CHICAGO — Harley-Davidson has determined the easiest way to get youthful prospects to purchase a brand new bike is to promote them a used one first. The Milwaukee-based firm plans to roll out a licensed pre-owned bike program, referred to as H-D Licensed, adapting a method carmakers have been following for years to place well-tended used automobiles as an alternative choice to low-margin, “entry-level” new fashions.
Harley’s embrace of used bikes is a part of a brand new five-year turnaround technique beneath Chief Government Jochen Zeitz, and is the newest effort to increase the model’s attraction past middle-aged and prosperous riders.
The 118-year-old American model has been steadily dropping U.S. market share amid declining retail gross sales for six years, however the demand for used Harleys, that are cheaper, has remained sturdy. Some sellers instructed Reuters that pre-owned bikes final yr outsold new ones 3-to-1.
Melissa Walters, proprietor of a Harley dealership in Fresno, California, says the coronavirus pandemic has led to an elevated demand for outside leisure exercise, however sellers are hard-pressed to search out bikes to promote to prospects.
“Individuals are uninterested in staying dwelling,” she mentioned. “They wish to exit and do one thing.”
That sentiment was echoed by over a dozen sellers in six states. Information from business marketing consultant J.D. Energy exhibits Harley was essentially the most sought-after model within the used large bikes market final yr, boosting bets the licensed program will attract new prospects.
For Harley, it affords a strategy to construct model loyalty and appeal to new prospects with out engineering and manufacturing new lower-cost bikes, which are inclined to have decrease revenue margins.
“We imagine this program will drive Harley-Davidson desirability, enhance gross sales and margins, and improve the general buyer expertise whereas supporting development,” Zeitz instructed Reuters.
Beneath the pre-owned bike program, which was revealed final month, Harley will certify bikes as much as 5 years previous with as much as 25,000 miles (40,234 km). Licensed bikes will probably be inspected and backed by a 12-month restricted guarantee, and could be financed by Harley’s monetary arm, distinguishing them from different used Harleys.
Whereas the heavyweight bike maker has the same program in the UK, that is the primary time it’s getting into the used market in the USA — its greatest market.
This system will probably be launched in late April and over 300 sellers have expressed curiosity in collaborating to this point, Harley instructed Reuters.
“It is going to attract new riders … and can give them entry into the Harley-Davidson world,” mentioned Brad Conn, advertising coordinator at an Indiana-based dealership that plans to enroll in this system.
A possible income stream
Within the auto business, in response to J.D. Energy, comparable applications provide larger revenue to sellers with quicker stock turnover. J.D. Energy’s knowledge additionally exhibits the applications are more practical in cultivating model loyalty and have a tendency to generate extra enterprise for the monetary arms of automakers, which fund the car purchases.
James Hardiman, an analyst at Wedbush Securities, mentioned the secondary bike market has turn out to be an enormous enterprise over the past decade and could possibly be a “important” income stream for Harley.
In 2017, on-line retailer for pre-owned automobiles RumbleOn Inc pegged the worth of the used bike market in the USA at $7.5 billion a yr, with Harley bikes accounting for greater than half of gross sales. The research additionally confirmed prospects aged 18-34 had been shopping for three used Hogs for each new one.
New versus previous
A booming demand for pre-owned Harleys till now has been a drag on the corporate’s U.S. retail gross sales, which have declined by almost 40% since 2014.
As its bikes don’t put on out or exit of style rapidly, used Harleys are usually extra in demand vis-à-vis dear new fashions.
Zeitz has tried to handle the issue up to now yr by tightening the provides of recent bikes. Leaner new stock along with the elevated demand for outside sports activities have pushed up the costs of pre-owned bikes.
Nonetheless, the corporate estimates there are 3 million unsold used Harleys in the USA, way over the roughly 80,000 new bikes it shipped final yr.
“The largest competitors for a brand new Harley-Davidson bike is just not an Indian bike or a Honda, or a Suzuki bike, however is a used Harley-Davidson bike,” mentioned Hardiman.
Confronted with the same scenario within the Nineties, automakers launched licensed applications to resell 1000’s of returned leased automobiles to first-time and budget-minded patrons.
The applications allowed them to scrap less-expensive entry-level fashions, which had razor-thin revenue margins, releasing up sources for extra worthwhile merchandise.
Harley is pursuing comparable targets. It has executed away with among the cheaper entry-level fashions and can ramp up funding in touring, giant cruiser and trike bike segments that drive firm revenue.
It’s also trying to enhance gross sales of ancillary merchandise comparable to equipment, common merchandise and monetary providers by leveraging the licensed bike program.
Michael Uhlarik, founder and lead marketing consultant at Bike International, reckons the licensed program is geared toward changing misplaced bike income from falling shipments.
Harley’s bike shipments to sellers in the USA have dropped greater than 60% from the 206,000 items in 2008.
“It’s going to by no means be a 200,000 vehicle-a-year firm,” mentioned Uhlarik. “They’ve to switch that misplaced income someplace.”
