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Rapha to scale back discounting as sales fall and losses mount upRapha founder Simon Mottram.jpg

Rapha to scale back discounting as sales fall and losses mount up

"We'd taken our eye off the ball" admits founder Simon Mottram...
by Simon_MacMichael
Sun, Oct 27, 2019 13:45
42

Rapha is to scale back on discounting as the upmarket cycle clothing business looks to get back on track following its acquisition in a £200 million deal in August 2017 by Steuart and Tom Walton, heirs to the Walmart grocery fortune.

Founder and CEO Simon Mottram revealed the change of strategy in an interview with the Sunday Telegraph, ahead of Rapha filing its first accounts since the takeover with Companies House.

While the newspaper did not publish precise figures for the year to January 2019, it did report that in previous 18 months, sales had dropped and pre-tax-losses totalled £50 million.

> Rapha records £20m loss in six months after being bought by Walmart heirs

Mottram admitted to the newspaper that at the point of the takeover, the company was suffering from its growing focus on discounting as well as expansion into new categories.

“We’d taken our eye off the ball,” he said, adding that Rapha had become “incredibly complex,” in the decade and a half since it was founded.

“We developed into so many product categories. It was fuelled by ever-increasing product ranges and product purchases, with discounts to clear the products.

“There’s a point at which the discounts at the end of the season become mid-season discounts and early-season discounts. And then Black Friday and it ends up being far too much of your business.

“We realised after Tom and Steuart bought the business that we’d been doing too much of this,” he admitted, explaining that the Waltons injected £30 million into Rapha after their takeover to help it avoid defaulting on a £20 million bank loan.

Since then, Rapha has undergone what Mottram termed “18 months of pretty interesting challenges in the business” including making a number of staff and management redundant, reducing international operations and closing the company’s cycling holiday arm.

He said the company is now headed in the right direction, and expects it to break even during the current financial year and to repay £10 million in bank loans.

A large part of the turnaround is attributed to retreating from the discounting culture that the company had come to rely on to drive sales at the expense of profits – something businesses across the retail landscape have experienced to their cost, and hits businesses with a luxury positioning particularly hard.

Mottram explained that scaling back the discount offer, which had grown to account for a third of sales, would not take place overnight to avoid losing customers, but added: “It’s about having proper quality sales at the right margin.”

Rapha
Simon Mottram
Simon MacMichael

Simon joined road.cc as news editor in 2009 and is now the site’s community editor, acting as a link between the team producing the content and our readers. A law and languages graduate, published translator and former retail analyst, he has reported on issues as diverse as cycling-related court cases, anti-doping investigations, the latest developments in the bike industry and the sport’s biggest races. Now back in London full-time after 15 years living in Oxford and Cambridge, he loves cycling along the Thames but misses having his former riding buddy, Elodie the miniature schnauzer, in the basket in front of him.

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42 comments

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jollygoodvelo replied to Rick_Rude | 5 years ago
0 likes

Rick_Rude wrote:

Premium products that actually last are problematic. If Rapha was good enough to last a long time then why would anyone keep buying it. The price excludes a degree of expansion as general Joe can't afford it and how many pairs of bib shorts or jerseys and jackets do you need? Even the well-heeled aren't going to keep buying endless variations on a theme.

This is it for me.  As a leisure rider rather than a commuter, if I'm honest I only actually need about three jerseys - thin, thicker, long sleeved - plus a gilet, a jacket and probably two pairs of bibs.  I've got more than twice that much stuff already, because why not, right? 

To be honest, I could afford Rapha prices if I wanted to, because each of those things is going to last me several years (my gilet is by Vulpine and still looks brand new) and it evens out.  But why would I, when it all looks the same and other brands do it at least as good for less and without the stigma?

Avatar
Doug.F. | 5 years ago
3 likes

Too expensive.

Avatar
Freddy56 | 5 years ago
2 likes

R ich

A rseholes

P aying

H yped

A dvertising

Avatar
srchar replied to Freddy56 | 5 years ago
9 likes

Freddy56 wrote:

R ich

A rseholes

P aying

H yped

A dvertising

Rapha

Annoys

Parsimonious

Humdrum

Antagonists

Avatar
MTB Refugee | 5 years ago
5 likes

In my opinion Rapha kit is just too expensive for what you get. It doesn't seem to be any better than Gore Bike Wear which is considerably cheaper and always served me really well.

