died in 1945 and was succeeded by his son Herbert. Two years later, the last managing partner of the second family generation, Eugen Märklin, died. His son Fritz continued as managing director until his death in 1961. In the postwar years, the company followed a dual strategy based on the fact that there were different kinds of customers: adult collectors who put their model trans on display rather than in a "model train landscape," adult model train enthusiasts who were involved in building and expanding their own "living room railroad," and boys who just wanted to have fun playing with Märklin's locomotives and wagons. While sticking with the idea of making true-to-life model trains, the company also wanted them to be easier to handle as toys. Märklin focused on expanding the range of products for the 00 and H0 gauges and dropped the entire gauge 0 program. Production methods switched from lacquered tinplate modeling to zinc and plastics die casting, which allowed even more detailed models. As the postwar reconstruction period gave way to the German "economic miracle," Märklin's sales exploded. At the end of the 1960s, the company relaunched a model train series in the traditional gauge 1 size.

The 1970s and 1980s saw Märklin launch a number of major product innovations and expand into new geographical markets. In 1972, the company introduced the world's smallest mass produced electric model train system under the "mini-club" brand at the Nuremberg Toy Fair. The fully functional mini-train, which was 220 times smaller than the original and ran on 6.5 millimeter-wide gauges, was included in the Guinness Book of World Records not only for its small size but also for breaking the world record in uninterrupted operation. A Märklin "mini club" train managed to run 720 kilometers in 1,219 hours. In the late 1970s, Märklin boosted its international marketing and distribution network by establishing subsidiaries in Switzerland, Belgium, France, and the United States. At the end of the decade, the company launched a solar powered "mini-club" train. In the 1980s, Märklin trains entered the electronic age. Launched in 1984, the electronic control system "Märklin Digital" enabled independent multi-train operation with or without the help of a computer. Theoretically, the new system was able to manage up to 80 locomotives and 256 switches within one circuit. Three years later, the company put out a prototype of a locomotive with an inbuilt video camera that beamed pictures onto a monitor. Innovations notwithstanding, in the second half of the 1980s Märklin's sales stagnated and profits vanished, partly due to the company's single-minded focus on adult railroad hobbyists.

Expansion and New Marketing Strategies in the 1990s and 2000s

In the early 1990s Märklin was able to overcome the stagnation of the late 1980s. The company acquired three new production sites and launched a comprehensive marketing campaign. The 1990s began with an unexpected expansion of Märklin's domestic market when East Germany was reunited with the western part of the country. Märklin acquired a toy factory in Sonneberg in the eastern German state of Thuringia and moved its production of rolling stock there. Another production subsidiary was established in Györ, Hungary, where 100 employees assembled small parts, railroad tracks, and switches. Later in the decade, in 1997, the newly established management holding company Märklin Holding GmbH took over Nuremberg-based model train maker Trix Modelleisenbahn GmbH & Co. KG. It took three years of major investments and modernization until the manufacturer that had carved out a market niche with gauge N-sized mini-trains, and with which Märklin had cooperated in special projects since 1978, broke even in 2000. In addition, the company launched a joint marketing initiative with specialized toy retailers, the Märklin Student's Club for children, and the Märklin Insider Club for adult customers who received a club magazine and were able to buy exclusive models. The company even opened its own model railroad museum in Göppingen. A new advertizing campaign featured fathers and sons playing together with Märklin model trains. The combined effect of all these measures was a period of dynamic growth that lasted until the second half of the 1990s, when sales began to stagnate again.

Key Dates:

1859:: Tinsmith Friedrich Wilhelm Märklin and his wife Carolyn start a toy making business.
1888:: Two of the founder's sons take over the business and name it Gebr. Märklin.
1891:: The company presents the first standardized wind-up train running on sectional track.
1935:: Märklin introduces electric table top model railroads half the size of common models.
1972:: The company launches the smallest mass-produced electric model train system under the "mini-club" brand.
1984:: The electronic control system "Märklin Digital" enables independent multi-train operation.
1994:: Management company Märklin Holding GmbH is established.
1997:: Märklin takes over German competitor Trix Modelleisenbahn.
2003:: The company launches a model of Harry Potter's Hogwarts Express train.

At the end of the 1990s, Märklin found itself in the middle of a crisis that was partly self-made. Old-fashioned production methods and long waiting times for electronic parts caused a backlog of orders, some of which were not filled until months after the promised delivery date. About 10 percent of them were not filled at all. In 2000, Märklin produced losses for the first time in many years. The company eliminated 400 products from its catalogue, cut the time for new product development, and updated production technologies. The Trix production was moved to a new site, the tool-making workshop spun off, and the workforce cut in half. However, the company had to face additional problems, including decreasing interest of Germany's specialized toy retailers in model trains, lower consumption spending, and competition from electronic toys and video games. To win back the interest of teenage boys, Märklin put out models of high-speed Intercity Express (ICE) trains along with historical product lines. The company's model of the bright red Hogwarts Express train that the title hero of the popular Harry Potter novels took to school became a bestseller in the 2003 Christmas shopping season. Märklin made about 60 percent of its annual sales during this period each year.

By 2004, Märklin was back on track. More than 110 years after the first Märklin model trains were sold, they had become collector's items. The various Märklin fan clubs counted over 120,000 members and roughly two-thirds of the company's output was purchased by collectors. Confronted with a stagnating domestic market, further expansion into the world's biggest market for model trains—the United States, where Märklin's market share was lower than 2 percent—was declared one of the company's major goals at the beginning of the 21st century. Fred Gates, president of the company's U.S. subsidiary in New Berlin, Milwaukee, summed up his take on Märklin's future when he told Playthings in November 2002 that there will be model trains as long as there are trains in the real world.

Principal Subsidiaries

Gebrüder Märklin & Cie; Trix Modelleisenbahn GmbH & Co. KG; Märklin-Vertriebs AG (Switzerland); Märklin B.V. (Netherlands); Märklin S.A.R.L. (France); S.A. Märklin N.V. (Belgium); Märklin, Inc. (United States).