News Column

The Next Generation

December 2005, HISPANIC BUSINESS Magazine

Keith Rosenblum

Harley Davidson logo

J. Richard Tapia owns and operates four Harley-Davidson dealerships in California and Nevada, employing 60. He is one of the company's 650 U.S. dealership owners, who collectively sold 375,000 of the pricey bikes in 2004, at least 12,700 of them to Hispanic buyers.

These dealers operate in a market niche that has become largely synonymous with Anglo baby boomers. However, Mr. Tapia describes a younger, affluent, Hispanic buyer demographic that just might help sustain the Harley market as the baby boom market peaks.

Mr. Tapia, a Los Angeles native whose parents emigrated from Mexico, holds bachelor's and master's degrees from Golden Gate University in San Francisco, and at age 46 has accumulated a slew of businessman-of-the-year distinctions. Though he does not reveal specific financial data, Mr. Tapia says his Carson City, Nevada dealership and its Lake Tahoe satellite (called an "SRL," or secondary retail location) sell about 300 Harleys per year. His other dealership, Yosemite Harley-Davidson, in Merced, California, and its Golden Valley satellite store in Los Banos, sell about 250. He bought the Merced dealership first, in 1998, and opened the fourth location, Los Banos, in 2004.

He says he was bitten by the Harley bug after riding with friends who owned various brands. Already a General Motors-certified master technician with experience as an expert witness on "lemon laws" (consumer protection laws obligating manufacturers or sellers to repair, replace, or refund the price of motor vehicles that prove to be defective), he bought his own Harley at retail price. And, having made friends in the motorcycle ranks, he decided to inquire about dealership prospects west of Denver. After a four-year wait, opportunity revved up.

According to the company, a typical 20,000-foot Harley dealership stocked with 160 bikes and a large array of clothing, accessories, and custom parts requires a minimum $900,000 investment plus excellent credit.

"Harley makes most of its money on clothing and accessories," says Mario Nieves, president of the international Latin American Motorcycle Association (LAMA), a touring club and "the foremost representative of the motorcyclists in the Hispanic community" with more than 22 chapters and 2,500 members in the U.S. "[The company] has blazed the trail in motor clothes," he adds, "making the Harley-Davidson label on a par with designer labels."

The Hispanic Factor
Within the company's corporate structure, including its various manufacturing plants, Harley-Davidson is "one of the most ethnically diverse organizations I have ever seen," claims corporate effectiveness expert Lee Ozley, co-author of the book More Than a Motorcycle: The Leadership Journey at Harley-Davidson, from Harvard Business School Press.

But on the dealership side, to date the company reports no target dealership demographics, saying simply it encourages all minorities to seek out availability.

The Harley Web site lists two ways of coming on board: buying an existing dealership or a new dealership location. At this writing it indicates there are opportunities to buy existing dealerships, but no new dealership locations.

Mr. Tapia knows he may be a relative rarity in the Harley universe: He can name only Victor and Joe Guidera, owners of area dealerships in Yuba City and Rocklin, California, as fellow Hispanic Harley dealers. But then, insiders agree, the company historically tended to regard ethnicity as irrelevant among dealers and buyers alike. Rather, Harley has viewed their customers as a demographic in their own right.
Words like "independence," "camaraderie," "freedom," "empowerment," "individuality," and even "anonymity" pepper a conversation between a customer and a dealer long before Cruise Drive transmission or engine torque.

A Young, Upscale Hispanic Market
Mr. Tapia has two Spanish-speaking salesmen at Merced and two at Los Banos, but more often than not, his Hispanic buyers successful in whatever line of work they have pursued complete their transaction in English.

These Hispanic buyers tend to be in their mid-20's to early 30's, easily a decade younger than the current mainstay Harley buyers, Mr. Tapia adds.

Generally, they are looking for the "classic" Harley look in such models as the Heritage Softail, Fat Boy, Dyna, and Road King models, Mr. Tapia says. They tend to prefer sport bikes, opt for wider rear tires and higher performance engines, and "trick out their bikes more than white bikers," he explains. The basic bikes without extras range in price from $6,500 to $20,000.

At the corporate level, Harley-Davidson estimates that 3.4 percent of its U.S. buyers were Hispanic in 2004. That estimate of about 12,700 purchases may be skewed by vague data gathering with regard to who identifies as Hispanic and what is a Hispanic surname, in line with the "riders are riders" philosophy. But Mr. Tapia says his own sales to Hispanic clients closely parallel that overall niche.

And aside from these numbers, "we know of no one that has kept any records on Hispanic motorcycle owners," says LAMA's Mr. Nieves. "Harley-Davidson is the first company to our knowledge that started addressing this issue a couple of years ago." At LAMA's last count, in 2003, by far the largest segment of its membership (45 percent) owned Harleys. The next largest segment, at 28 percent, was Honda, followed by Kawasaki at 12 percent and Yamaha at 10 percent.

If Harley-Davidson's figures are credible, another 8.0 percent of its customers are African American, meaning this demographic buys more than twice the number of bikes per capita as Hispanics. One interesting question is whether this group might be more weighted in the baby boom age group.

Dawning Recognition
On the marketing side, Harley-Davidson allows its dealers to advertise as they see fit, according to corporate spokesperson Rebecca Bortner. And though at the corporate level it has done little to appeal to bikers directly through ethnic channels, it still knows that survival in dramatically changing demographics requires outreach.

Recently, for example, the corporation chipped in as a sponsor of the August 2005 U.S. Hispanic Chamber of Commerce convention in Milwaukee, and has given to various functions organized by the National Association for the Advancement of Colored People. The company also recently participated in Lowrider magazine demos at trade shows in San Diego, California, and Houston.

Harley "was the first company to reach out to LAMA," says Mr. Nieves. "They showed an interest in teaming up with LAMA on some of our events…and played a…role in [the organization's 2005 annual] Latin American Rally in Florida."

More may be indicated. Reaching new markets is essential to Harley's future, asserts Jake Balzer, a senior equity analyst with Guzman & Co. in Miami. To the extent that Harley-Davidson can be included in the economics of the motorcycle industry, the outlook is good. More than 12 million motorcycles were manufactured worldwide last year and growth continues at a 7 to 10 percent annual sprint.

But for Harley's U.S. market, "Next year is the peak of the baby boomers," says Mr. Balzer, "and my worry is, 'Who is going to replace them?' They need to find new markets."



Source: HISPANIC BUSINESS Magazine


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