July/August 2007

Exclusive Industry Roundtable

Big Twin Dealer

Building Beyond Skin Deep
           
Experts say that it will take more than radical designs to make money in the custom bike market (how about quality, handling and reliability?)

If rumors could power an internal combustion engine, the motorcycle industry would be like a gushing oilrig. There seems to be an endless flow of opinions and predictions about companies, how busy or dead sales are, or whether the bottom is finally gonna scrape. While much of the talk is no more that idle chatter, it does point to the larger concerns and questions that linger in the minds of dealers, builders, company honcho's and back shop workers.

Big Twin Dealer went looking for answers that would read like a snapshot of the business in its current state and place. We looked across the broad spectrum of the V-Twin and metric sectors, hoping to mine nuggets of wisdom that told every point of view. What we heard was universally colored with optimism that the industry will continue chugging along, that the lull will eventually expire.

It's just going to take hard work, customer service, and the talent and creativity already inherent in the business.
Answering our questions were:
Bert Baker, tech genius behind Baker Drivetrain
Mark Blackwell, VP of Victory Motorcycles
Nick Messer, president of Big Dog Motorcycles
Erin Rucker, COO at Rucker Performance
Roland Sands, founder / brain of Roland Sands Designs
Brett Smith, president of S&S Cycles

Big Twin Dealer: What's the main difference between today's custom market and that of two, three or even five years ago?
BAKER: Five years ago there were new faces entering the scene every month. More recently, the frequency of new faces each month has decreased a lot.
SANDS: It used to be cool to spend a lot of money on your custom bike. The more it cost, the cooler it was. Now people are counting their dollars and paying much more attention to what they spend money on. If they are going to spend the money they want it to be a truly special product.
BLACKWELL: The custom scene has matured in recent years. It takes much more than just paint and a radical look for a machine to sell. The current customer is seeking a complete riding experience in addition to the bike having strong curb appeal.
MESSER: I believe the custom market five years ago allowed the small manufacturing companies to build and sell anything that looked custom, regardless of quality. The consumers were also unaware of what style of bike would really fit their riding habits and ability. This of course caused further problems, with inexperienced riders buying the biggest, baddest choppers they could possibly afford. The questions asked were typically "What's the horsepower? How long can you rake it? How fat of a tire does it have?" And for $25,000 to $30,000, they expected these big V-twins to be as reliable as a Honda.
Since then, we have seen many of these novice riders go back to Harley Davidson or Metric bikes one they realized the differences in riding customs. The seasoned riders—as well as new riders who caught the custom bike bug—are asking more questions, doing more research, and attempting to further modify the custom they purchased. They are less impressed with the TV bike builders and are looking for something that they can actually ride for a distance, yet stand out in a crowd like they once could on a Harley. They are still interested in fat tires, big engines, and chrome and graphics, but only if it handles well.
RUCKER: Custom bike production produced exponential growth in the industry, record sales, increased job opportunities and record show attendance. Companies focused on increased production levels. Investors poured cash into newly born custom bike manufacturers and dealerships.
Three years ago, growth began to slow not all companies were affected. Sales dropped yet competition increased. Bike inventories increased, which created a backlog on dealer floors. Some dealerships continued to show strong profits but others didn't. Dealers were forced to divide their efforts between loyalty to the OEMs and finding new lines for diversification. There was an increase in the variety of different manufacturer lines in order to provide different price points, paint variety, and product diversity on their floors.
The market has changed quite a bit over the years. However one thing remains the same—the development of new and innovative products continues to be a driving force. Perhaps one particular niche has been filled to capacity in the large manufacturer custom bike market of the past. Fortunately, there are many new segments that have yet to be discovered.
SMITH: Air and noise emissions are playing a much larger role than they did five or even three years ago. While several companies appear to be serious about meeting these standards and addressing the enforcement of regulations that have been on the books for years, several others are still hoping that it will go away and back to the way it used to be. That simply isn't going to happen.
Customers are becoming more sophisticated because of their experience with the larger-volume OEM motorcycles. They have questions regarding vehicle liability. And with an abundance of Harley-Davidsons available and the newer Victory models, the competition is fierce.
The traditional custom bike builders all seem to be going quite well, however, because they offer something you can't get somewhere else. Several of the newer OEMs are taking a different approach to qualifying and developing their dealer networks and they are having a great deal of success learning from others mistakes. I think what all of this means is that we could see some rapid change coming for the larger-volume custom OEMs while they fend off serious competition from newer entrants.

