Rapha recently turned 14. Like many 14 -year-olds, the apparel brand is spending a lot of time thinking about precisely what it is, and what it wants to be.
For customers, these changes have been most obvious within Rapha’s membership program, Rapha Cycle Club( RCC ), which is built on the back of physical retail spots it calls clubhouses. The rapid growth in RCC Clubhouses, of which there are now 21 globally, has slowed. Clubhouses are shutting, including Sydney. Others are decreasing hours, like Melbourne and Boulder.
Benefits of RCC membership have changed. Rapha shut down Mondial, the publication it sent to members, quietly stopped rendering free send from Clubhouses, and cut down on its travel business. The company also recently implemented layoffs, solidifying staff in London. Much of its North American and Australian staff are now run. Nearly 50 employees out of about 300.
In August, 2017, Rapha founder Simon Mottram sold a majority share of his company to RZC Investments for a reported 200 million pounds. The principals of RZC are Steuart and Tom Walton, grandsons of Wal-Mart founder Sam Walton. The two are avid cyclists and have transformed Wal-Mart’s hometown of Bentonville, Arkansas into a mountain bike destination.
From the outside, the two changes appear to concur. New majority owner, new direction. New beancounters counting beans. But, as always, things on the inside can be more complicated.
For a deeper look at where Rapha is now, and where it’s going, we rang up Mottram. The following is a condensed version of a 35 -minute interview with Rapha’s founder, including a few mentions for context. We discussed Rapha’s new investors, changes to RCC, the company’s new partnership with the EF Education First-Drapac WorldTour team, and more.
A complete transcript of the conversation are provided to our VeloClub members, who also submitted a matter of Mottram prior to the interview.
To listen to this interview, tune into this week’s CyclingTips Podcast.
Caley Fretz: I want to know what life’s been like since RZC came on board. How have things changed for you and how have things changed for the company in the last couple of months?
Simon Mottram: We’re a year and a bit into the brand-new relation, the new world, and I have to say a lot hasn’t changed at all. And that’s kind of what we expected, but you don’t know what you’re doing in these transactions, quite how it’s going to pan out. That’s one of the most scary things about it.
But one of the reasons we were so keen to have them as shareholders was they bought into the program, they bought into the strategy. And they’re bicycle equestrians so they share our eyesight. And they also didn’t want to do this as some kind of short-term investment. It was about a 15, 20 -plus-year journey. So we felt we’d get the privilege support without the horrendous pressures that come from being part of a PE[ private equity] firm or something.
And I have to say in, what, 13, 14 months, they’ve been completely true to their term. They’ve been supportive and interested. Not pushy. Pretty patient. Extremely hands-off. They’re obviously keen and they’re interested and they don’t want it to go wrong, because they’re an investor and it was a significant bargain. So, yeah, they’re commercial-grade people but they’re very hands-off and patient. So we have the best of both worlds I consider. We’ve got very, very well resourced partners. But they likewise will back us I belief for the project that we want to deliver.
So far, so good I would say.
There have been a bunch of changes in the last year. RCC has changed, you’ve shut some clubhouses down. In that context, what has been the hardest thing about the change thus far?
Yeah. It’s not easy shaping the sort of changes that you’ve heard about. I imagine the interesting thing for us is that we’re 14 years in now. This has been a passage. Well for me it’s probably a 16 – or 17 -year journey, but for the company, it’s 14 times, and we’ve never really had that kind of adjustment before.
We’re not just sort of a cautious company. We’re a company that only attains large-scale bets, and innovates and tries to create sells. We’ve done that from day one. And I would say we always try and take the harder but most beautiful road. There might be a really big highway manager up the hollow at 3% but there’s that beautiful sinuous road that goes off to the left and sort of disappears over the ridge, and you think well I don’t know where it goes but that’s got to be worth doing.
And that’s how I would liken our approaching to sort of business truly. We try and do the thing that is going to make the most difference to the customer and move the market forward, and develop new markets. And that’s quite a difficult thing to do. And it’s quite a frightening thing to do.
So you don’t know what you’re going to find and every now and again you have to adjust. So that’s really what’s been happening, is over 14 years we’ve taken a whole loading of those hard but beautiful roads and we’ve accumulated a lot of stuff which is quite complex and quite challenging to manage. And we just need to focus a bit so we’re stronger to go forward again.
That’s really what’s happening. But it’s quite interesting that it’s taken 14 times to get to that point. And hopefully, it will be another 14 years before we have to do it again.
In my background experiment I heard this from a couple of different people: That Rapha feels like, and you feel like, it’s time to double down on the real hardcore cycling market. Reinvesting in endemic media, I heard that mentioned. More traditional distribution channels, I heard that mentioned.
