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Reaching the Fountain of Youth

Small Capacity Strategies for A New Market

Mon, January 03rd, 2011

Last week, JD Power identified reaching customers in a new, younger demographic as one of the key challenges currently facing the motorcycle industry. As high-margin, high-capacity bikes like the BMW R1200GS became the major focus of the industry in the run up to 2008’s financial market collapse, the basic-but-appealing, utilitarian-but-exciting motorcycles that had brought about the initial success of many manufacturers were forgotten. Now that we suddenly need to rediscover them, motorcycles like that aren’t coming from the traditional players, they’re coming from relatively unknown companies using Far East manufacturing to deliver niche products at an affordable price.


JD Power reports that the average age of a motorcycle buyer in the US has increased to 49 years old, 12 years older than the median age of the US population. That shouldn’t come as a surprise, the western motorcycle industry chose to focus exclusively on high-disposable-income, older riders over the last several decades. Now, with those same riders aging out of riding over the next decade or, worse, unable to afford new motorcycles in the short term, we suddenly find ourselves needing to return to that young buyer. The thing is, those younger buyers have different needs and different tastes than the product mix currently on offer caters to. Enter ATK and Cleveland CycleWerks.


Both companies intend to combine western product ideals — high quality and high style — with the low cost manufacturing that’s available in countries like Korea and China. But, they’re pursuing that similar idea in very different ways.


Utah-based ATK sees its major advantage as being access to a large proportion of Harley’s dealer network, something it plans to exploit with a range of entry-level motorcycles assembled in America from components made by S&T motors (formerly Hyosung) in Korea.


Cleveland CycleWerks’s business model couldn’t be more different. Its 30-year-old leader is designing bikes specifically to cater to the tastes of his peers, then relying on an existing network of alternative-brand dealers to reach the young customers he hopes are ready and waiting for an appealing, small-capacity product. CCW’s model looks like a mirror of Honda 30 or 40 years ago. Their 250-500cc products are a response to the excess of Boomer-oriented 1,200cc v-twins and 1,600cc, six-cylinder tourers. UJM could become UCM as CCW designs, then imports bikes that are appealing on their own, yet ripe for customization. CCW’s second product, the 250cc, sort-of-cafe-racer-style Misfit looks and feels like a quality western product, just one that, at $3,195, retails for $800 less than the CBR250R Honda is pinning its youth appeal push on. Ironically, it’s the CCW, not the Honda, which most feels like a product of our time, meeting American youth consumer expectation far more successfully than the fully-faired CBR.


ATK suffers more from the burden of the negative image unsuccessful attempts to introduce Far East products to the American market have created. Currently offering re-badged bikes from Hyosung’s cut-price range, it’s hoping that a presence in major Harley dealers will be enough to move bikes in the short term. Still, ATK’s CEO, industry veteran Frank White, claims it’s the dealers’ desperate need for entry level products that’s motivated ATK’s push to sell them products. Where Harley is investing $60 million in a three year project to develop a new, entry-level learner bike intended to appeal to its Riders Edge program, new riders and women, the re-badged Hyosungs are giving dealers an immediate product to sell to those to whom 883cc or $8,000 is simply too much. Of course, the re-badged Hyosung Aquila is both more powerful and lighter than that Sportster 883, but there’s also an even lighter 250cc version that retails for just $4,000. The thinking is, that someone buying a 250cc Korean cruiser now, might come back to buy a Harley in the near future. Starting someone off in motorcycling creates new customers, even if the payback to the The Motor Company won’t come immediately.


While ATK’s plan to build American-style bikes from Korean components won’t bear fruit until 2012, CCW is importing and selling bikes right now. In fact, it plans to bring no less than six models to the American market next year (it also sells in Europe, Africa and Asia), of which it hopes to sell around 3,000 bikes a year, for each model. CCW’s business is unique; the company only employs its designer and executives in the Cleveland, plus a handful of quality control people at its Chinese factories. Distribution is handled by New Jersey’s PIT Motors Ltd, a company that services over 100 dealers nationwide with Asian products. This leads to very low overheads and therefore unprecedentedly low prices.


But, unlike Kymco, QLink or Hyosung which have tried and, largely, failed to penetrate the American market with low-cost Chinese products, CCW hopes to become a significant player. Even at two-thirds its projected sales volume, CCW will likely eclipse BMW in overall sales in the North American market next year. The way they hope to do so isn’t just with products that tick the cheap and reliable boxes, but with a quality product that appeals to western sensibilities.


“We’ve investing in quality where other people only invest in making the cost as cheap as possible,” says Cleveland’s Scott Colosimo, the 30-year-old designer behind the company. “The consumer is the one pushing for cheaper, cheaper, cheaper. We push for better quality. Good companies only want to work with other good companies. If we find, say, a gas tank manufacturer that we’re happy with, we say, ‘Hey, do you have any other factories that you work with?’ And we go visit that factory. Are they ISO certified? What quality controls do they have in place? Can we see some samples? Can we talk to their customers? And we have our own quality control engineers over there monitoring everything too.”


It’s designing products to and for American tastes rather than hoping products intended for the Far East might find some fans here that will be the key to CCW’s success. The ability to leverage large-scale Chinese manufacturing in order to adapt quickly to trends will also help. Next year, Cleveland will have a bobber, cafe racer, supermoto, as well as a 500cc v-twin cafe racer and muscle bike at a time when a manufacturer like Honda is still churning out large-capacity adventure tourers and cruisers. CCW can afford to follow trends where Honda has to make major marketing pushes to sell bikes competing in the same classes as everyone else.


“What we’ve found is that people in the US want to ride,” continues Scott. “It’s a purchase that people are willing to make some sacrifice for, but many can’t quite make the stretch to an $8,000 price tag. Dealers are left having to stock used bikes, there’s a huge hole in the market for this.”

Someone buying a $3,195 CCW today could become a lifelong rider and purchaser of new motorcycles tomorrow. Where there’s someone buying a CCW at 21 years old, there might be a someone buying a CBR five years later. Of course, they won’t be buying into an established brand, they’ll be buying into a new one. One that values them as a customer and caters specifically to them. With brand equity like that, will the next step be a Big Four product or will it be another CCW? You can bet Scott’s penning that next step up the ladder as we speak.

“That’s kind of our key, taking this person that wishes they could afford a motorcycle and showing them that they can,” concludes Scott. “You can afford a cool bike that makes you feel good, it doesn’t have to be a dream.”