What next for Rapha and its growing cycling army?
10 min read
02 March 2017
In attempting to become the first true lifestyle brand in cycling, Simon Mottram is taking Rapha around the world and posting record revenues in doing so.
The cycling world was a very different space when Mottram set up his business, Rapha, in 2004. Back then, the Tour de France was being dominated by the now disgraced Lance Armstrong, British heroes Chris Hoy and Bradley Wiggins had not yet won any gold medals and cycling in London was 71 per cent lower than it is now.
Nowadays, Brits like Chris Froome are dominating world cycling’s elite events, Team GB won a staggering 24 Olympics gold medals on the bike in that period and you can’t step off a kerb in the capital without running the risk of taking out a cyclist.
Throughout all of that time Mottram has been building his Rapha empire, a brand synonymous with premium cycling clothing, at an impressive rate. The company has just released its year-ending 29 January financials, revealing revenues of £63m and a 30 per cent increase year-on-year.
Its expansion during 2016 was driven by a 35 per cent lift in online sales, 24 per cent growth in Clubhouses through openings in Seoul, Copenhagen and Chicago, and by cultivating new customers in markets such as Japan and Korea.
In an interview with Real Business, Mottram described Rapha’s recent progress as a “crystallisation” of what had been done before.
“It’s still possible to trace lots back to when we launched,” the Rapha boss explained. “One of the key bits was that international growth continued to be really good, considering how hard some markets have been.
“If I had to pick one thing that was most pleasing, it would be getting up to 10,000 members [in its Rapha Cycling Club], and seeing it firsthand around the world.”
Like any sound business, Mottram realised the value of creating a diversified revenue stream. The Rapha Cycling Club, a paid-for members’ club providing access to exclusive kit, events, cycling holidays and social networking, represents the subscription-based recurring revenues component.
Rapha, Mottram and his team have also placed a greater focus on warmer weather climates after realising that many potential customers had never actually experienced a winter like a British customer will have.
Mottram described his business quest as one looking to crate a “global lifestyle brand” – an interesting description for a company operating in a sector that has never really produced a lifestyle brand. Alongside its ranges of cycling clobber for both urban commuters and hardy road riders, Rapha also produces content, holds events and has a physical presence in the form of Clubhouses.
One interesting component of the Rapha journey is Mottram’s decision to retain control of its product sales. While “massively rewarding” when it does work, the upshot is there is nobody to share the risk with.
The business has also got where it has with surprisingly little funding. In its 12-year history,equity funding for Rapha has only totalled £5.6m. As sales have grown handsomely, Mottram said there has been a concerted effort to stay away from funding – however, that was not the case in the company’s infancy.
“We have banks which are much more supportive than when we were tiny. But in the first five years I would have taken more. But think back, in the early 2000s there wasn’t this cycling boom so no offers of money on big valuations,” he explained.
“But it keeps you honest this way, more focused on things working. When you have too much headroom you can make wrong decisions as there is less pressure. I like the discipline of having less resources, its the startup thinking I guess.”
Not having funds, and by virtue of that having a low headroom, meant he was up against it early on. Making payments to salaries and suppliers was “pretty full on” for a number of years, he admitted. Then there has been the challenge of producing products across multiple categories to a quality level it had become well known for.
“The hours you have on the bike are precious, so it we have to be brilliant every time. Developing product is a constant challenge, and we now have 40-50 people working on that.”
One partnership serving as a catalyst in Rapha’s drive to innovate in the cycling market has been the one involving Team Sky – the most successful cycling team in British history. Headed up by Dave Brailsford and with three-time Tour de France winner Chris Froome in its ranks, Rapha was a vital component in Team Sky’s pursuit of “marginal gains”.
Adding a heavy dose of science and engineering to cycling, Team Sky has produced the results it has by having the best bikes, travelling with its own custom mattresses and pillows, building a revolutionary team bus and making the often chaotic feeding zone during races more organised. With Rapha, there was a push to make jerseys, bib shorts and other apparel as lightweight, streamlined and energy efficient as possible.
Between 2011 and 2016, Rapha produced the clothing that adorned the backs of first Wiggins and then Froome as they collected four Tour de France titles between them.
Explaining the decision to end its deal with Team Sky, Mottram told us: “The trouble was, it was like a terrible drug. I love having Dave Brailsford on my phone and seeing people cheering in my products – being close to racing is amazing.
“But it’s also a massive investment. I felt we’d had a big benefit, and were still getting it, but there is the law of diminishing returns – something I was nervous about.”
Mottram didn’t want to keep going for the sake of it, and also believes the sport of cycling is not in need of more well-funded and branded cycling teams. This comment brought us onto the topic of wider professional cycling, something he things is “quite broken”.
His approach to fixing it will be a combination of other investment forms, with the upcoming Rapha Rides programme going to 20 cities around the world for a long weekend of riding, content, events. “It’s about celebrating parts of the world where riders ride, and is a big focus,” Mottram said.
For Rapha to improve on its 2016 performance, and produce another year of 30 per cent growth, it must continue to tread that fine line between attracting new customers and getting existing ones to spend more, and maintaining the premium nature which has characterised its rise.
“We have to help customers see more value than just a commodity, but the problem is so much of cycling is positioned as just that – another product,” he explained.
“The value of the sport, the experience and the service we provide need to be wrapped up in all of that. When a customer buys Rapha, it’s not just about buying but also entering into an experience and relationship.”
Even Mottram admits that “sounds fanciful”, but you wouldn’t bet against the first cycling fan, and then businessman, making it work.