But then likewise you’re a brand that is clearly striving to do something similar to what Lululemon has done or Patagonia has done, where they’ve kind of transcended their original niche sell and grow something much better. Creating new markets and discovering new ways to expand. How do you reconcile those things going forward?
Well, congratulations on your digging. You’re a reporter, that’s good and I think that’s a really great question because it gets to our 20 -, 30 -year vision and our two-to-three-year vision and it sort of brings those two things into a few questions, which I think is smart.
Long term, we’re not messing around here — I didn’t do this to create a nice little label that intends I can go to bike races and have a couple of pros on speeding dial and ride with my chums. That’s not why I started Rapha, and it’s not what’s driven Rapha on. What’s driven Rapha on is a fervour for the athletic and a massive frustration that the rest of the world thinks it’s rubbish. And that it’s direction smaller than it was appropriate to. It should be a huge lifestyle. It should be a acknowledged, respected, admired, wanted lifestyle because it is.
So, long-term, perfectly Rapha is about growing the overall market, constructing it a brilliant cycling lifestyle sell. That’s whether you’re hopping on a bike to go to the stores, or whether you’re hammering up Flagstaff, or you’re doing the Transcontinental, you’re getting this connection to this wonderful process that we have when we ride a bicycle. But that’s going to take quite a long time for us to achieve that. That doesn’t happen in three year or five-year plans.
And what we’ve realized, and certainly what I’ve recognise in recent years, is because we’re forever striving forward and trying to reach more and more people and break down these hindrances, we kind of have forgotten to look over our shoulder and look at what we’ve built. And look at job opportunities that is available all around us.
So I think if you think back 15 years, there wasn’t really a premium cycling sell. There were some expensive bicycles but there wasn’t really a premium cycling sell. I envision more than any other label we’ve likely driven that sell. And it’s allowed a whole loading of people “re coming” and have a good time and lots of people have done some nice things.
And some people have just done the basics. And a lot of people have benefited. And we’re so busy generating new sells that we’ve kind of taken our eye of the ball I suppose, a little bit. And we need to kind of get back and was becoming increasingly offensive. Start on offense as you guys would say, in our core marketplace, and not make it so easy for people.
And so that will involve extending our channels of distribution. It will involve proper media partnerships. A chip like we used to do. That was always part of our armory in the first few years. And we certainly are passionate about being direct to consumer and having this fantastic and pure marketing framework. But sometimes it’s a bit too pure. And it’s significant challenges to hold growing at its scale.
And sometimes I think you’ll is beneficial for just getting more out of the core market because there’s so much there to go for. And I look around at the rivalry and think that if we focused on the things that they’re trying to do, we could probably do extremely well. So I guess only being more competitive, more aggressive and gone on offense is right. Whoever gave you that belief is on the right lines.
It’s quite a challenge for a athletic to become the more popular sport in the world. We’re all going to have to work really hard. And it’s going to be easier to get there if you’ve got the strongest possible platform. And I think that means being totally successful in our core sell. And not leaving any stone unturned.
So it’s about shoring up the foundations a little bit more before we are going to be able build another story on the house.
Over the last 18 months, Rapha worked on a project it called the Roadmap. The stated aim was to identify problems with competitive cycling and seek to address them, with the objective of growing cycling as a whole. Rapha personnel chatted with everyone from Lance Armstrong to cycling reporters and members of the UCI. The resulting Roadmap hasn’t been published but does appear to have helped direct Rapha’s future.
I know that you were working on sort of a manifesto or roadmap for road cycling. I ponder where that are currently and how that fits into the scheme?
Yeah utterly. And it fits right in. It’s right at the heart of it, to be honest. As you are familiar, we started that project 18 months before or so. And interviewed lots of people like yourself and what we decided was we can’t simply publish official documents that says,’ Here’s all that’s wrong with road cycling, with professional cycling .’ Because how does that is actually help things? It might induce a little bit of a debate, but it’s not really the best application of the document.
The reason we mainly did it was to help us make decisions about what we should do next. And because we started thinking about, okay what should we do with crews going forward, and the roadmap has given us the coordinates as to how to do that. And you are familiar with our crew relation which is now being launching next week. We chose we’d wait for that to be able to be announced before we said,” And we’ve done this article of research and it’s called the Roadmap and it says these things.”
Rapha chose to delay the publishing of its Roadmap until it announced its new partnership with Jonathan Vaughters’ EF-Drapac team. That partnership was announced on Monday of this week.
You won’t be surprised at the substance of the roadmap because some of them are reflected in how we’re going to do this squad. It’s fundamentally about constructing the sport more exciting in order to be allowed to attract more followers, therefore it can be more valuable.
If you want a one-sentence definition of what needs to happen, I think that’s it.
Why did you choose EF in particular?
