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You'll Never Guess What Whole Foods Market and Harley-Davidson Have in Common

By Rich Duprey – Mar 8, 2016 at 11:30AM

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Despite their very different businesses, both retailers are pursuing similar goals to turn their operations around

No, it's not Harley-Davidson that wants to put tattoo parlors in its dealerships, but rather Whole Foods Market that does.

Whole Foods Market (WFM) and Harley-Davidson (HOG 1.86%) have more in common these days than you might think.

First, both appeal to more well-heeled consumers who don't mind paying up for the experience that comes from patronizing their businesses, and both have hit a rough patch in their respective industries: Whole Foods reported falling comparable store sales for two straight quarters after seeing positive comps for almost two straight years, while Harley-Davidson is having difficulty selling more big, V-twin motorcycles and is resorting to questionable tactics to make its year-end numbers.

Over the past year, their stocks are down 43% and 23%, respectively, though over the past month both have moved sharply higher, Whole Foods by 13%, Harley by 18%. Yet the challenges they face haven't changed and that's leading them to try remedies that are remarkably similar.

Living down a bad reputation
Whole Foods is in the process of rolling out a new concept store called 365 by Whole Foods, whose name is a takeoff on its private label 365 Everyday Value brand, a lower cost option that often meets, and at times even beats Wal-Mart (WMT 1.00%) prices for similar products. Despite such efforts at giving increasingly price-conscious consumers a discount option, it is unable to live down its reputation as an overpriced organics grocery store that continues to earn its Whole Paycheck nickname.

Harley-Davidson has also encountered the withering effects on its bottom line of price sensitivity among motorcycle buyers. Its core customer has long been the 35-and-older white male who could afford to spend $30,000 or more on one of its tricked out touring bikes, but the recession hit that buyer hard and he's never been back in the same numbers as before.

Worse, those who are buying bikes are considered atypical riders: first-timers, urban riders, women, blacks, and Hispanics. And they're favoring bikes with different dynamics too, so to keep them from going to Suzuki, Kawasaki, and Yamaha, Harley's introduced its Street bikes that were designed specifically for this customer.

While it's still too early to tell whether Whole Foods will succeed with its new venture, it is notable that Wal-Mart has abandoned its small concept stores called Walmart Express that would have been more akin to shopping at a Whole Foods-sized store than the traditional big-box superstore Wal-Mart customers are accustomed to.

Harley-Davidson, though, has gained real traction with its Street 500 and 750 bikes, as they've been its one consistent growth component since they were introduced, though it hasn't been enough to offset the lackluster performance of Harley's cruisers and touring bikes.

How many people are going to want to stop in at a high-end grocery store when going to buy a Harley-Davidson, or vice versa? 

One of these things doesn't belong here
Yet both companies are adding a new twist to their efforts. In Whole Foods new 365 stores, it wants to open up space in the grocery stores for outside vendors to set up shop. So instead of just produce and products you would normally find in a supermarket, you may just find a body-care products boutique, a record shop, or even a tattoo parlor.

Similarly, Harley-Davidson is opening up a new dealership in in Farmington Hills, Mich. that will not only sell motorcycles, but will also feature a trendy brew pub and a high-end grocery store (Whole Foods, are you listening?).

What both efforts are aimed at is expanding the purpose of what you would normally view their respective locations as, and transforming them into stand-alone destination spots. The thinking is, by drawing in a more diverse customer you may be able to boost sales. Someone coming in for some ink might also want to pick up some granola; a customer kicking back and having a few craft beers might want to buy a bike too (OK, maybe Harley really shouldn't be encouraging drinking and riding).

The ultimate mashup would be a 365 store with a tattoo parlor inside a Harley dealership so that right after getting the H-D logo tattoo on their body the customer could pick up some crunchy kale before heading over to buy a new motorcycle.

Other retailers are trying this too. Apparel retailer Urban Outfitters (URBN 1.95%) offbeat Anthropologie stores thought customers would want to spend more time in its stores, not less, so it tripled the size of the store, threw in home and garden furniture, and added its line of wedding goods too.

Whole Foods and Harley should take note of its results. Where Anthropologie had once been Urban Outfitters top performing chain, notching quarter after quarter of higher comparable sales, growth suddenly slowed dramatically and last quarter turned negative. Coincidence? Perhaps, but a warning to others wanting to try such ideas nonetheless.

Consumers likely don't want to make going to a store an all-day affair, and making a supermarket or a motorcycle dealership a "destination spot" is probably not what most people have in mind when they visit one or the other, particularly when such offbeat outside shops are being added.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Whole Foods Market. The Motley Fool recommends Urban Outfitters. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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