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Harley-Davidson set to bolster dealer sales online

The Milwaukee-based company already draws 140,000 enthusiasts to its content-focused Web site each week, but will likely drive a new wave of users with this week's launch of the RoadStore.

Harley-Davidson motorcycle riders may have a new hobby: surfing.

The Milwaukee-based company already draws 140,000 enthusiasts to its content-focused Harley-Davidson.com Web site each week, but it likely will drive a new wave of users with this week's launch of the RoadStore--where customers can browse but not yet buy Harley-Davidson clothes and accessories.

As many brick-and-mortar manufacturers increase their online sales efforts, they're simultaneously struggling with the touchy task of how to divvy up the profits.

But for Harley-Davidson, the decision is clear: all sales leads that come through the corporate Web site will be funneled to the company's 600-plus U.S.-based dealers--and the site will eventually be designed to seamlessly connect dealers to the corporate hub.

"At this point, our dealers are the providers of products and services," said Ken Ostermann, Harley-Davidson's manager of electronic communication. "Our public Web presence is really designed to drive that dealership traffic."

That's a far cry from the muddled plans that have tripped up other companies, such as Levi Strauss, which recently announced intentions to retreat from selling clothes direct online after the holidays, bowing to the pressure of high distribution costs.

Jupiter Communications analyst Mike May said reseller strategies vary among companies, depending on the stakes.

"Some may see the Internet as a huge new opportunity to get closer to customers and widen their margins by selling direct," he said. "Others see the Internet as being, at this point, too small a channel to risk alienating partners in their traditional channels."

To build the RoadStore, Harley partnered with e-commerce software maker Blue Martini--as well as an all-star Internet services team including Andersen Consulting, USWeb/CKS and high-end design boutique VSA Partners --to build a site that lets users peruse 3,000 Harley items from chaps and leather jackets to mufflers and handlebars. The site will open for public buying through a select group of dealers sometime next year, the company said.

The RoadStore will give riders a comprehensive view of what their local dealer may or may not carry and provides dealers with a central catalog of thousands of accessories, Ostermann said. Blue Martini's software eventually will give dealers the ability to target specific buyers with clothes and accessories that suit the type of motorcycle they own.

Thomas McIlhattan, co-owner of Harley-Davidson of Vallejo, in California, said the jury is still out on whether Harley-Davidson's future efforts to refer Web surfers to his shop will improve his sales.

"To not give it a try is to bury your head in the sand," he said. However, McIlhattan said that ultimately many riders want to visit the dealer shops directly, asking: "What does new leather smell like on the Web?"

Ostermann did not comment on whether there are plans to allow riders to configure their own motorcycles on the site.

Although analysts say riding accessories are only a fraction of overall Harley-Davidson sales--about 80 percent of the company's $2 billion in annual revenue comes from the sale of motorcycles--the RoadStore should help the company cross-sell its products and build better customer relationships.

But the overall market for heavyweight motorcycles also has grown 20 percent annually during the past two years, analysts say, providing fertile ground to sustain the accessories market.

To date, Harley-Davidson has done little marketing and depends largely on a base of intensely loyal customers supported by relatively few dealers, Hambrecht & Quist analyst Shawn Milne said in an interview.

"Six hundred distribution points is not overwhelming," he said. "There may be an underserved market."

Milne also noted there are about 200,000 Harley-Davidson credit card users in the company's database--and it could leverage that personal information to target sales or promotions to users. Harley-Davidson customers spend a "great deal of time dreaming about how they can accessorize and personalize their motorcycles," Ostermann said.

"The RoadStore will position us to be flexible and to anticipate customer preferences and drive consumers into dealerships," he said. "This allows them to establish a relationship with a dealer electronically."

Jupiter's May said Harley-Davidson will please its dealers by sending them new business, but he questioned how local shops that carry widely differing inventories will successfully fulfill orders that go through the corporate Web site.

"The costs and quality issues in outsourcing fulfillment to hundreds of dealers across the country is a nightmare in progress," he said.

McIlhattan, who said he doesn't have a computer on his desk, said he hopes the plan works.

"I don't really have a clue [if it will]," he said. "But I'm prepared to see."