Easy Rider

Nov 01, 2002 10:30 PM  By

Consider the “e.” Never, perhaps, has a single letter had such dramatic ups and downs in popularity and reputation. Not long ago, this fifth letter of the alphabet — once noted primarily as the back end of words like “the” and as one of the vowels often purchased on “Wheel of Fortune” — suddenly found itself appended to the front of practically every noun and verb in the English language. Ah, but the slings and arrows of outrageous fortune (as some guy with an “e” on the end of his name once said) soon took their toll, and poor “e” was just as suddenly blamed for a precipitous economic collapse. The renaming process began, with “e”s flying off stationery and billboards faster than former Internet tycoons could sell their homes.

Well, not so fast. It seems that “e” has, in fact, quietly maintained its standing in at least one important area: e-commerce. “Contrary to conventional wisdom,” notes Jeff Smith, consumer goods and services partner at Chicago-based consulting firm Accenture, “most businesses that were doing things that made sense [in e-commerce] are still doing them.” And, says Smith, one company that is doing “e” right — with a unique B2B twist — is something of an American icon. But it’s also a company whose fortunes have changed dramatically over the years; indeed, Harley-Davidson’s reputation has taken turns as tortuous as those of a racing bike on a dirt track, and as startling as those taken by our friend the “e.” But, says Smith, perhaps none are as surprising as the way Harley has been able to teach motorcycle dealers how to be apparel retailers — and e-commerce fulfillment houses.

Founded in Milwaukee in 1903, Harley-Davidson became the world’s largest motorcycle maker by 1920, producing nearly 30,000 bikes a year. Hard hit during the Depression, the company revived after World War II, and in the next two decades shored up its reputation. Notable achievements in the 1950s included a string of victories in the Daytona 200 and the appearance of Elvis Presley with a Harley-Davidson bike on the cover of Enthusiast Magazine.

Then, in 1969, Harley-Davidson merged with American Machine and Foundry (AMF). And in the 1970s, the company faced the same problem that had befallen the entire American automotive industry: declining market share and concerns about product quality in the face of cheaper and (in the opinion of many) better-performing Japanese imports. During this period, says Steve Davey, associate publisher of Motorcycle Industry magazine (and someone who spent 20 years working for both Harley-Davidson and its competitors), it was the efforts of H-D’s dealers that really kept the company in business — though it had a rather contentious relationship with them as a result. That contentiousness did not immediately disappear when senior management bought the company back from AMF in 1981. But the turnaround had already begun. In 1983, more tariffs were imposed on Japanese motorcycle imports, improving Harley-Davidson’s ability to compete against high-quality foreign manufacturers. But perhaps most significant to the mystique that surrounds Harley-Davidson was the establishment that year of the Harley Owners’ Group, or H.O.G. — the largest factory-sponsored motorcycle club in the world. Today, the club has over 600,000 members.

The relationship between H-D and its dealers might be described as a bit schizophrenic. On the one hand, notes Davey, the company has done a wonderful job with its marketing efforts since 1986, and dealers are profitable again. “If anybody who was a dealer back in ’84 isn’t a millionaire today, I’d be surprised,” says Davey. On the other hand, H-D makes many demands of its dealers, including a stringent insistence on product exclusivity. For instance, in 1994, the company attempted to register what it claimed was the “distinctive” exhaust sound made by Harley-Davidson V-twin engines.

This trademark sensitivity also results in a somewhat contradictory relationship with Harley owners. In espousing a philosophy of what might be called “rugged individualism,” the company encourages bikers to customize their machines, as a kind of extension of the owner’s personality. But that individuality can only be taken so far. For one thing, the company would prefer that the “aftermarket” products used be genuine Harley-Davidson accessories and parts, embossed with the company name. For another, it doesn’t want bikers to go too far in their customizations — to the point where, say, the engines really aren’t Harleys at all. Davey is aware of instances when attempts were made to sell Harleys on eBay. When the company discovered that the machines weren’t completely “born in Milwaukee,” letters were written — and the bikes were pulled off the auction site.

All of these efforts have proved remarkably successful. In 2001, sales grew by 15.7%, net growth was 25.9%, and the number of employees increased 5.2%. Harley-Davidson has been a darling of Wall Street, with its stock holding tenaciously in the $50 range as its earnings growth continues to confound market trends. Simultaneously, the company has managed to land on Fortune‘s list of most admired companies as No. 1 in the motor vehicles industry, and at No. 74 on the same magazine’s list of the best companies to work for. And, for approximately the past two years, Harley-Davidson has committed itself to the world of e-commerce.

The most telling fact about the Harley-Davidson Web site is that the home page does not feature a picture of a motorcycle. Instead, we find a wide landscape photo showing a rocky shoreline, lushly vegetated mountainside, and, oh yes, a winding two-lane highway: freshly paved, bright double yellow line down the middle, with the company’s distinctive logo superimposed alongside. Below it, the bold headline: “The road starts here. It never ends.” For the uninitiated, it might be appropriate to ask: Just what does this company sell? You have to choose from Experience, Products, Dealers, Company, and 100th Anniversary, and under the Products heading, there it is, in tiny type: “100th Anniversary Motorcycles announced.” That’s right — Harley-Davidson makes motorcycles!

We really shouldn’t be surprised by this seeming lack of focus. With demand for its bikes exceeding supply, H-D doesn’t need to sell them online; it’s selling a lifestyle, as is obvious when you compare the Web sites of Harley’s major competitors. They make the perceived lack of focus on the H-D site look like a laser beam. Visit the home pages of Yamaha Motor Corp. USA, Suzuki, Honda, or Kawasaki, and there’s no endless road, no total lifestyle. You click on strictly matter-of-fact listings of motorcycles, ATVs, and other transport machines. Clearly, if there is a Harley mystique, it’s not by accident. Nobody else’s Web presentation tries to compete on the same level. Certainly, nobody else sells such cool clothes.