Avatar
WDG | 5 years ago
3 likes

Ironic how the struggles started around the same time as the Sky deal finished.  The discounting is a dangerous game as you get to the point where there's no point paying full price, you just wait for the next sale, but discounting per se is not a bad thing - you just need to manage your brand when you do it if you are 'premium'.  I don't think Rapha ever grasped this - seeing their clothing on Sportpursuit was an alarm bell ringing for me .  I think the range is too complicated and too expensive, the colour choices for garments are extremely hit and miss and that other manufacturers are doing things better.  That said I still have a soft spot for them and hope they can turn it round.

Avatar
CyclingInBeastMode replied to WDG | 5 years ago
0 likes

WDG wrote:

Ironic how the struggles started around the same time as the Sky deal finished.  The discounting is a dangerous game as you get to the point where there's no point paying full price, you just wait for the next sale, but discounting per se is not a bad thing - you just need to manage your brand when you do it if you are 'premium'.  I don't think Rapha ever grasped this - seeing their clothing on Sportpursuit was an alarm bell ringing for me .  I think the range is too complicated and too expensive, the colour choices for garments are extremely hit and miss and that other manufacturers are doing things better.  That said I still have a soft spot for them and hope they can turn it round.

Definitely, in some sporting events fans end up thinking we'll wait until last minute to buy because there's always a surplus (which shows that availability/production could be badly overestinated) and there's no incentive buying up front because tickets will get discounted or in some instances you get an upgraded seat for same cost of original.

In most industries especially areas where there is a saturation of products at all price levels from multiple organisations this gives buyers a huge choice, lesser known brands up-market their looky/likey products and/or features that match/similar to other higher end brands. So for the vast majority of people whether it be a person who cycles, fishes or buys groceries, can look for less expensive brands/products that offer same/similar quality even if that might not be the reality in some cases. people also adjust to the quality they have.

Also when a premium product lets you down and you've spent a huge chunk of money that can be a disaster for premium brands in what are very tight markets. Just read some of the comments on the Continental 5000 thread, people saying they didn't buy Conti at all for 10 years because of a failure. There's so much pressure on the company to make sure their product meets what it says on the tin AND the customers expectations plus backing up when things do go wrong.

When you no longer offer a niche product and others offer same/very similar for a little bit less at rrp + others upping their product quality for significantly less you're left with brand image, and on the cycling industry (amongst many, many others) that's not enough anymore to keep you in the black.

Avatar
srchar | 5 years ago
2 likes

I think it's over for Rapha. I've got loads of their kit from back when their product range was easy to understand. I go in the shop now, or on the website, and have no idea what the difference is between their gazillion types of jerseys and shorts. Other brands offer the same or better quality for just a bit less money too.

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Kapelmuur | 5 years ago
0 likes

I wondered how they could sustain giving stuff for free, for example free fizz at the Eroica Britannia and talks at their clubhouse with a free drink included.

 

I benefited from these freebies but only once bought a piece of Rapha kit, a (discounted) jersey that was a disappointment so I never bought another.

Avatar
Russell Orgazoid replied to Kapelmuur | 5 years ago
2 likes

 

 

I benefited from these freebies but only once bought a piece of Rapha kit, a (discounted) jersey that was a disappointment so I never bought another.

[/quote]

I agree as I felt the same about the one item i have. Mediocre but expensive. You need to be a mug to put up with that.

DHB stuff tends to over-deliver based on expectations; Rapha is the reverse. Ergo DHB gets my hard-earned.

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hobbeldehoy | 5 years ago
2 likes

I knew this would happen. Working class sentiment still dominates the sport despite the yuppy insurgency.

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caw35ride replied to hobbeldehoy | 5 years ago
0 likes

hobbeldehoy wrote:

Working class sentiment still dominates the sport...

Does anybody really believe that?

Freddy56 wrote:

R ich

A rseholes

P aying

H yped

A dvertising

Ah. Indeed.

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