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 consumers, these changes have been most obvious within Rapha’s membership program, Rapha Cycle Club (RCC), which is built on the back of physical retail locations it calls clubhouses. The rapid growth in RCC Clubhouses, of which there are now 21 globally, has slowed. Clubhouses are closing, including Sydney. Others are decreasing hours, like Melbourne and Boulder.
Benefits of RCC membership have changed. Rapha shut down Mondial, the magazine it sent to members, quietly stopped providing free shipping from Clubhouses, and cut back on its travel business. The company also recently executed layoffs, consolidating staff in London. Much of its North American and Australian staff are now gone. 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 coincide. 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 notes 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 is available to our VeloClub members, who also submitted questions for 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 new relationship, 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 plan, they bought into the strategy. And they’re bike riders so they share our vision. 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 right support without the horrible 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 word. They’ve been supportive and interested. Not pushy. Pretty patient. Very 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 deal. So, yeah, they’re commercial people but they’re very hands-off and patient. So we have the best of both worlds I think. We’ve got very, very well resourced partners. But they also will back us I think for the plan 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 making the sort of changes that you’ve heard about. I think the interesting thing for us is that we’re 14 years in now. This has been a journey. Well for me it’s probably a 16- or 17-year journey, but for the company, it’s 14 years, 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 just makes big bets, and innovates and tries to create markets. We’ve done that from day one. And I would say we always try and take the harder but more beautiful road. There might be a really big highway heading up the valley 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 approach to sort of business really. We try and do the thing that is going to make the most difference to the customer and move the market forward, and create new markets. And that’s quite a difficult thing to do. And it’s quite a scary 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 load of those hard but beautiful roads and we’ve accumulated quite a lot of stuff which is quite complex and quite challenging to manage. And we just need to focus a little 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 years to get to that point. And hopefully, it will be another 14 years before we have to do it again.
In my background research 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 also 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 market and become something much larger. Creating new markets and finding new ways to expand. How do you reconcile those things going forward?
Well, congratulations on your digging. You’re a journalist, 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 one question, which I think is smart.
Long term, we’re not messing around here — I didn’t do this to create a nice little brand that means I can go to bike races and have a couple of pros on speed dial and ride with my buddies. That’s not why I started Rapha, and it’s not what’s driven Rapha on. What’s driven Rapha on is a passion for the sport and a massive frustration that the rest of the world thinks it’s rubbish. And that it’s way smaller than it should be. It should be a huge lifestyle. It should be a recognized, respected, admired, desired lifestyle because it is.
So, long-term, absolutely Rapha is about growing the overall market, making it a brilliant cycling lifestyle market. That’s whether you’re jumping on a bike to go to the shops, 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 bike. 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 realized in recent years, is because we’re constantly striving forward and trying to reach more and more people and break down these barriers, we kind of have forgotten to look over our shoulder and look at what we’ve built. And look at the opportunity that exists all around us.
So I think if you think back 15 years, there wasn’t really a premium cycling market. There were some expensive bikes but there wasn’t really a premium cycling market. I think more than any other brand we’ve probably driven that market. And it’s allowed a whole load of people to come in 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 creating new markets that we’ve kind of taken our eye of the ball I think, a little bit. And we need to sort of get back and be more offensive. Go on offense as you guys would say, in our core market, and not make it so easy for people.
And so that will involve broadening our channels of distribution. It will involve proper media partnerships. A bit like we used to do. That was always part of our armory in the first few years. And we absolutely are passionate about being direct to consumer and having this fantastic and pure marketing model. But sometimes it’s a bit too pure. And it’s a challenge to keep growing at its scale.
And sometimes I think you’ll benefit from just getting more out of the core market because there’s so much there to go for. And I look around at the competition and think that if we focused on the things that they’re trying to do, we could probably do extremely well. So I think just being more competitive, more aggressive and going on offense is right. Whoever gave you that thought is on the right lines.
It’s quite a challenge for a sport to become the most 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 utterly successful in our core market. And not leaving any stone unturned.
So it’s about shoring up the foundations a bit more before we can build another story on the house.
Over the last 18 months, Rapha worked on a project it called the Roadmap. The stated goal was to identify problems with competitive cycling and seek to address them, with the goal of growing cycling as a whole. Rapha staff 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 wonder where that is now and how that fits into the plan?
Yeah absolutely. And it fits right in. It’s right at the heart of it, to be honest. As you know, we started that project 18 months ago or so. And interviewed lots of people like yourself and what we decided was we can’t just publish a document that says, ‘Here’s all that’s wrong with road cycling, with professional cycling.’ Because how does that really help things? It might cause a bit of a debate, but it’s not really the best use 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 teams going forward, and the roadmap has given us the coordinates as to how to do that. And you know about our team relationship which is launching next week. We decided we’d wait for that to be able to be announced before we said, “And we’ve done this piece 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 contents of the roadmap because some of them are reflected in how we’re going to do this team. It’s fundamentally about making the sport more exciting so it can attract more fans, 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 fit for us. Back when it was Slipstream we had conversations and before doing Team Sky, I know a number of people when they talked to me about, ‘Oh if you had a team which team would it be?’ It would probably have been that team. Because it was … JV’s quite a forward-thinking guy, it had a spirit about it, it had character. It was somewhat more entertaining than some teams, shall we say.
