A yellow jersey in manufacturing
Giant Manufacturing has become the world’s largest bicycle manufacturer. Professor Willy Shih (Harvard) looks at its climb to the top and its recent foray into all-women’s bike stores.
The world’s largest bicycle manufacturer was born thanks, in part, to the typhoon that destroyed King Liu’s eel farming business. Turning to something completely different, the Taiwanese engineer created Giant, a bicycle manufacturing business in Taichung.
The initial strategy was to to manufactures bikes that were designed and sold abroad under different brands (or as an OEM, Original Equipment Manufacturer). King Liu would be responsible for the operations side while Anthony Lo (the current CEO) would handle the marketing side.
Giant’s first American customer was West Coast Cycle but the main goal was to become a supplier for America’s top brand, Schwinn. Thanks to attractive pricing, Giant was able to land its first Schwinn contract in 1977.
In 1980 American labor relations enabled Giant to take a leap forward. A strike organized by the UAW closed down Schwinn’s Chicago plant and Giant jumped in to fill the production shortfall. By 1984 it was supplying approximately two thirds of Schwinn’s bikes or 500,000 units a year. In 1985, Tony Lo proposed a joint venture to Schwinn. In retaliation for the refusal, Giant decided to start selling under its own brand in the US. Giant’s US branch, headed by a former Schwinn executive, offered dealers lower retail prices as well as higher profit margins (36% as opposed to 34%). Seven years later, in 1992, Schwinn filed for bankruptcy; at that point Giant was already selling 300,000 bicycles in the US or more than half of Schwinn’s sales of 534,000 units.
By the end of the twentieth century Giant had justified its name and become the world’s largest bike manufacturer. In 2008, it had nine factories producing 6.4 million bikes sold in 10,000 retail outlets; its six Chinese factories accounted for over 80% of its production
Giant’s success was largely attributable to acute awareness of segmentation. Everything from design to retail store layout was predicated on segmentation. Two variables took precedence: terrain (on-road, off-road or across-the-road) and cyclist type (lifestyle, performance, sport). But one area where Giant was not attaining the success it sought was women’s bicycles. Tony Lo set about changing this state of affairs.
The gender turn
Lo’s idea was to open a store exclusively for women. After all there were women’s apparel shops, why not a women’s bike shop? To head the project, he chose Bonnie Tu, Giant’s CFO. This offered two benefits: first, a woman would be leading this project and secondly, her financial experience would ensure financial discipline.
A core project team tested various ideas in the women’s corner of existing Giant retail stores. The new store was designed to be as modular as possible so as to allow for maximum experimentation. Baptized Liv/giant, it was inaugurated in April 2008.
The store was an immediate success, turning profitable after four months. What did the women’s store do differently from the already existing “bisexual” stores? One key feature was comfort. There were places to sit, making it something of a bicycle lounge. Cyclists have their own apparel and the changing rooms were made larger and more comfortable so that women would not hesitate to try new cycle fashions.
There were classes and excursions to overcome any technical hurdles. Women could learn to ride a bicycle through the store; they could join together for scheduled store-led rides to discover new paths and areas of the island. The store was less about selling bicycles than about building riding experiences.
With experience, Giant discovered a few things it had not envisioned. Apparel and accessories account for a much larger percentage of the women’s store sales. This translated into more repeat purchases, with customers coming back on a monthly average.
With regard to accessories, women were quickly making design requests. For example, small bags around the seat, conveniently designed for holding purse, phone and other such personal items. Giant soon recognized the demand for a mirror that would allow the rider to check her appearance.
The question raised in the end is how to go about spreading the concept of the women’s store, namely for a women’s store in Tokyo.
Reference:
Harvard 9-610-096
Professor Willy Shih, Ethan Bernstein, Maly Hout Bernstein (Harvard Business School)
Professor Jyun-Cheng Wang, Yi-Ling Wei (National Tsing Hua University)
Published September 2010