What issues keep you up at night?
MESSER: Reliability: We are addressing this daily with a multi-million dollar test facility where we investigate every component that we use on our bikes. With this extra effort, we should be able to improve our quality while combating the negative reputation the custom industry has received.
Emissions: Our goal is to stick with an air-cooled V-twin for 2010 emissions without losing the look, feel and sound.
Excessive regulations: Our government is overly protective of riders. When it comes to a point where an individual is afraid to build or modify their own bike, things have gone too far.
BAKER: How do we connect with the next generation of enthusiasts? I have a young staff that immerses itself in the youthful side of the custom motorcycle culture. What new products should we develop to generate excitement? I listen to my staff and customers at shows to determine my new product directions.
SMITH: The longevity of custom OEMs. Changes in emission standards that are not communicated far enough in advance to meet them in a timely fashion and maintain sales. Overcoming the fear of emissions regulations in the mind of the dealer / consumer. We have to advertise and communicate directly with them. Maintaining a cutting-edge approach to V-twin technology, particularly the ultimate reception of our proprietary X-Wedge engine. And, how long will the custom motorcycle mystique last?
RUCKER: How can we continue to increase our sales? Diversify, diversify, diversify. How do we continue to build products that meet customer demand? What new niche can Rucker Performance explore? Through market research, dealer input and customer surveys, we are trying new ways to broaden the industry. We are paying close attention to non-industry related markets for clues as to the desires of the population in general. Finally, how do I keep my team members motivated when they see other manufacturers going out of business or disappearing? We keep a full workload and a diverse project list to motivate and excite team members each day.

In what way have the 2006 EPA rules affected your business?
BAKER: No affect. If you play by the rules, it is not a problem. If you resist future changes, you will be a dinosaur. We all know what happened to them.
MESSER: We have spent a great deal more money in emissions testing  and alternate drivetrain sources. Not that this is all bad because I do think we need to improve upon our current technology. I believe it will take some time for customers to become educated on where drivetrains are headed and what the new EPA rules mean to them.
SMITH: They have forced us to work harder to achieve compliance and spend a great deal of money on equipment for development and testing. But, this has also created opportunities for us because not everyone can or is willing to make the same commitments and investments that we and others have in the industry.
RUCKER: My dad established a lab (TET Emissions) in 1996. He spearheaded efforts of finding a more economical way to deal with increasing emission regulations. Since then the lab has tested more than 200 motorsports vehicles for emissions certifications. He is a consultant on numerous projects and is a true expert in this field. We have been prepared for these changes and expecting this increase in regulatory standards for a very long time.

What impact has the CARB enforcement efforts had?
BLACKWELL: CARB is in a position to affect a motorcycle industry. Unfortunately some costs must go up with more regulation. We have concentrated on delivering an outstanding riding experience, while meeting regulatory requirements. The fuel injection system employed by Victory on the whole line are designed not only for emissions regulations, but for superior drivability as well.
MESSER: Our main challenge with CARB has been obtaining our certification on a timely basis. Because of several delays, we are unable to release our new models in California for two months after they are released throughout the rest of the country.
BAKER: Some decrease in orders from California-based builders has been noticed. But those in California that are working with CARB, rather than fighting it, continue to submit strong orders with us.
SMITH: All in all, I believe CARB has done more to scare dealers and consumers into compliance than anything else. Right or wrong, that may have been necessary to achieve compliance from people who really didn't seem to care much about the rules. However, an open forum like what we have now with CARB through the MIC would have been more useful. It would have allowed us to be better prepared for product offerings that were easier for dealers/consumers to use and be in compliance. In any event, it has been a very useful learning curve for all of us. The lessons we've learned in the U.S. have helped us in our foreign markets.