We’ve known them for a long, long time and had conversations through a number of years. And in many ways, it was always a likely good is suitable for us. Back when it was Slipstream we had discussions and before doing Team Sky, I know a number of people when they talked to me about,’ Oh if you had a team which crew would it be ?’ It is apparently have been that squad. Because it was … JV’s quite a forward-thinking person, it had a feeling about it, it had attribute. It was somewhat more entertaining than some teams, shall we say.
And for other reasons, we did Team Sky which we adoration and it was a brilliant suffer. But when we chose we ought to get back in and god, it’s such a aid to be going back in, I have to say. It’s so exciting to be going back in. It was around that time we were just thinking, oh shall we? And then we got the bawl from the man who owns EF saying,” Will you consider it? ”
So it was a really natural development. And we said … we were quite cautious, we said,” Hey listen we’re doing this project about the future of the athletic, and whatever sponsorship we do, it’s got to fit with the findings of that experiment, otherwise we’re idiots. We’re not just doing it for merriment and our own indulging .” And he said,” No that’s fine. What does the report say ?” And so we told him the key findings and it had to be about storytelling. And it had to consider travelling cross-platform, looking at get the races involved in other formats , not only road race. Talking about heroes and the sort of ways you might do media. And then what it mean for kit and all the merchandising.
It struck me initially because it feels like EF is almost like the anti-Sky. At one extremity of the spectrum, you have Sky. At the other point of the range, you have something like EF. So I found it interesting you chose to reached either end of the range. I’m assuming that was conscious.
Yeah, we knew what we were doing, if that’s what you mean. It is interesting though because where reference is first signed with Sky, I remember there being lots of speech about how, spiritually, Rapha and Team Sky were a million miles apart. I remember saying at the time,” Well we’re a bit more technical than you give us credit. We’ve got Pro team and we’ve got the best bib shorts and we’ve got this that and the other. And they’re a bit less robotic than perhaps you give them credit for .”
So I think we weren’t shaking from place to place. And I reckon actually EF is much more concerned with technology and concert than perhaps sometimes people give them credit for.
So I think it’s less polarizing but there’s something in “what youre saying” emphatically. And I think it merely fits with where the athletic should still be. You could have a team winning every race, but if no one’s watching or if it’s just the same people get older I just think we’re all going to lose. And we need to work with a team that can try brand-new things, innovate, try and commit and connect in another style. And we’ll probably mess up in lots of ways and we’ll take wrong turnings, but we’ve got to take that harder but more beautiful street and I envision EF can do that.
What you’re saying is crews like EF that are a little bit more … there’s more personality to them I guess is the manner in which to throw it, those teams are, in your opinions and Rapha’s view, a better path forward for the future of the athletic. Is that an accurate summation of what you’re saying?
Yeah, I think it’s all about followers, right? And not devotees like us who are completely infatuated already and are aficionados who are familiar with the difference between the Binck Bank Tour and the tour of, I don’t know, the Tour of Langkawi. Most new fans, it’s just impenetrable. And what those fans need are heroes. They perfectly necessity heroes.
So what you have to do, I envision, is let those heroes reflect and develop personality and be themselves and have character and behave in a way that’s true to that persona. And that is anathema to a machine and it’s probably anathema to a kind of a marginal-gains approach. It’s more risky.
Part of EF’s plan for the 2019 season includes transmitting equestrians to gravel races, specified crits, and other events that fall well outside the usual WorldTour calendar. It’s hiring equestrians specifically for that intent. The conception is quite simple: The path many amateurs go is sliding farther and farther from traditional European street race, and thus a professional squad should change to reflect that. As Simon points out 😛 TAGEND
You know, what we’re doing as equestrians, what most of our customers and the course we ride today, it’s massively inspired by racing but actually journeying and racing are getting ever further apart. So what I don’t think is very exciting is having a squad of highly sharpened athletes who are brilliant at hour tests or road races being ever more … disappearing into the eye of a needle when clients are moving off-road or doing gravel bicycle journeying or mixing it up and trying endurance.
They’re doing all sorts of different things. And I belief the pro equestrians, for them to still be this aspirational hero,[ have] to sort of step towards what everyone else is and not be quite so technical and narrow in their outlook.
Changes to the RCC membership program and closes of popular Clubhouses have set off debate within the RCC community. For the last 14 years, Rapha’s expansion has felt unstoppable; suddenly, we are seeing contractions. Mottram insists these are right-sizing efforts.
I want to change the subject before we let you go. It’s the Clubhouse thing. “Thats one” of the most visible changes from Rapha in the last year and a half. It’s something your members have emphatically noticed. There’s a quote in The Guardian from I think about a year ago where you said the cash injection from RZC would be spent on world expansion a blueprint for 100 new storages around the world.
