The world’s largest bicycle manufacturer was born thanks, in part, to a typhoon. That typhoon destroyed King Liu’s eel farming business. Turning to something completely different, the Taiwanese engineer assembled eight partners to create Giant, a bicycle manufacturing business located outside Taichung, Taiwan. 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 (now Raleigh Cycles) 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. The Chicago plant was closed down three years later and Giant’s supply share kept rising.
Giant was able to manufacture and ship bikes at a cost lower than the raw materials cost of a Chicago bike. By 1984 it was supplying approximately two thirds of Schwinn’s bikes or 500,000 units a year. In 1985, only seven years after the initial contract, Tony Lo proposed a joint venture to Schwinn. The Schwinn management was split on whether to marry Giant or to seek a greater range of suppliers. Ultimately, the CEO, Ed Schwinn, Jr. , opted for diversification by entering into an agreement with China Bicycles Company, a Shenzhen-based supplier.
In retaliation, Giant decided to start selling under its own brand in the US (it had already started doing so in Taiwan in 1981). 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 008, 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 A large part of Giant’s success was due 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. Women were buying fewer bikes than men and and spending less money doing so.
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? And the managers of a women’s only store would be forced to discover what and how to sell to women in order to survive. To head the project, he chose Bonnie Tu, Giant’s chief financial officer. Such a choice offered two benefits: first, a woman would be leading this gendered store project and secondly, her financial experience would ensure financial discipline and an eye on profitability.
A core project team of four members initially spent a year testing various ideas in the women’s corner (or ghetto? ) 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. Taiwanese women do not like tans and bandanas became a top selling item. Customers would buy two or three of them, one for the neck, one for the face and one for the head. For the same reason, they preferred their jerseys long-sleeved and their shorts not short at all. To avoid any wrist-tan, gloves were redesigned to extend further along the arm. And, of course, all these pieces of apparel needed to match the bike. Then 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. As Lo puts, 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 – 43% as compared to 20% of sales in a standard store and 27% in the women’s section of the standard store. The emphasis on apparel and accessories made for more repeat purchases, with customers coming back on the average once a month.
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. When customers started twisting their mirrors, Giant realized it could design and sell a mirror that would allow the rider to check her appearance upon dismounting from her bicycle. The question raised in the end by the case is how to go about spreading the concept of the women’s store. The Japanese division head has developed a plan for women’s store in Tokyo.
The question CEO and case readers must decide whether the first store in Japan should be corporate-run or whether each regional subsidiary should be allowed to set up the women’s stores as it saw fit.
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 Professor profile Willy Shih * Home * About Casium * Newsletter * Strategy * Entrepreneurship * Leadership * Marketing * Finance * Operations * Human capital Designed by Shubh Infotech Bottom of Form