Harley-Davidson Apparel Riding High
We've seen it before: fashion-forward styling lifts niche market clothing into the mainstream, from military gear to yoga wear. Most recently, motorcycle jackets are taking center stage as the must-have item for the wardrobe of the hip - biker or not.
Undergoing a metamorphosis in recent years, the utilitarian biker's jacket-cum-fashion-statement has become not only a core outerwear item for women, but along the way has upped its reputation as a performer, with advances in technology that have increased protection for riders from both abrasions and weather.
Along the way, these developments have opened up new markets not just for riding apparel, but also for introducing sportswear, enabling brands to reach out and rope in a completely new segment of consumers: the children and adults that comprise the non-riding population.
Rich history that buffers troubling times
In 2008, Harley's general merchandise sales brought in annual revenues of almost $314 million - a nice chunk of change for the company (overall sales were $5.59 billion) that puts the division on par with some pure-play apparel companies.
Despite its status as a cultural icon and a lifestyle brand, the company has had to weather the recession like any other. It has shut down and consolidated factories and warehouses, ended its Buell product line, divested the MV Augusta unit, and come up with a long-term strategy of focusing exclusively on the Harley brand.
The recession has made deep inroads not just into the auto industry in Detroit but also into Harley's bike sales, with revenues down more than 20 percent for the third quarter of 2009, compared to the same period a year earlier. Third-quarter general merchandise sales also declined 15 percent compared to the previous year.
However, this decline was still smaller than analysts expected, which is quite an achievement. Even in a tough economy, the executives steering the ship at Harley have stayed the course, not tampering with its legacy or core image, but focusing on reaching out to new segments of consumers. (It didn't hurt that biking took on new appeal in late 2008 when gas prices soared, either. Many of those new bikers didn't relinquish their newfound mode of transportation even when gas prices came down.)
The company also has found growth in international markets that have helped to boost sales. In countries such as Japan, where Harley has gained in popularity, sales have been stronger than in the United States. Additionally, sales of general merchandise (which includes apparel and accessories such as toys, jewelry and gift items) in such markets account for a larger share of overall company sales - 20 percent vs. 5.6 percent in the United States.
Nothing new for the company, Harley found success introducing riding apparel as an accessory as early as 1912; its first foray into the business required that it replenish its stock three times in one season, and since then, it has grown the market steadily, with the leather jacket making its first appearance in 1928.
Even so, it wasn't until the 1950s and '60s that the rebellious look and clothing of the American motorcycle rider became a part of popular culture. By the 80s, the clothing lines had taken on a fashion twist, and later, when Harley-Davidson MotorClothesTM was created, the line was expanded to include men's, women's and children's leather jackets, casual sportswear and small leather goods.
As its apparel continued to evolve, its more fashionable appeal brought accolades in the form of a Council of Fashion Designer's award, which recognized the company for bringing the biker look to the ready-to-wear market. Harley also experienced a huge spike in sales with the introduction of its Biker Blue denim line. More recently, the company has expanded distribution to include online sales.
High volume with healthy margins
It's the bond and identification with the lifestyle that leads people to buy everything from leather vests to separates for women, footed and half-length onesies for babies and performance wear for men, extending Harley's reach as a lifestyle brand through two main categories: general merchandise and licensed apparel. (Licensing royalties for leather, apparel, jewelry and toys topped $45 million in 2008.)
Harley maintains significant input into the design development of its products, working closely with its licensees. Those include VF Imagewear, a division of VF Corp., which acquired the bulk of the assets of Wisconsin-based Harley licensee Holoubek five years ago, with the aim of leveraging its own deep experience in design and production to create fashionable clothing for the brand.
The two categories, licensed apparel and general merchandise, complement each other, and decisions to license or retain a category in-house are made on a case-by-case basis, says Patrick Smith, vice president and general manager of general merchandise, who says the apparel is "very collection driven," with its three high-volume categories (leather, riding apparel and sportswear) producing "healthy margins" and also achieving higher margin parity among them than is typical for traditional retail.
Key drivers: Technical performance wear, stylish sportswear
Harley's goal is to own a major share of the rider's closet, from technical performance wear to sportswear; it is determined to maintain a position as a lifestyle apparel player and avoid being pegged into a narrow hole, such as a riding-gear provider. In this area Smith says Harley differs from the other players in its space, typically either broad generalists or small specialists that do not cover all categories in depth.
In recent years, one pitfall of the trend towards stylish looks in biking apparel has been compromise in quality - the careful attention to detail such as reinforced patches for the knee and elbow, which some riding clothes makers have ignored. As one motorcycle clothing expert put it: "When you are sliding down the asphalt at 50 miles an hour it's not about the looks."
Given that bikers encounter the hazards of rough terrain and inclement weather, Smith's division puts a lot of effort into technical riding wear and gear, eschewing an emphasis on low price and instead approaching the development from a high-tech perspective that encompasses the whole garment, from top to bottom.
One new performance wear item that has been very popular is a jacket with a waterproof, windproof and insulated lining that incorporates Gore-Tex fabric. Seeking to fill gaps in the line and cater to the needs of night riders, Harley has also partnered with 3M for high visibility solutions in both the men's and women's categories.
Emphasis is also placed on styling that complements the rider's lifestyle, given that the key to attracting new customers lies in the appeal of the apparel. Smith says it's crucial to be able to engage people who are not riders.
Bischman concurs, explaining that general merchandise serves as the "point man" for the brand - often the first exposure that people have to all things Harley.
Dealer network plays unique, proactive role
While the technical features of its apparel are not necessarily obvious to the untrained eye, Harley's dealers are extremely adept at highlighting the performance aspects of its apparel for customers, which is just one of the many ways that its dealer network brings extreme value to Harley, beyond its distributor role, say Smith and Bischman.
Additionally, they say, the dealers are instrumental to the company's development efforts because of their ability to secure critical shop-floor feedback and insights about the regional markets they serve. The dealers themselves have placed a high priority on understanding the market and have hired experienced staff who know how to stage and even buy merchandise - a practice uncommon among other brand dealers - because its dealer managers really understand the market, says Bischman.
Especially in a challenging economy, says Smith, such a "second-to-none" dealer network is a strong advantage. Assuredly, the company offers support, through its Harley-Davidson University, for example, which prepares the dealers and their managers to be proactive players who drive design decisions, offer helpful service on the sales floor and close the loop with critical feedback from customers.
Additionally, the company offers training at annual international dealer shows, and also produces tapes and online seminars that demonstrate how to set a helmet, for example, or to gear up for a ride. Newsletters communicate key strategies to regional motor clothes managers, and the company also offers planning support and trend information.
In sync with customers but not trend driven
The Harley Davidson brand has a unique legacy that the general merchandise division makes relevant and current, Smith says.
Padma Nagappan is a San Diego-based business writer who focuses on the apparel industry, sustainability, environmental issues and renewable energy.
systems at a glance
* Dealer network: In-house system for point of sale (POS) data* Licensing: TLC
* Merchandise Planning: Manugistics
* Design: Gerber
* Finance: SAP
* Under consideration: Other SAP enterprise software modules for company-wide implementation; evaluating which legacy systems to retain.