Rapha: All downhill from here?
Questioning the closure of Rapha’s Sydney clubhouse
Here’s the thing about the photo above. It represents in real-time, how a boards-eye view of a company can irreversibly damage a customer’s view of a company.
The Rapha Origin Story
Let’s step back to 2004, when Simon Mottram founded Rapha Racing. As the Independent reports, the company’s name is derived from the St Raphael cycling team of the 1960s, which included stars such as Jacques Anquetil and Britain’s Tom Simpson. Its feeder team — the reserve squad, if you like — was called Rapha.
Mottram founded Rapha in 2004. He’s a brand guy. Formerly a director at Interbrand, he understands the power of brands. Rapha’s mission statement is a strong foundation for the brand:
Mottram speaks in 2011 about being a customer driven company.
You understand the customer, because you are the customer. And as soon as you have deep customer insight, it really gives you a massive headstart. It liberates you to build around something very real rather than just research and a perceived sort of market plan.
What we wanted to create was a brand for a certain type of person that was absolutely for that person. So it was everything to some people and nothing to some people. I didn’t want to be something to everyone. I’ve spent so much time with clients trying to explain to them that you can’t sit on the fence — you want your brand to have a bit of side to it, a bit of tension.
And for most of the time Rapha has been around — they have been exceedingly focused on their customers.
You know you’ve made it when you’ve got haters making spoof websites poking fun of the brand — Rapha became known as a brand who knew who it was and didn’t make any apologies for it. Rapha took the 1980s middle age man in lycra (MAMILs, we call them) — and made cycling downright sexy. The brand became known for its high performance fabrics and tradition of excellence in British tailoring. In 2012, Rapha began outfitting Team Sky.
Part of Mottram’s strategy was to make the brand’s content the advertising – I.e. an advertising budget of zero. The brand launched in 2004 with a photo exhibition called Kings Of Pain, a celebration of ex duris gloria or “glory through suffering,” Rapha’s motto.
Chapter 2: Subtle Shifts
But in 2017, two interesting things happened. First, Rapha began expanding, rapidly — into places like Boulder, CO, and Mallorca, a stunning location — but a location for a holiday. Second, Rapha began to go on sale, a lot. Perpetually. It had become somewhat of a joke amongst my cycling friends that it was foolish to buy Rapha full price — because you only had to wait two weeks until the item you wanted would go on sale.
But all of those sales did what they were supposed to — they made the books look good. The company recorded sales of £63m last year, a 30% increase on the previous year. In retrospect, the rapid expansion and the perpetual sales look like attempts to increase cashflow — mostly likely during the time the Walton brothers were doing due diligence on Rapha.
Chapter 3: Business as usual?
What happened, in reality though, is that Rapha trained people not to buy kit at full price — which meant that when they stopped the sales, the revenue slowed down. That’s a problem when you’ve opened up new shops in odd places.
In August 2017, Rapha sold majority share to RZC Investments, a private equity firm run by Walmart heirs Tom and Steuart Walton, valuing the business at $225 million. Mottram’s statement on the day of the sale is a PR-sanitize promise to stick to business as usual — but with more cash:
“This is an exciting day for Rapha. The arrival of RZC Investments as a shareholder means we can pursue our mission to elevate cycling as a global sport and recruit more participants by engaging them and enabling them to ride with us at all levels.”
Mottram said the cash injection from RZC would be spent on its global expansion, with plans for 100 stores or “clubhouses” around the world.
But. There’s always a but.
If the initial press releases were to be believed, it meant that it would be business as usual. But the Walton boys are “trying to do for mountain biking what the family biz has done for retailing. Change everything.”
And change everything, they have.
Chapter 4: For lease
Cut to September 2018.
From what I understand, a decision was handed down from Rapha HQ to close the Sydney store, in addition to the Spitafields, Seattle, and Chicago. Full-time marketing staff on the ground in Australia (and I assume in the other cities) were let go. Why?