Has the decreased amount of TV coverage affected your business?
MESSER: The TV coverage of OCC, Jesse, and other builders certainly sparked and programs certainly sparked an interest in the custom industry, but I don't believe it really helped custom motorcycle sales as much as some would think. Yes, it sold a lot of T-shirts for Jesse and the Orange County boys but did it really sell more custom bikes? I don't think so. The soft sales in the industry are more a reflection of the economy and consumer confidence more than it is of dropping TV ratings.
BAKER: The big TV boom brought our motorcycle culture into the households of all potential customers. They now know us and our world. That whole TV surge will last us 10 years or so.
SANDS: Certainly TV has helped to spread the word about what we do, so the lack of it affects people's perception of the industry. Of course the guys that ride and buy parts are going to do so if there is TV coverage or not. They are the true customers, the ones who go to the bike shows and read magazines and search the Web for what we do.
SMITH: I believe that TV coverage can assist any industry, but ultimately once you've saturated the market, it is up to you—with your products and service—to keep them coming. We saw a big boom, saturated the market, overbuilt motorcycles, and in turn hurt our own market in a somewhat depressed disposable income economy. It seems that everything that could have gone wrong externally did. How we, as a company and as an industry, ultimately respond to this downturn is what will define us; not our ability to make money when it was easy for anyone and everyone.
RUCKER: Actually, we have received more TV coverage. Now, Rucker Performance is focusing on technological advances for a new generation that calls for change. We have been putting some of our videos on YouTube for the public to access and we have also added video clips to our website.

What can you do to keep current customers, and what are you learning from them?
SMITH: Customers will not continue to buy junk. You may be able to get away with that for a period of time, but ultimately you have to deliver the goods.
RUCKER: Talk to them. See what they like and dislike. We try to find the strengths and weaknesses in our own products in order to determine what we need to go forward.

What can you do to attract new customers?
BAKER: Bring more exciting products to market. This whole thing must evolve. Adapt to new trends and customer demands.
SANDS: Give them what they don't know they want.  You want them to see something and say ‘Damn, I've got to have that for my bike.' Then the cost isn't that big of an issue. They need to have a passion for owning the parts.
BLACKWELL: The Victory Vision rollout has been successful, with hundreds of customers placing deposits on new machines. Combined with a regional demo program, we expect to see an influx of new customers to our brand. It helps that we entered a new segment—but it's important to surprise customers every now and then.
SMITH: We are learning that new customers are looking for something different and expect the best. People do not want to settle for mediocrity.
RUCKER: We attract customer interest and curiosity via our website with the latest news, video clips, photo galleries and fresh content. Buyers need to see as much variation and availability in the product line as possible when it comes to custom bikes, accessories, paint, etc.

How are you applying this to your business?
RUCKER: We are only as good as our dealer network. We want to make differences in our manufacturer-to-dealer relationships, surveying the dealers, making one-on-one visits and meeting sales goals. Rucker Performance has a very strong website which is constantly being updated. We use a powerful marketing and media vehicle combined with a strong sales staff to follow through with solid leads generated by a quality dealer network, web traffic, and media relations. In addition, we keep continual contact with our customers with an e-newsletter displaying the new and exciting projects we are working on.
MESSER: We have an extensive customer service department with a tech support department that does a fantastic job with both dealers and consumers. In Addition, with a coming Owners Group, we will expand our consumer research to know what our customers want in a bike.
BAKER: We are investing more money in R&D.
BLACKWELL: The Victory Vision reservation system, advertising schedule, media placements and 13-stop demo program are all interlocked to make the biggest possible impression over a long period of time.
SMITH: You can never be complacent as an industry leader because there is always someone else out there that is hungry and willing to do what it takes to succeed.

What are you doing to restore or reinforce your customers trust:
MESSER: Dissect every warranty issue that comes up and resolve the problem. Reliability is the key!
BAKER: We are not doing anything because we already have premium products that we support. The self-induced demise of some fly-by-night knock-off artists is also improving trust. Five years ago things were real easy for all of us in this business. Unfortunately, this attracted a lot of cheesy quick-buck types. Today, a lot of those people have dropped off the face of the earth and that is starting to increase trust.
SANDS: Give them something new and keep them guessing.
BLACKWELL: Deliver a quality product, and exhibit the enthusiasm that brought us all to the industry in the first place. We have the advantage of being connected to a large company with more than 50 years experience. It is important to reflect on that history in making future decisions.
SMITH: We believe that we have to be stewards of what we inherited from our 2nd generation and my grandparents, arguably the founders of the performance aftermarket for V-twins. Therefore, we work to educate, promote, and protect our company's interest in this industry. That is a big reason why I was so insistent that we have an industry council—to the point I prepared legal paperwork to start our own association.
Fortunately, the MIC stepped up and provided what we were looking for and has worked hard to deliver very important considerations such as the July 25, 2006 EPA letter of guidance clarifying the provision for manufacturer certified engines like ours, which eliminate the requirement for expensive model-by-model certification.
RUCKER: We believe that business is dependent on relationships with dealers, vendors, customers and employees. Our Fly-n-Buy program is one of the ways that we give to our customers. We fly an interested customer out to our factory and then personally meet with them regarding exactly what they want. We start with a blank piece of paper for every customer. It's our goal to please our customers.

