Harley-Davidson’s Hurdle: Attracting Young Motorcycle Riders

[MotoTex]

No dog in this hunt either.

Have read in several forums over the past few years where reports along these lines seemed to match my experience.

The quality of many things seem to suffer as the current crop of replacements are handed the reigns from the preceding teams, whether it be engineers or statisticians.

My gut says there ought to be quantifiable data to support the answer, one way or another. Maybe there really isn't any to be found that has been well formulated.

Likewise, I nearly pulled the trigger on the F800GS a few years back, but bowed out after reading of several owners having their frames bend due to a poorly designed upper shock mount that wasn't up to the task. If the engineers overlooked this in their models for stress, what else might have been missed?

 

[bmcdonau]

Unless something happened that I'm not aware of, HD is still selling plenty of bikes, as is BMW. BMW may be more of a niche market in the US, but HD certainly sells a lot of cruisers. No doubt they'd like to sell more to younger people, but as far as I can tell, they keep making old bikers every day. One day that young guy won't be so young and his hip will scream at him when he throws his leg over his sport bike and he'll be looking for another ride.

I don't think that CR data means too much to most buyers of HD or BMW motorcycles. When you look at the problem rates, even unreliable modern motorcycles have few problems. I've read CR over the years and it has never caused me to not buy a brand or model, even the Suzuki Samurai.

 

[bmcdonau]

Some food for fodder, from Cycle World Magazine.

For full-year 2014, Harley shipped 270,726 motorcycles to dealers and distributors, a 3.9 percent increase compared to 2013.

–For full-year 2014, dealers sold 267,999 new Harleys worldwide, up 2.7 percent compared to 260,839 motorcycles in 2013.

–Retail unit sales for 2014 were up 1.3 percent in the U.S., 11.8 percent in the Asia Pacific region, 6.4 percent in the EMEA (Europe, Middle East, Africa) region, 2.1 percent in the Latin America region.

–Retail unit sales for 2014 were down 10.8 percent in Canada.

INCOME AND EARNINGS
–Net income for 2014 was $844.6 million, based on consolidated revenue of $6.23 billion. (In 2013, those figures were 734.0 million and 5.90 billion, respectively.)

–For full-year 2014, revenue from motorcycles was $4.39 billion compared to $4.07 billion in 2013.

–Revenue from parts and accessories was $875.0 million in 2014, compared to $873.1 million in 2013.

–Revenue from general merchandise, which includes MotorClothes apparel and accessories, was $284.8 million in 2014 compared to $295.9 million in 2013.

Interesting that revenue from motorcycle sales was $4.39B and sales from merchandise was $284.8M. Didn't someone say HD made more off of non-motorcycle sales than they did from motorcycle sales?

Why are we worried about a company with over $6B in revenue in 2014?

 

[MotoTex]

"Profit vs Revenue

In accounting, economics, law, and real property, “profit” and “revenue” are defined with a slight difference. Basically, “profit” refers to the amount earned left over after all the expenses are taken out in a particular time frame. “Revenue” refers to the total amount generated by a company without taking out expenses for services provided or goods sold within a particular time frame."

What were the profits after expenses?

Are the profits on merchandise greater than the profits on motorcycles?

 

[YoDoc]

Having worked in clothing retail, I'd be surprised if the that weren't the case, at least as far as percent margins go.

If I remember, I'll look at Harley's last statement and tell you.

 

[bmcdonau]

"Profit vs Revenue

In accounting, economics, law, and real property, “profit” and “revenue” are defined with a slight difference. Basically, “profit” refers to the amount earned left over after all the expenses are taken out in a particular time frame. “Revenue” refers to the total amount generated by a company without taking out expenses for services provided or goods sold within a particular time frame."

What were the profits after expenses?

Are the profits on merchandise greater than the profits on motorcycles?

Since the difference between the two is ~$280 Million vs over $4 Billion, I doubt that's the case. Even if the entire $280 Million is profit--they didn't pay for the merchandise they sold, it'd be hard to beat the profit from selling $4 Billion worth of motorcycles. Their net income was $844 million. Want to argue what "net" means?

Does anyone else find $280 million to be low? I would have thought they sold way more apparel and bumper stickers than that.

 

[bmcdonau]

"Profit vs Revenue

In accounting, economics, law, and real property, “profit” and “revenue” are defined with a slight difference. Basically, “profit” refers to the amount earned left over after all the expenses are taken out in a particular time frame. “Revenue” refers to the total amount generated by a company without taking out expenses for services provided or goods sold within a particular time frame."

