With the sudden departure of its CEO, followed by a global pandemic that’s keeping huge chunks of the world’s population indoors, Harley-Davidson’s first quarter was anything but business as usual this year. It should come as no surprise that sales are down – I doubt very much any motorcycle manufacturer will get through this crisis without suffering a big ol’ financial Hadouken – but the numbers still take your breath away.
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In the United States, Harley’s sales were down 15.5 percent in the first quarter of 2020, compared against the same period last year. In the Europe, Middle East and Africa market (EMEA) sales were down a thundering 28.4 percent. Sales were down elsewhere, too – creating an overall drop of 17.7 percent – but the US and EMEA markets are where Harley-Davidson sells the bulk of its motorcycles. It’s important to keep that in mind when considering the change in strategy that Harley announced in conjunction with its Q1 results.
“The crisis has provided an opportunity to reevaluate every aspect of our business and strategic plan,” acting President and CEO Jochen Zeitz said. “We have determined that we need to make significant changes to the company; to our priorities, to our operating model and to our strategy to drive more consistent performance.”
But, of course, it’s not just coronavirus that’s to blame for bad news in Harley’s case. The company’s sales have been on the decline ever since Drake’s “Hotline Bling” was No.1 in the US charts*. I’m not saying Drake is to blame or anything but it’s worth noting that the next time he hit No. 1 was in 2017 – the same year Donald Trump was sworn in as US president. Now Drake’s at No. 1 again and hundreds of thousands of people around the world are dead from coronavirus. It just seems that bad things happen when Drake gets a No. 1. So Harley might want to be alert to that fact as it goes forward with a strategic plan it has dubbed “The Rewire.”
Thoughts on Harley CEO’s Sudden Departure
Classic Harley: everything has to have a trademarkable name. Anyway, The Rewire is set to be implemented over the next five years, which seems to be the rate at which the company switches out its CEOs. Full details of the plan are set to come in the second quarter but for those of us who like to pontificate on the interwebs the company has offered a pretty good outline of what it intends to do. So, straight from Harley’s media release, The Rewire plan will seek to:
“Enhance core strengths and better balance expansion into new spaces
- Return focus to the strength of brand and company, starting with dealers, customers, stronghold products and committed employees globally.
- Re-evaluate strategies to reach new riders and build ridership.
Prioritize the markets that matter
- Narrow focus and invest in the markets, products and customer segments that offer the most profit and potential. This includes building on Harley-Davidson’s strong position in the U.S.
- Establish a simplified market coverage model and take cost out of the process.
Reset product launches and product line up for simplicity and maximum impact
- Continue to be guided by the voice of customers and dealers to optimize value and profit delivery.
- Simplify and retime launches to reflect the new reality, align with the start of riding season and better suit the capacity of the company and dealers.
- Expand profitable iconic motorcycles to excite existing customers. Remain committed to Adventure Touring, Streetfighter and advancing electric motorcycles.
Build the Parts & Accessories and General Merchandise businesses to full potential
- Develop a comprehensive strategy across P&A and GM businesses that focuses on assortment and distribution opportunities, maximizes channels, improves ecommerce capabilities and grows revenue and margins for both the company and dealers.
- Align P&A and GM strategies with motorcycle strategy for a holistic presentation to the market.
Adjust and align the organizational structure, cost structure and operating model to reduce complexity and drive efficiency to set Harley-Davidson up for stability and success
- Create a framework including an organization that is more focused, profitable and nimble; a cost structure that is adjusted to the new realities of the market post crisis; and an operating model designed to increase empowerment and accountability.
- Establish commercially led central and new regional structures to gain a deeper understanding of customers and to return focus to dealers and selling.
- Elevate the role of Motorcycle Management and sharpen marketing strategy and execution to enable a bigger impact with an improved go-to-market process.“
So, let’s break that all down point by point. The first aim seems to be getting the bulk of attention and hate from internet commenters. Specifically, people are locking on to the idea that Harley wants to “return focus to the strength of brand and company.” To many critics, this sounds like code for: “We’ve given up on forward thinking and are now just going to relentlessly concentrate on selling big, heavy, expensive cruisers to Boomers until the very last one of them has been put in the ground.”
I don’t think so. Refocusing on the brand – its ethos, what makes it special – isn’t the same thing as refocusing on the demographic that supported the brand in past decades. If everyone else can see that cruiser sales in the United States are on the decline and that fewer and fewer Boomers are riding, Harley-Davidson can see that, too. I think what the company is talking about here is the fact that Harleys are special.
If you are someone who is locked into the mindset of hating the brand and what it represents you’re going to struggle to see that, but surely you can acknowledge that motorcycles – in Western civilizations, especially – speak to an irrational, emotional side of ourselves. As I’ve said before, motorcycles are inherently stupid/silly things. Harley-Davidson is very good at making bikes that speak to that side of us.
OBVIOUSLY I HAVE A SOFT SPOT FOR THE BRAND
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Take, for example, the Street Bob that I’m always swooning over. I’m not stupid: I know that in price, weight, performance, handling, tech, comfort, practicality, application and running costs the Street Bob is markedly inferior to a Suzuki V-Strom 1050. By the numbers, the Suzuki is better in every single way (except torque). But the bike that makes you laugh and dance around in excited circles is the Harley. The bike you ride through town thinking, “Look at me! Look how cool I am,” is the Harley. The bike you gently pat on the tank after a good ride is the Harley. The bike you hold onto for decades, until it is a rumbling mess that you are always fussing over but which you vehemently refuse to sell or give away, is the Harley.