How does the used bike market affect your business?
MESSER: We are actually seeing our used bike prices going up.  Our dealers are constantly asking if we know of any used Big Dog Motorcycles that they can purchase. This has helped most our dealers a great deal. In the past some dealers were reluctant to take anything other than a H-D bike in on trade, now it's just the opposite. Now if a dealer takes a H-D on trade they won't put money into it like they used to. And with used Big Dogs available, our dealers can introduce our product to a new buyer at a more affordable price.
BAKER: True enthusiasts spend money, consistently, on their bikes regardless of how old the bike is. As time goes on, the volume of bikes on the road increases and this is a good thing for sales.
SANDS: A used bike allows a guy to do much more to it because the purchase price is so much lower than a new bike. This is where our catalog comes in. You can truly transform a stock bike with our catalog of parts.
SMITH: I like the used bike market because it creates a demand for our aftermarket products and upgrades, unless of course, those bikes already have our engines or components. For that market, we offer a rebuild program; even our engines get a little tired when they have more than 100,000 miles on them!
RUCKER: We found a high demand for restoration, collaboration, and updating projects. We have built an additional segment of our business with the ProMod Road Kings we launched in 2006. We used low mileage, previously-owned 2005 and 2006 police Road King models to creae a customized wide-tire bagger package.

What major changes do you see coming?
MESSER: Like it or not, I don't see the custom bike industry doing well the rest of the year. We will continue to see small bike manufacturers, and even some dealers, go out of business, downsize or change their business structure. But there needs to be a shake-up. The custom industry is not going away; it's just going through a correctional period. I believe it will be some time before we see anything like we did several years ago.
BAKER: The baby boomers fueled the Harley boom in the early 90's, the chopper craze in the late 90's, and the recent Bagger boom. Generation X and successive generations must be understood and catered to with new products. I think even the iPod generation will find their way to motorcycles because the freedom felt on a motorcycle will be more and more desirable as society adopts more and more stifling rules.
SANDS: The strong are going to survive. If a company is putting out bullshit, they won't last. It's a small industry so word gets around quickly. Specialty bikes are needed to spur the customer into buying. He needs to be inspired to buy.
BLACKWELL: The industry must retain professionalism as well. This is a business and though we are an enthusiast-based industry, sound business planning and maintaining standards of quality are of equally important in every aspect—from whole goods to parts, accessories and apparel.
SMITH: Anyone building a motorcycle that is other than a one-off pure custom bike should make reliable, durable and rideable vehicles. They should support them through a technically trained dealer network, and provide exceptional after-purchase services. If you are in the motorcycle business and you cannot do this in today's market, your business will be in jeopardy because the consumers just won't stand for it any longer.

How do you get around the apathy that exists?
BAKER: I ignore it and see it as an opportunity to take business. People who are apathetic in this business need to get the hell out and work at Wal-Mart or something. Lisa [Baker] and I used to work at GM and that was truly work that grated on your nerves. The motorcycle industry is a dream job.
SANDS: Inspirational bikes are needed to keep the interest level up. We also need to work outside the industry to keep motorcycles in the spotlight as much as possible There's so much left to be done as artists. I think the builders could use some kind of formal organization to keep our art in the spotlight. We need collaboration with art galleries and other ways to be represented in a new light. This always gets new people interested in what we do. Bikes are such an integral part of American culture, we need to continue to progress.
BLACKWELL: Ride a motorcycle. Riding a bike keeps you in touch with the passion and drive of the industry—it is critical to stay in touch with what brought you to this industry in the first place.

 

October 8, 2007 11:40 AM | send page | Press Releases