Luxury cycling company Rapha is on fast track to success

The British outfit is changing gears as it targets global expansion

Spotting a new social trend is often a way for smaller businesses to take
advantage of a new, niche market.

Rapha, the luxury cycling clothing company, has certainly done that making
its name providing jerseys for everyone from Tour de France winner Sir
Bradley Wiggins to the fashion-conscious hipsters of San Francisco and the
Mamils (that’s Middle-aged Men In Lycra) of Middle England.

Its growth has been rapid and now it is looking to digital and physical
expansion and a successful move up to the next stage of development.

First (Other OTC: FSTCnews) , there will be a new e-commerce platform built by Hybris. If all goes to
plan, customers won’t notice an obvious difference but Rapha, which saw its
revenue increase 56pc last year to £28m, has hinted at its ambition by
investing in a framework that is capable of processing about £200m of online
orders per year.

Second, the business will move from its 14,000 sq ft four-floor headquarters
in Kentish Town, north London, to a 19,000 sq ft space in the hive of
regeneration just north of King’s Cross station.

Third, and perhaps most significantly, it will open four new “cycle clubs”,
this year in Amsterdam, Manchester, Tokyo and Los Angeles, adding to
existing locations in London, New York (Frankfurt: HX6.Fnews) , Sydney, San Francisco and Osaka.

Cycle clubs are retail units that also include coffee shops and that can
double up as event spaces (for watching live coverage of the Tour de France,
among other things).

“It’s completely different,” says the founder and chief executive of Rapha,
Simon Mottram. His original business launched online with no physical retail
space 10 years ago. Rapha then opened its first permanent cycle club (in San
Francisco) in 2011.

“There are two real reasons it makes sense for us,” says Mottram, 47. He is
wearing cycling shoes when we meet in his office and, on Wednesdays, gives
all of the 90 staff at the headquarters the morning off to go for a ride.

“First, we are a niche business with a niche audience, and that audience is
all over the world. We need to be where our customers are and they’re just
as likely to be in San Francisco as they are to be in Huddersfield.

“In fact, they’re more likely to be in San Francisco, let’s be honest,” he
says. “Also, because we’re a premium brand, there’s something so awful about over-exposure.
So that stops me from [opening more shops] in London. We could easily have
four or five in London, they’d probably do very well.

“It’s easier, there’s less risk, but in a few years’ time the brand would be
massively over-exposed and we would have a different problem.”

Mottram’s background as a branding and design consultant who has worked with
companies such as Aston Martin, Burberry and Chanel, is clear in Rapha’s
distinctive aesthetic and the attention to detail in everything from its
website to the products that it sells.

As well as high-end racing kit, customers can buy specially designed clothing
for city riding and more esoteric items, such as gloves that incorporate the
same padding as those worn by army snipers, skincare products (cream to stop
saddle sores) scented with lavender from Mont Ventoux in Provence and a
branded £1,500 coffee machine. Even the more prosaic products carry
significant price tags a Jersey is £150. Cheap it ain’t.

Mottram acknowledges that there was a feeling in some quarters that although
Rapha’s wares were out of the ordinary, it was more to do with their price
than their quality. However, he says, when the company usurped adidas to
take over as the supplier of Team Sky’s kit in 2012 it “changed that
perception for a lot of people”.

Sir Dave Brailsford, the team principal who has overseen two consecutive Tour
de France victories as well as Team GB’s Olympic (BSE: OLPCL.BOnews) cycling success, has to be
constantly convinced of the quality of Rapha products, he says. “There’s no
resting on your laurels. That’s the Team Sky way; to look for faults, look
for problems, correct them and keep moving on. It is quite relentless, and
good for us.”

As a way of setting out his vision, Mottram has occasionally written newspaper
and magazine articles about Rapha that are set in the future. The most
recent one, written three or four years ago, he says, talked about “Rapha
customers meeting at Rapha cafés, going for rides together, maybe going on
holidays and consuming Rapha content”.

And that is exactly what has happened. As well as publishing a steady stream
of videos and blogs on its website, the company has started to offer holiday
packages that give amateurs the chance to ride historic stages of famous
races, such as the Giro d’Italia.

Mottram says that for the next few years the company will focus on opening
more cycle clubs about five per year and building the communities around
them. Places such as Hong Kong, Melbourne, Denver and Paris have been
pencilled in for next year, and Jakarta, Taipei, Shanghai and Seoul have all
been slated for 2016.

The UK currently accounts for 26pc of Rapha’s sales, but Mottram expects that
proportion to shrink over time. Part of the company’s wider purpose, he
says, is to see cycling grow as a sport and a “lifestyle” around the world
and to continue the process that has seen its popularity boom both in the UK
and abroad.

“We want to bring it all together into an amazing, unique blend,” says
Mottram. “Honestly, I see no company doing quite what we’re doing, which is
going direct to a consumer, but with such a strong brand at the heart of it.

“We’re not just a retailer; [the company is] totally
international, super-niche, multi-channel, but all owned and with a customer
base that is almost like a club. That’s a very interesting business.”

“But,” Mottram adds, almost warning himself not to get carried away, “it helps
that we do cool stuff and have this amazing engine of products that people
want to buy. If you don’t get that right, then the whole thing is built on
sand.”