In short, at least in Sydney, the clubhouse was up for lease.
This makes it an easy target for cost-cutting measures. Less profitable stores who have signed multi million dollar leases for 5 and 10 year terms will remain open, while Sydney, rumoured to be one of the most profitable stores and with the largest member chapter in the world, will close. The Sydney clubhouse is one of the most profitable stores in the network.
Call it a business decision. I call it a fundamental identity crisis — and a chink in the armour of one of the world’s most progressive, customer and community centric brands.
Unfortunately, I think it’s also a testament to an obsession with shareholder primacy, a tenet in corporate governance that holds that shareholder interests should come as priority numero uno compared to all other corporate stakeholders — this gives shareholders power to intercede directly and frequently into corporate decision-making.
Chapter 5: The slow death of a great brand
While the Walmart heirs bought a brand, and an attractive brand mission (make cycling the most popular sport in the world) which would (and should) trigger dollar signs in the eyes of its board members — in their attempts to make cycling the most popular sport in the world, they seem intent on doing so at the risk of alienating their most loyal customers.
Actions speak louder than words. Closing Rapha Sydney sends a clear signal to Sydney’s cycling community — and most importantly, Rapha’s customers and RCC members — that they are no longer a priority.
The way that the clubhouse shut down has been communicated — or not communicated, to be accurate — is the perfect analogy for the way priorities shift from long term thinking to short term thinking when companies are acquired. To date, members have still not been communicated to as to when or why Rapha will close, short of the message on their bulletin board. In a cruel twist of fate, it’s not Rapha’s management that’s been tasked with communicating this to members — Rapha Sydney’s beautiful staff have been left to communicate this to (understandably) irate members. Members have already requested refunds on our RCC memberships — a membership which doesn’t make sense to hold if no clubhouse exists in Sydney.
Why is this so upsetting?
Rapha clubhouses are the church for cyclists, where we come to worship at the alter of suffering on the bike, share coffee, swap tales, start and end rides, and make friends. Emotion aside, it is a strategy that works. The hardcore Raphia, as some call them, market the kit themselves.
But enough of that. When Rapha shutters its doors, what’s left behind?
Chapter 6: …but a new chapter for Sydney RCC
Sydney’s cycling community is among one of the tightest and most vibrant communities I’ve experienced. That doesn’t show up on a balance sheet — but it shows up where it counts in the long-term — in people’s hearts and minds. When British cyclist Mike Hall was tragically killed during the 2017 India Pacific wheel race, Crown street was flooded with cyclists who rode out on a memorial ride to the Sydney Opera House, the finish line of the Indy Pac.
Rapha’s Women’s 100 training rides gathered women from all over Sydney and introduced many of them to road cycling for the first time. As a female cyclist in Sydney, I can say hands down that it is one of the best places to find like-minded ladies (and supportive gents) to ride with. My first experience cycling more than 80kms was with the Rapha women’s 100: that experience gave me the confidence to get out on the roads regularly. I count myself incredibly lucky to have made many good friends through the Rapha Cycling Club, Rapha’s club membership.
The thing is, money can buy kit, and money can buy companies, but money can’t buy some things. Money can’t buy friendships. Money can’t buy a community of support. Rapha built a community — but when you’ve built as tight a community as Sydney’s, it needs to be handled with care. Communities take on a life of its own.
As a cyclist, I’m devastated to see a place I’ve loved and visited for years now close one of its most vibrant clubhouses. As a brand strategist, I’m gutted to see what was one of the world’s leading brands in cultivating a community, take a massive step away from supporting their community. But I’m excited to see what the community that’s been built in Sydney does next. The truth is that this is a business decision that very clearly reflects the priorities of the business owners: and that priority is no longer cyclists. It’s shareholders.
Just as Rapha has their priorities, I have mine — and my loyalty lies with the Sydney cycling community, not a brand. Rapha was a good ride while it lasted. It’s time to look to new horizons.