Harley-Davidson's Northwest Outlook for 2010
 Dealers
and industry vets share their thoughts
We were a bit taken aback when we were putting together our 2010
demographic study in November. Turns out the level of
Harley-Davidson ownership among readers of Sound RIDER! increased
from 17% percent in 2007 to 23% in 2009. With a reader base of
60,000, this equates to 13,800 pairs of H-D owner eyes
reading SR! every month. Interesting.
What’s this telling us? Our pragmatic approach to motorcycling is
embraced by Northwest Harley-Davidson owners who don’t subscribe to
the bad boy, tavern-to-tavern lifestyle often associated with the
brand. Instead we’re providing useful content to touring riders who
are starved of it by the lifestyle publications.
With that in mind and all the activity within the motor company
in the last year, we took time out to talk to some area dealers and
veterans of the industry to get a look at where things are headed
for the Harley-Davidson brand in the Northwest in 2010.
Harley-Davidson is 107 years old. They’ve been through a lot of ups
and down in more than a century and always come out the other side.
But first, a quick recap of 2009 before we take a look into the
future.
- The motor company has lost 10-15% of its dealer network in
the last year. Right here at home we saw Shumate go bankrupt
closing out all three of their locations – Spokane Valley,
Lewiston and Kennewick.
- Buell production was ceased in October and the entity was
closed out.
- The H-D owned MV Augusta brand was put up for sale.
- H-D stock rose 50% in 2009.
In addition, Harley-Davidson has been plagued of recent years with
the fact that their demographic is getting older and older. Buell
was an attempt to reach a younger audience, which they did, but at a
very high price. The division never turned a profit for the
company in its 27 year history.
Dealers and sage industry voices all agree that there are several
key factors that must be focused on to make 2010 a good year within
the Northwest H-D camp.
Financing comes out on top. Jim Boltz, owner of Seattle
Harley-Davidson in Lynnwood, points out – “HDFS (Harley-Davidson
Financial Services) is the most dynamic such organization in the
industry.
They constantly have programs geared to the current market and
economic situations.” But it’s too soon to tell what those programs
will be until they are announced in the first quarter.
Matt Harlowe, a Northwest motorcycle industry veteran who has
worked at several H-D dealerships over the years, offers an
outside-looking-in viewpoint. “HD will have to think out of the box
to assist their dealers. Two items of paramount importance are going
to be product value and the availability of financing product."
Ahh. Product value. Dealers have long made additional money in
the sales departments selling all sorts of after-market accessories
such as performance exhaust systems, air filters and every chrome farkel imaginable. But with less money for consumers to spend,
dealers will have to come up with new ways to create an add-on
worthwhile. Harlowe looks at it this way – “'Value added’ items can
complete an already good product. But going forward it may make more
sense to push ‘factory’ maintenance and service for a finite period
dictated by mileage or time, than accessory add-ons.”
Local marketing is surely a consideration and the PSHDDA (Puget
Sound Harley-Davidson Area Dealers Association) is working together
to promote the brand, rather than marketing individually. Last fall the dealer
group put together a radio campaign which ran in December, aimed at
driving business at the store level with the costs of the campaign
being shared by the group, rather than being shouldered by a single
dealer. That’s smart money when you consider how tight ad budgets
are. It’s likely we’ll see more of this banding-together style of
marketing in 2010.
Before we go any further, it’s time to talk about H-D’s wild ride
on the stock exchange. The stock opened on January 2,
2009, at $18.40. By early April, it dropped to $8 a share. With the
economy slowing, the executive board had to respond to the stock drop
and pull the right strings to make the stock price rise. And
pull strings they did. In the summer, they announced they were shutting
production down for much of the fall quarter. In October, they
announced the closure of the Buell division entirely and the sale of
MV Augusta. By year's end, they had dropped their inventory levels
significantly and reduced their staff by 50%. And on December 31,
2009, the stock closed at $25.20 - 50% higher than it started in
January.
But if profits are slow in 2010, H-D now has less cards than ever
to play to impress inventors, which may send the stock tumbling one
more time.
Probably the most concerning part of all this to a potential
buyer in 2010 is the question “what will the new Harley I want
cost?” Those who were around during the inventory shortage that
occurred between 1999 and 2001 will remember the MSRP+++ price
gouging that was going on. Terry Stallcop, GM for Downtown
Harley-Davidson shares his take – “Harley’s new allocation system so
far has kept some dealers from running low and others from being
over-inventoried. It’s a turn and earn system. I think based on
today’s sales rate that Harley will be able to keep dealers well
inventoried to avoid a waiting list like we had a decade ago.”
Barry Mercer, who spent a number of years selling H-D's in the
Northwest sees it this way – “The days of greater dealer
profits may arise again, but not until the economy looks brighter.
Will the lack of product create demand, no.
Lack of product just forces people to other products.
The only time they will stand in line is when economic forces are
good enough to make waiting worth the wait for a particular
product.”
Anyway you look at it, 2010 will be an interesting year to watch
with regard to Harley-Davidson. The motor company has made some
smart moves, area dealers are working together and the economy is
looking on track for an uptick, however slow that may be.
Each of our interviewees had their own closing thoughts to share:
Jim Boltz: No matter the brand, these are tough times.
Motorcycle ownership makes so much sense during times of limited
finances – if not for saving money in commuting, then for the low
cost of entertainment.
I am happy to report that we have lost very few dealers this year –
probably a testament to the fact most dealers in our state have been
around for a long time, but even the new guys seem to be hanging in
there.
It will be a slow climb back up for our industry, but we are a
resilient and committed group of small business owners – virtually
all of whom have ‘all their eggs in one basket’ – their dealerships.
Barry Mercer: In this down turn in motorcycle sales, it would
behoove all of the motorcycle manufactures and distributors to
increase money spent on motorcycle safety and awareness.
If there are real reasons to believe that motorcycling is getting
safer, more will ride motorcycles as an alternative to other forms
of transportation.
Matt Harlowe: Dealers must think outside the box. Look to other
industries to nurture ideas. Totally different industries can be a
very good venue. Do not be afraid to try a new concept. Work hard
for new customers. Work harder to keep those “family” you have. Keep
in mind that what worked in the past may not work today. If something
does not work, change it. “Now” is always a good time.
Terry Stallcop: I think Harley is one of the best Powersports franchise
to be associated with before, during and after a recession.
Sound RIDER!/Winter 2010
Dave Preston contributed much of the information used in
putting this article together including pulling the interviews off. We’d also like to thank
each of our interviewees for their insight and time spent replying
to our interview questions. |