We’ve seen the opposite; we’ve seen a contraction of RCC clubhouses. Sydney closed down, some others. I’m wondering what happened from a business perspective in the last 12 months that made that change? It seems to be a contradiction between what you said back then and what has happened the last couple of months.
I think to coin an age-old word, there’s a danger of overdoing the short term and underestimating the long term. I think if you look back a year, in the last 12 months we opened eight brand-new clubhouses. In 2017, we opened eight brand-new clubhouses and we’ve got 21 clubhouses around the world, this is why we squander a huge amount of money in the last 12 months, opening clubhouses. And you’re right, in the last six weeks we’ve announced the closure of Sydney which is happening in the next few weeks.
This isn’t some kind of strange dramatic change. We’ve seen a steady increase in the amount of clubhouses we have and the modeling which is the distribution channel framework of owning physical retail and digital at the core and then this highly active community the RCC — that’s absolutely our strategy going forward.
So yeah, we have 21 of them now. In the future I would love to have 100, but we can’t only leap to having 100 clubhouses because that they are able to cost you about 100 billion dollars. And unless you’re really sure that they’re going to do well, that’s a massive probability, and it’s a huge gamble. And our stockholders may have the funds but they’re going to stimulate the right calls, and we’re going to attain the right calls on when to do that and how to do that.
So having 21, which we developed over the last five or so years, is pretty rapid given they’re all over the world. We’re learning all the time. We’re learning how to draw them together with the digital experience and the RCC but we’re likewise conscious that they can’t merely be loss-making.
And some of them make a lot of money, some of them make a little bit of money, and some of them don’t make money. And the ones that don’t make money likely can’t last forever. Because we do plenty of other marketing like EF and all sorts of product marketing and media partnerships and what have you. So we can’t induce everything we do a marketing expense.
The closure of the Sydney Clubhouse has set off comprehensible consternation among our own member. More broadly, it was seen as the first indication that the RCC model is being evaluated more carefully now.
And very specific issues with Sydney. I don’t know if you’ve been to that clubhouse, it’s one of my favourites, so it was a very difficult decision to close it but it’s never made a profit. It’s a difficult site in an interesting part of township, which we love journeying from but it doesn’t get that much foot traffic. And the website itself has got two floors with clothes upstairs and a cafe downstairs. And it never could drive enough. Because it’s a balance between community involvement and actually paying the invoices, and it never genuinely paid the bills.
So when the lease came to an end, which is now being November, it just made appreciation for us to get out of that loss-making area, and we’re rethinking. So how do we do Sydney? Do we do it through wholesale? Do we do some pop-ups?
We will still have ambassadors and we’ll still have some of our people on the floor. And we’ll there has journey leaders from the association. And there’s lots of association members. So we just need to think of the next best behavior to do it. Maybe it’s out of a permanent clubhouse; maybe it’s not. But we still have 21 of them and they are absolutely central to our future.
So I believe these things can be cyclones in a teacup if you look at them the same way.
The membership model itself, are you rethinking that? There have been some changes to the membership advantages that you provide. It did seem to be very much are stationed in physical spots. And as you say it’s very expensive to get to 100 physical locations. Are you rethinking the mode you approach that at the moment?
Yeah, all the time. To be honest, we’ve been thinking about it … you are not able to recollect but the first golf-club we did was with the Rapha Condor team about 10 years ago or nine years ago. It was 1,500 pounds to join. Then it went to 40 pounds, then it went back up to 150. Then we did the RCC. So as I say, if you’re an innovator, if you’re trying to create markets and do things differently, you have to try stuff and keep see, and keep adapting and changing to make it work.
And we’re tremendously proud. I’m personally more proud of the RCC than anything else we’ve done. It’s 14,000 members around the world and it’s an incredible thing. No one else has done anything like this. Most people would do an online chat group with a bit of merch.
We’re ambitious about it but[ it’s] global and it’s very high participate. So you have to really be careful about how you build it and you have to learn and adapt. So passing everyone Mondial magazine didn’t actually make sense when our surveys told us the vast majority of people weren’t interested in it, for example. And having a physical clubhouse coordinator in every metropoli in countries around the world, would mean we probably employ more people than the British legion, which we can’t afford to do that either.
The original hypothesi for Rapha was physical place right?
Yeah. That’s right, yeah. We started with a one-man depict, Kings of Pain. And it’s Rapha.cc, it’s Rapha cycling club, it ever has been. There’s a straight line through all we’ve done. And as we said a while ago, the simulate is the correct simulation, I’m convinced it’s the right way to be. Mainly direct to consumer, building relationships. Being passionate about the athletic. Being an active brand not just being a label that flogs stuff. And that comes at a lot of cost and our job is to make sure we don’t invest too much so we don’t go bust.
Welcome to my world.
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