What were the profits after expenses?

Are the profits on merchandise greater than the profits on motorcycles?

Their net income was over $800 million dollars. Their revenue (gross) from apparel sales was only $280 Million. If the entire $280 Million was profit they'd still make over $500 Million on motorcycles and motorcycle parts and we know they paid something for the apparel.

 

[MotoTex]

It could be that is only what HD made on merchandise they created and marketed directly.

There may be one or several other divisions, diversified corps, etc. that shows profits from "licensed" merchandise that HD didn't create as a product line and market themselves.

Things get a little hazy when lawyers and accountants get together.

 

[YoDoc]

It's fairly common practice to simply sell licenses to produce branded items rather than making them yourself. Lowers risk, lowers investment, and if you have a name as big as Harley, still nets you plenty of control and plenty of cash.

 

[bmcdonau]

Its still a lot less than they make on bikes.

 

[StrokedNBored]

......"But HD still has real tins. Metal fenders." Okay. So? It's heavy, it rusts, the paint comes off and it gets dented. ...

Everything else in the statement- sure.

But I will say that I have never had another vehicle with the paint quality of my 2 HD's. (not custom painted - just stock)
heck, If i could get those guys to respray my VW GTI - I would.
It was excellent, and not from a "check out my skulls and flames" kinda way.
No orange peel, very nice base spray, very deep and a great clear coat. Very high quality stuff.

 

[DaveC]

I look at the print ads, you can see the demographic markets the brands chase, interesting but I am not that demographic !


Sent from my iPhone, that's sort of wonky as it thinks it can spell Texan better than I !

 

[mr-roboto]

What were the profits after expenses?

Harley generates about 36 percent gross margins on it's operations. They have a fantastic lean manufacturing model and control inventory risk really well based on channel or retail demand.

The HD management web site mentioned that around two thirds of its competitors had increased discounting levels, which have since ticked up as foreign exchange concerns (mostly a much stronger U.S. dollar) have moved against the business. With nearly one third of Harley's domestic and two thirds of international new sales coming from new customers to the brand, training consumers to wait for discounts is a destructive strategy for a premium brand longer term. It's also a strategy that builds ill will with riders who have paid full price for bikes, as well as leading to prices that suffer in the used market, making those consumers more cautious about the brand when purchasing their next bike.

HD is a very well run company with an exceptional return on equity. You can only trim costs only so much and increase operational efficiency to offset slower sales due to competitors offering like Polaris, Victory, and the Japanese alternatives chipping away at your margins. Then there is a real or at least perceived trend change in the motorcycle market. Consumer preferences shift toward smaller-displacement bikes could be a new constraint on Harley's profitability ...yeah Harley is allaying this fear with its new, narrower-chassis Street model. Harley's dominance in the U.S. market for heavyweight motorcycles--with about 60% share--has allowed the firm to achieve economies of scale that have so far eluded its competitors. With the increase interest in adventure bikes perhaps this trend is taking a partial bite into HD market share for disposable income?

RB

 

[MotoTex]

Let me rephrase, what were the profits after expenses on motorcycles vs. every thing else?

A few years ago I saw a detailed break down of these figures for HD in an article somewhere, but cannot find the information presented that way in searches that come up now. At the time I recall the merchandise side (which likely included brand licensing) was a surprise to me in how it exceeded the profits on the motorcycle side. Likewise, it seemed like half the clothing and a lot of other stuff in Wal-Mart had an HD logo on it, as did some models of Ford trucks, and a number of other items you wouldn't have expected.

Perhaps that wave has crested, but there were a lot of things to be found with HD art in all walks of life. Still are. It was easy to believe the article as you couldn't throw a Nerf ball without hitting an HD logo pretty easily.

I always considered this a rather remarkable marketing job.

 

[YoDoc]

This will tell you all you need to know.

 

[MotoTex]

This will tell you all you need to know.

I don't see where this report shows the profit margin broken out between segments, but, as stated before, the numbers seem to indicate that of late the greater share of profit is most likely from the motorcycle and financing segments.

It looks like whatever I remember reading may have been from longer ago than I thought. I found in a Wiki that Ford added the HD package to the F-150 back in 2000.

My, how time flies. That's when I bought the DRZ that is still in my stable.

 

[bmcdonau]

I don't see where this report shows the profit margin broken out between segments, but, as stated before, the numbers seem to indicate that of late the greater share of profit is most likely from the motorcycle and financing segments.