There is a very old – and annoying and arrogant – cliché in the Harley world: “If I have to explain, you wouldn’t understand.” What I assume is that The Rewire aim of refocusing on brand wants to try to explain; it wants to encourage new riders to understand what’s so special about Harley-Davidson.
The second point of prioritizing the “markets that matter” is another one that sets off alarm bells for critics, especially because Harley-Davidson says it wants to build on its “strong position” in the US market. Some people see this as another example of Harley wanting to turn inward, to circle the wagons. There may be some of that – if you live somewhere without a nearby Harley dealership don’t expect to see one showing up any time soon – but probably not as much as critics are imagining. Europe will still be important and that means Harley-Davidson will still pay attention to the interests of European customers, something it speaks to in the third point when it says it will “remain committed to Adventure Touring, Streetfighter and advancing electric motorcycles.”
However, I do wonder if perhaps the Street platform will be abandoned – the Street 500, Street 750 and Street Rod 750. These are bikes that haven’t captured the spirit of Harley-Davidson as well as others. I don’t know how well they perform in other parts of the world but certainly I don’t ever see them on British roads, and from what I understand they’re equally hard to find on American highways. Affordable and aimed at new riders Street models are dripping with the quality of being affordable and aimed at new riders. I think the Street platform has the potential to be better with some work, but in its current state it misses the mark.
Harley-Davidson is a premium brand. And in my opinion it is a brand for riders who have ridden other bikes; you can’t appreciate how wonderfully stupid a Harley-Davidson is if you’ve not ridden anything else. And I think that’s OK. Ducati is also a premium brand that isn’t for noobs. There’s nothing wrong with that. If Harley chooses to embrace this reality about itself, look for the Street platform to quietly disappear, and, perhaps, for Riding Academy courses to be dropped.
The third point lets us know that the super cool bikes we were promised a few years ago won’t be taken away. We’ll still be getting the Bronx 975 and Pan America, and the LiveWire won’t be going anywhere. Indeed, in the very name of this strategic plan – The Rewire – it seems Harley-Davidson is reconfirming its commitment to electric motorcycles. However, unless the Bronx and Pan America are wildly successful, I wouldn’t expect to see the multiple displacement options that have been hinted at in the past. The Pan America will be a 1250cc machine; the mooted 975 version will probably just be the stuff of daydreams.
In the same breath, though, the company says it will “expand profitable iconic motorcycles.” I’m guessing that means we’ll be seeing more variations on the Softail theme and if Harley-Davidson can figure a way to get the Sportster through Euro 5 regulations it will also be a stalwart. These are platforms for which the R&D has long been done; everything’s paid for. Bikes you don’t have to put a lot of work into are bikes that make profit.
I’m intrigued by the bullet point that says Harley will “continue to be guided by the voice of customers and dealers.” That’s probably bad news if you’re an influencer. I think Harley is among a handful of motorcycle brands that feels it’s made a few mistakes in chasing an audience that never shows up to buy bikes. It’s difficult to determine how such a focus will manifest itself but, uh, probably don’t expect Harley to sponsor any Generation Z-focused events.
I’M GLAD HARLEY WILL BE KEEPING THIS:
The Harley-Davidson LiveWire is So Much Better Than I Imagined
Harley also says it will be moving product launches to coincide with the start of riding season, which is pretty sensible. I’ve never fully understood how the company got into the habit of holding September press launches anyway. I mean, it makes life easier for moto publications, who generally struggle to find the resources** to cover every bike launched during pre-riding season, but, hey, they’ll adapt.
I’m hoping that the fourth point, focusing on building the “full potential” of Harley-Davidson’s parts, accessories and general merchandise, means more stuff will be available to order online. I understand that you’re trying to get people in the door but it drives me nuts that motorcycle brands don’t sell their shit online. Whether it’s a jacket or a set of LED indicators you’re expected to go into a physical damn building so that some dude can fill out a form for you – ONLINE – and you can come back at a later date to pick it up. That is bullshit. I don’t need The Dealership Experience when I’m buying a fucking bottle opener keychain for my uncle’s birthday. Just let me buy your shit from the peace and COVID-19-free safety of my own home.
I’m not entirely sure I understand the jargon of the fifth point, but it seems to be largely related to management structure and Harley’s ability to respond to changes in market trends. Certainly it’s the case that – rightly or wrongly – Harley has a reputation of being far more evolutionary than revolutionary in its actions, and usually when people discuss this aspect of the company the finger of blame gets pointed at the top.
One thing that unnerves me slightly about The Rewire outline is how much attention it pays to dealers. They are mentioned no less than five times, whereas customers – presumably the most important thing when seeking to improve a business’ fortunes – are mentioned less. Here in the UK, most of the Harley dealerships I’ve encountered are pretty good. (Though, I’ll admit I’ve never been through the process of buying/owning a bike with any of them.) I’m sure that the same can be said of many US dealerships, but, ah, I’ve also heard some pretty awful things over the years. Tales of Harley dealership misadventures are part of what kept me away from the brand when I was younger.
Harley-Davidson’s ridership is often compared to a cult or church, so let’s run with that analogy for a second. If you grew up going to church every Sunday you’ll know that there are some people who have faith and some people who just have religion; some understand and try to live by Jesus’ message, whereas others seem to be preoccupied with the specific rules of church: pay your tithing, stand at this time, say these words, follow these rules, etc. As Harley-Davidson seeks to better explain its message, to help new customers understand the Harley “thing,” I’d be just a little worried that old, too-long-established dealers might not be the best ones to proselytize. We’ll see.
** This is why I usually get the bulk of my freelance work in the first quarter of a year. Publications call me in to cover stuff their regular team isn’t able to get to. So, from a personal point of view, I’m glad to hear Harley-Davidson will be following the trend. It might mean more work for me.