However complex Harley-Davidson’s relationship with its dealer network is, it does make for an intriguing e-commerce model. Some experts, like Motorcycle Industry’s Davey, believe that Harley’s dealers, like most automotive dealers, are simply franchisees. Ken Ostermann, the company’s manager of electronic commerce communications, maintains that Harley dealers are completely independent businesses. (This serves to further enhance the Harley image of individuality and independence, but it also facilitates something else, says Davey: It allows each dealership to set its own prices. Because of the high demand for Harleys, notes Davey, some dealers are able to sell bikes for thousands of dollars above MSRP, either by actually raising the bike’s price, or by pre-loading it with accessories on which there’s a high markup.) Above all, though, what is most important to Harley-Davidson is preserving the one-to-one relationship between dealer and customer. And that relationship extends to e-commerce.

Key to the online availability of H-D MotorClothes and accessories is the requirement that before a site visitor can order anything, he must select a single dealership with which to do business. Ostermann explains the importance of the dealer/customer relationship thus: “Many of our accessory products are very complex; we want to enable our dealers to give their expertise.” The Web site answers the FAQ, “Why do I need an E-Dealer?” with, “The E-Dealer locator consists of a select number of dealers that participate in our online shopping program.” Currently, according to Ostermann, out of some 600 H-D dealers in the U.S., only about 126 are designated E-Dealers.

Dominic Maturo, general manager and e-commerce coordinator at Harley-Davidson of Bridgeport, CT, says that Bridgeport is one of only two dealerships in the state doing e-commerce; Hartford recently became the second. “We had to go through an application and testing process to qualify, to see how quickly and accurately we could process, pack, and ship an order,” says Maturo. “The e-business has been growing, and we now fill, on average, about two orders a day.” Maturo lauds the online business as a way of attracting customers who previously might never have visited the dealership, and as a great source of addresses for promotional offers. As usual with Harley, it’s all about individuality: “The customer chooses whether to have an item shipped or pick it up at the dealership,” Maturo notes. “A customer can also pick whatever dealership he wants to order from; it’s entirely up to the customer which dealership he has a relationship with.” Again, there’s another element to the program that Maturo doesn’t mention: pricing. Prices for items ordered online aren’t stated until after a site visitor selects a dealer — and when an item is selected, the site notes that “XX dealer will sell you this item for $XX.”

Meanwhile, Harley has deployed a proprietary dealer management system that rivals the Softail for back-end sophistication. Known as Talon, the internally developed system can handle inventory, vehicle registration, vehicle warranties, and point-of-sale transactions. For the dealers who are linked to the system (as usual, that’s an individual decision; according to Ostermann, about 400 dealers have chosen Talon), it also provides a check of each dealer’s inventory whenever an item is ordered online. Should the item be out of stock, Talon will create an easy prompt to generate an order, which can then be quickly submitted through the network. Those dealers who do not use Talon have access, instead, to a dealer extranet with the capability to receive, acknowledge, and process e-commerce orders.

Although Maturo says he expects all dealers to eventually become part of the E-Dealer program, there’s a competitive territoriality evident that could conceivably test the limits of the Harley “community” spirit. Maturo explains that if a dealer is out of stock on a particular item, he can check with other dealers and buy the item from one who has it — but unless the order is really a rush, most dealers would prefer to have the item first shipped to them, and not to have the other dealer ship directly to the customer. “We want to preserve that dealer-customer relationship,” Maturo says.

Whether the Harley-Davidson e-commerce program is a success is an open question. The company is highly protective of its results; the only figures Ostermann could provide were that harleydavidson.com receives over 1 million visitor sessions and over 19 million page views a month.

Well, that’s certainly a lot of “experience” sharing, and there’s no reason to believe that a company with as finely tuned a marketing focus as Harley-Davidson won’t be able to translate that into bona fide e-commerce success. Perhaps they’ll call it V-Commerce — and put a trademark on it.

Jeff Morris is a South Salem, NY-based freelance writer who still has trouble riding a two-wheeler.

The Vroom Factor

Harley-Davidson introduced its first “V-twin” in 1909; this engine, with twin cylinders in a 45-degree V shape, would become one of the more recognizable images of the Harley-Davidson brand. (The bar-and-shield logo was introduced in 1910; the teardrop-shaped gas tank debuted in the 1920s.) In 1936 H-D brought out a new model considered by many “the motorcycle that saved Harley-Davidson.” It was the first time a major American motorcycle company had built a big bike with overhead valves. Despite the Depression, Harley-Davidson produced almost 10,000 motorcycles in 1936.

After World War II, motorcyclists were eager to get back to their sport; H-D’s 1948 production was 31,163 bikes. Hydraulic front brakes were featured in the new Hydra-Glide models in 1949. But the company’s technological development was considered less than revolutionary; engine designs were said to be in use for 14 to 17 years before being updated. Still, as Harley-Davidson celebrated its 50th anniversary in 1953, its oldest and closest competitor, Indian, went out of business, leaving H-D as the sole survivor in a once-overcrowded American motorcycle marketplace. The Duo Glide (based on the earlier Hydra-Glide), introduced in 1958, showcased more improvements for the rear of the motorcycle — including a hydraulic rear shock suspension to go with the hydraulically dampened front fork — and the first rear brakes.

In 1984, the new Evolution engine, in development for seven years, appeared, along with a new model, the Softail, primarily distinguishable by hidden rear shock absorbers. Says Steve Davey, associate publisher of Motorcycle Industry magazine, “It was a chassis that combined nostalgic style elements from the late ’40s and early ’50s with modern technology. By ’86, it really started to catch on.”
JM