It looks like whatever I remember reading may have been from longer ago than I thought. I found in a Wiki that Ford added the HD package to the F-150 back in 2000.

My, how time flies. That's when I bought the DRZ that is still in my stable.

HD breaks income into motorcycles, parts and accessories and general merchandise which it says includes apparel.

Looking at 2014 income, which is how they describe net profit, HD made $844 million in 2014 on all three categories. Total revenue on general merchandise is only $280 million. There is no way that you can conclude that HD makes more on merchandise than motorcycle sales given these numbers.

Looking at the sales figures for the last ten years, there is no way HD ever made more on apparel than they did on motorcycle sales. Total sales today are well below the peak of 2006 and surely profits on motorcycle sales have to be lower today too, relative to 2006 prices..

 

[MotoTex]

HD breaks income into motorcycles, parts and accessories and general merchandise which it says includes apparel.

HD Financial Services is in there somewhere too, right?

Going back through the years there were other HD holdings, like Buell, Agusta, the RV company, etc. that may have operated as stand-alone corporations. Are there any others?

Looking at 2014 income,

You quoted my post referring to YoDoc's 2015 Q1 data. That is where I indicated I didn't see the segments broken out. I had read your earlier posts and understand everything you have presented.

Whatever was the basis of my comment cannot be substantiated today, and, I don't recall how long ago I read it. Only that the data presented appeared comprehensive and complete. But, it might have been complete hogwash dressed up real pretty.

Thanks for bringing the numbers, clearly HD has done much innovation in management and planning at the corporate level and I think they will have no problem finding a way to bring in new riders. The company has everything in place to support what ever direction they decide to take this.

They will never operate on the scale of the Japanese brands, but that is what makes their style so valuable a commodity, and the image lasting. They aren't cookie-cutter.

 

[h2000fb]

It could be that is only what HD made on merchandise they created and marketed directly.

There may be one or several other divisions, diversified corps, etc. that shows profits from "licensed" merchandise that HD didn't create as a product line and market themselves.

Things get a little hazy when lawyers and accountants get together.

It is a publically traded company. They can't be too fuzzy or they will go to jail and HD has a reputation of being an honest company. Their merchandise and licensing agreements all goes under merchandise. Look at the financials - they are public after all.

IMO its the people who hate HD that made that "more off merchandise than bikes" statement because they can't stand the fact HD is selling bikes.

It is what is. All bikes are good and all other brands drool with envy they don't have a merchandising arm as strong as HD's. If they could do it, they would. Nothing against other makers and insinuating nothing about HD except they have great brand awareness many people want to be a part of.

 

[SpiritAtBay]

I'm not convinced the word "antiquated" is what you mean.

"you keep using that word. I do not think it means what you think it means."

wait, wrong movie

 

[TGTUMBLEWEED]

Well,
I am of the video game generation.
I've owned 2 Harleys - both in my 20's BTW.

1. '08 Dyna Glide Lowrider - put about 20K on it.
I had exactly 0 problems. Never leaked, never coughed, never failed to start. 6 speed meant that 80mph was around 2900 RPM if i remember - barely trying. However, 6th gear was crap below 70. It lugged the engine a lot. Handled OK for what it was - something to cruise around on and enjoy the scenery. Rode it to Luisiana and all over Texas. Looked really good, wasn't comfortable for more than 100 miles at a clip.

2. '12 Street Glide - also, put about 20K on it.
I had exactly 1 problem with it. The compensator sprocket started wearing out... in Utah. I rode it another 2000-ish miles (and 7 states) before I got home and had it replaced... within 2 days.... under warranty.
Comfortable and capable. Maybe not Goldwing status (Fred), but pretty darn good. 80mph was around 3200 rpm if i remember correctly (shorter 6th gearing on the touring and 103 models compared to the early 96in Dynas)

Both were great bikes at what they were built to do. That's the honest truth of it. The quality is top notch (these aren't the Harleys of the AMC years). The ride is better than you would expect. I will own another one in the future - i'm pretty sure.

I just roll my eyes when everybody always starts the Harley bashing. It gets old really quick and it's pointless. The truth is: for every serious riding BMW/Honda/Yamaha guy, there is probably a serious riding Harley guy. (There are just a lot more "other" Harley guys in addition) - This is purely my speculative opinion. The Bikes themselves are great. The mass # of the owners pulls the skill level down below average. This is why we all get stuck behind the Harley parades.

If you want the young(ish) guys opinion:
Harley makes an excellent product - it's not designed to do 150mph and carve canyons. It's made to cruise (Hence cruiser) and it does it very well.