And for other reasons, we did Team Sky which we loved and it was a brilliant experience. But when we decided we ought to get back in and god, it’s such a relief 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 call 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 sport, and whatever sponsorship we do, it’s got to fit with the findings of that research, otherwise we’re idiots. We’re not just doing it for fun and our own indulgence.” 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 going cross-platform, looking at getting the races involved in other formats, not just road racing. Talking about heroes and the sort of ways you might do media. And then what it means for kit and all the merchandising.
It struck me initially because it feels like EF is almost like the anti-Sky. At one end of the spectrum, you have Sky. At the other end of the spectrum, you have something like EF. So I found it interesting you chose to hit either end of the spectrum. I’m assuming that was conscious.
Yeah, we knew what we were doing, if that’s what you mean. It is interesting though because when we first signed with Sky, I remember there being lots of conversation 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 swinging from place to place. And I think actually EF is much more concerned with technology and performance than perhaps sometimes people give them credit for.
So I think it’s less polarizing but there’s something in what you say definitely. And I think it just fits with where the sport needs to be. You could have a team winning every race, but if no one’s watching or if it’s just the same people getting older I just think we’re all going to lose. And we need to work with a team that can try new things, innovate, try and engage and connect in a different way. 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 road and I think EF can do that.
What you’re saying is teams like EF that are a little bit more … there’s more personality to them I guess is the way to put it, those teams are, in your view and Rapha’s view, a better path forward for the future of the sport. Is that an accurate summation of what you’re saying?
Yeah, I think it’s all about fans, right? And not fans like us who are completely infatuated already and are aficionados who understand 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 absolutely need heroes.
So what you have to do, I think, is let those heroes shine and develop personality and be themselves and have character and behave in a way that’s true to that character. And that is anathema to a machine and it’s probably anathema to a sort of a marginal-gains approach. It’s more risky.
Part of EF’s plan for the 2019 season includes sending riders to gravel races, fixed crits, and other events that fall well outside the usual WorldTour calendar. It’s hiring riders specifically for that purpose. The concept is quite simple: The way many amateurs ride is sliding farther and farther from traditional European road racing, and thus a professional team should change to reflect that. As Simon points out:
You know, what we’re doing as riders, what most of our customers and the way we ride today, it’s massively inspired by racing but actually riding and racing are getting further and further apart. So what I don’t think is very exciting is having a squad of highly honed athletes who are brilliant at time trials or road races being ever more … disappearing into the eye of a needle when customers are going off-road or doing gravel bike riding or mixing it up and trying endurance.
They’re doing all sorts of different things. And I think the pro riders, 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 closures 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. This is one of the most visible changes from Rapha in the last year and a half. It’s something your members have definitely 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 global expansion plans for 100 new stores 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 caused 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 old phrase, there’s a danger of exaggerating the short term and underestimating the long term. I think if you look back a year, in the last 12 months we opened eight new clubhouses. In 2017, we opened eight new clubhouses and we’ve got 21 clubhouses around the world, so we spent 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 weird dramatic change. We’ve seen a steady increase in the amount of clubhouses we have and the model which is the distribution channel model 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 just leap to having 100 clubhouses because that would cost you about 100 million dollars. And unless you’re really sure that they’re going to do well, that’s a massive risk, and it’s a huge bet. And our shareholders may have the funds but they’re going to make the right calls, and we’re going to make 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 pull them together with the digital experience and the RCC but we’re also conscious that they can’t just 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 probably 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 make everything we do a marketing expense.
The closure of the Sydney Clubhouse has set off understandable consternation among its members. 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 favorites, 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 town, which we love riding from but it doesn’t get that much foot traffic. And the site itself has got two floors with clothes upstairs and a café downstairs. And it never could drive enough. Because it’s a balance between community engagement and actually paying the bills, and it never really paid the bills.
So when the lease came to an end, which is November, it just made sense for us to get out of that loss-making site, 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 ground. And we’ll still have ride leaders from the club. And there’s lots of club members. So we just need to think of the next best way 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 think these things can be storms 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 benefits that you provide. It did seem to be very much based in physical locations. And as you say it’s very expensive to get to 100 physical locations. Are you rethinking the way you approach that at the moment?
Yeah, all the time. To be honest, we’ve been thinking about it … you may not remember but the first 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 learning, and keep adapting and changing to make it work.
And we’re hugely 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 involvement. So you have to really be careful about how you build it and you have to learn and adapt. So giving 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 city in the world, would mean we probably employ more people than the British army, which we can’t afford to do that either.
The original concept for Rapha was physical location right?
Yeah. That’s right, yeah. We started with a one-man show, Kings of Pain. And it’s Rapha.cc, it’s Rapha cycling club, it always has been. There’s a straight line through all we’ve done. And as we said a while ago, the model is the right model, I’m convinced it’s the right way to be. Primarily direct to consumer, building relationships. Being passionate about the sport. Being an active brand not just being a brand that flogs stuff. And that comes at quite a lot of cost and our job is to make sure we don’t spend too much so we don’t go bust.
Welcome to my world.