CHICAGO — Harley-Davidson has determined one of the best ways to get youthful clients 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, often known as H-D Licensed, adapting a technique 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 below Chief Govt Jochen Zeitz, and is the most recent effort to broaden the model’s enchantment past middle-aged and prosperous riders.
The 118-year-old American model has been steadily shedding U.S. market share amid declining retail gross sales for six years, however the demand for used Harleys, that are inexpensive, has remained robust. Some sellers advised Reuters that pre-owned bikes final 12 months 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 out of doors leisure exercise, however sellers are hard-pressed to seek out bikes to promote to clients.
“Individuals are uninterested in staying house,” she stated. “They need to exit and do one thing.”
That sentiment was echoed by over a dozen sellers in six states. Knowledge from business advisor J.D. Energy exhibits Harley was probably the most sought-after model within the used huge bikes market final 12 months, boosting bets the licensed program will attract new clients.
For Harley, it provides a approach to construct model loyalty and entice new clients 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 progress,” Zeitz advised 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 will be financed by Harley’s monetary arm, distinguishing them from different used Harleys.
Whereas the heavyweight bike maker has an analogous program in the UK, that is the primary time it’s coming 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 advised Reuters.
“It is going to attract new riders … and can give them entry into the Harley-Davidson world,” stated 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 accordance with J.D. Energy, related packages provide increased revenue to sellers with sooner stock turnover. J.D. Energy’s information additionally exhibits the packages 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, stated the secondary bike market has grow to be a giant enterprise over the past decade and might be a “vital” 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 12 months, with Harley bikes accounting for greater than half of gross sales. The research additionally confirmed clients 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 vogue shortly, used Harleys are typically extra in demand vis-à-vis dear new fashions.
Zeitz has tried to handle the issue up to now 12 months by tightening the provides of recent bikes. Leaner new stock along with the elevated demand for out of doors 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 12 months.
Confronted with an analogous state of affairs within the Nineties, automakers launched licensed packages to resell 1000’s of returned leased automobiles to first-time and budget-minded patrons.
The packages allowed them to scrap less-expensive entry-level fashions, which had razor-thin revenue margins, releasing up assets for extra worthwhile merchandise.
Harley is pursuing related objectives. It has finished away with a number of the cheaper entry-level fashions and can ramp up funding in touring, massive cruiser and trike bike segments that drive firm revenue.
Additionally it is seeking to enhance gross sales of ancillary merchandise comparable to equipment, basic merchandise and monetary companies by leveraging the licensed bike program.
Michael Uhlarik, founder and lead advisor at Motorbike International, reckons the licensed program is aimed 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’ll by no means be a 200,000 vehicle-a-year firm,” stated Uhlarik. “They’ve to switch that misplaced income someplace.”