I think they are taking a step in the right direction - their marketing has been aimed at mid-life crisis and up people for too long so they've lost the younger buyers over time. The phrase "Get'em while they're young" doesn't just work for cigarettes.

I think there are 2 problems to overcome:

1. The typical Harley "Lifestyle" and "Image" is what the younger generations associate with their parents and older generations. Young people don't want to be like their parents. They will be - they just don't know it yet. Harley would be taking a huge risk to change their marketing/branding away from their main demographic.

2. This is motorcycling in general - not just Harley. Young people in general (my age and down) have been coddled and sheltered too much (of course there are some outliers) to be interested/excited about the "Freedom" and "Excitement" and "Adventure" and lets face it... "Possible Danger" of riding a motorcycle.
Everything was nice padded bumpers, rounded corners, those plugs you put in the outlets to keep kids from shocking themselves and Barney the dinosaur.
The majority of kids my age were raised to not do things without supervision, told that being independent was bad (everybody come join in the group circle and we'll play a game), and that it was irresponsible to do things other than the pre-prescribed curriculum of life and success. - So they don't. You might think this is stretching it a bit... but I lived through it and interact with tons of these people all the time. They don't have an adventurous bone in their body because they were told all their lives that could be bad and instead here's a nintendo. They weren't taught to explore and form opinions, they were taught to listen to directions. (I know this probably seems like a bold faced lie to parents on here, but if you always here them saying "I don't know, what do you want to do?"...

I blame the helicopter parenting trends of the last 30 years. The majority of parents of kids in my generation would never let their angel have a motorcycle growing up - their dangerous (and they don't have padded bumpers and wall socket plugs)
You show me a 20-something that doesn't get off the couch and i'll show you a set of parents who never let him actually figure out anything for himself when he was growing up.

Rant Over.

P.S. I'm only on the couch on this lovely Friday evening because I threw my back out earlier this week. The muscle relaxers might have something to do with the mess written above ... Guess I'm not all that young anymore.

P.P.S. Get off my lawn ...Just practicing

WELL DONE.

 

[TWTim]

WELL DONE.

Agreed.

 

[TWTim]

+1 on the Millenials not spending their money- most of them are saving lots and living frugally. I have some interns in their mid-20s right now and none of them have cars- they're all driving one of mom&dad's or taking mass transit- all have at least 2 roommates or live with their parents- all are making a decent salary but putting most of it in savings, and they all think that at some time in the future they will start their own startup using their savings and investments by family.

They aren't nearly as concerned about getting money from a job as they are becoming their own boss. That's a huge mindset shift from ten years ago where every intern was just looking for a job at a Fortune 500 company.

Exactly. That's been my experience with them thus far, as well. They want to call their own shots in life, and are willing to make what previous generations might consider huge sacrifices to get there. In that sense, perhaps they are rebelling against the molds they've been forced into over the years by government schooling and helicopter parenting. The nature of humans is to be free. Larval as it may appear right now, I hope this is a sign of better societal designs to come.

 

[tshelfer]

Didn't this whole thread start an eon ago with a statement HD's CEO made that he'd like to lure young folks away from their game consoles and onto a motorcycle? Back to that thought, great idea and good for him. And if he sells a few of his own products in the process, double good for him.

 

[MidlifeCrisis]

Older generations typically look at younger generations the same way - somehow less worthy than their own. Now think back to when you were a young adult... you probably looked at older generation with some distain. So it is with every cycle of life.

The young ones today aren't as sheltered and clueless as some of you make them out to be... at least no more so than those free sex and pot smoking hippies when they were the same age. In time, they will mature and accomplish things their way and enjoy doing things they find interesting. And the marketplace will move with the tide of popular interest.

So they may or may not get into motorcycling... who cares?! Let them be.

I introduce my kids to a wide variety of activities: bicycling, RC airplanes, RC cars, sports, martial arts, music, etc., etc., and yes, motorcycling. But I have no agenda to advance. It is their life to live and their choices to make. One of my tasks as a parent and a role model is to show them how to balance work, family and play, while enjoying all three.

Do I helicopter parent mine... in some ways, yes. My own parents never used to do that, but that was more out of their ignorance and their obsession with work (both of them worked). The dangers were always out there. Just ask all the Sandusky's and the pedophile priests. My wife and I decided before starting a family that one of us will always stay home with the kids, and that is what we did.

It isn't about not wanting to be like one's parents. It is about learning from their mistakes and being better adults... and parents to one's own next generation.

With reverence, not distain.