I liked this, and I spend a lot of time thinking about Rapha. I often think a large part of Rapha's downfall was that it moved away from its core market. Simon Mottram is a branding genius and a cycling geek. He built Rapha for people like himself. Since he sold the business, Rapha seems to be lost. They now have a limited foothold in the road conversation (especially with the new generation), and they're going after a new (smaller) market in off-road. I can't help but think the big off-road push in the US is just as much to appease its owners, as it is sensical.
That's a very good point, this could be because pressure from the Walton family. I would be interest to know the structure of their investment firm, RZC investments. I'm 80% positive it is only the Walton family's money being invested, but if their are other limited partners investing their wealth into the fund, that would certainly make the case that this is an actual strategic investment rather than a passion play.
We'll have to see how it plays out, but I think the success of this strategy really depends on the success of the Olympics bringing more Americans to cycling.
Good article. My view is that their biggest issue is the product they are selling. Nothing has changed in their designs, same stripe, same colours for the most part. I don’t want a kit from 10+ years ago.
Smaller companies have fresh designs that just look better.
Do they need core, brevet, race team, etc. I think their product lines could be streamlined and simplified.
Another issue is the regular 40% off sales. Who buys their kit at full price?
Quality also seems to be slipping.
I may sound negative. I am not, more sad than anything. I do want a want them to succeed but in my view it needs to start with a product that people want to buy, not the same product that Simon came up with in 2004/5
Inventory is definitely an issue facing Rapha. In my Pas Normal article where I compared their financial performance vs Rapha, inventory overhang was a major issue for Rapha. You're right, it's definitely a business decision that needs to be made: continue trying to get rid of the excess with 40% off sales or cut losses and start fresh.
I think their top-end performance kits are actually great quality, but everything below that is quite a drop off. As for branding, I think they are doing a great job with off-road team kits for their gravel racers, Kate Courtney's kit, and the Team Amani kits. They need to bring that flair to the rest of their line up.
I really enjoyed reading this. It’s a very well thought out analysis, especially given the fact that the company is not public and information is difficult to get. One thing that caught my eye (or to be honest, more like a “are you kidding me” level shock) was that the company aims to restore positive EBITDA by 2027. To be in the negative for that figure is usually a pants-on-fire level problem. You can’t even finance your working capital through a bank. One has to right the ship before even thinking about growth. As a former CMO for some well-recognized brands who has spent a chunk of his life in turnarounds, there are always “I wish I didn’t have to do this” type of cuts to marketing and other types of spending in such a situation. Rapha needed to reorient their business a long time ago if the business got to the point in which the EBIDTA went negative.
Thanks for the perspective, all very good points! In my Pas Normal article where I compared them to Rapha, I was able to pull Rapha's historical financials from Pitchbook. I agree with you that action was needed a long time ago.
I liked this, and I spend a lot of time thinking about Rapha. I often think a large part of Rapha's downfall was that it moved away from its core market. Simon Mottram is a branding genius and a cycling geek. He built Rapha for people like himself. Since he sold the business, Rapha seems to be lost. They now have a limited foothold in the road conversation (especially with the new generation), and they're going after a new (smaller) market in off-road. I can't help but think the big off-road push in the US is just as much to appease its owners, as it is sensical.
That's a very good point, this could be because pressure from the Walton family. I would be interest to know the structure of their investment firm, RZC investments. I'm 80% positive it is only the Walton family's money being invested, but if their are other limited partners investing their wealth into the fund, that would certainly make the case that this is an actual strategic investment rather than a passion play.
We'll have to see how it plays out, but I think the success of this strategy really depends on the success of the Olympics bringing more Americans to cycling.
Good article. My view is that their biggest issue is the product they are selling. Nothing has changed in their designs, same stripe, same colours for the most part. I don’t want a kit from 10+ years ago.
Smaller companies have fresh designs that just look better.
Do they need core, brevet, race team, etc. I think their product lines could be streamlined and simplified.
Another issue is the regular 40% off sales. Who buys their kit at full price?
Quality also seems to be slipping.
I may sound negative. I am not, more sad than anything. I do want a want them to succeed but in my view it needs to start with a product that people want to buy, not the same product that Simon came up with in 2004/5
Inventory is definitely an issue facing Rapha. In my Pas Normal article where I compared their financial performance vs Rapha, inventory overhang was a major issue for Rapha. You're right, it's definitely a business decision that needs to be made: continue trying to get rid of the excess with 40% off sales or cut losses and start fresh.
I think their top-end performance kits are actually great quality, but everything below that is quite a drop off. As for branding, I think they are doing a great job with off-road team kits for their gravel racers, Kate Courtney's kit, and the Team Amani kits. They need to bring that flair to the rest of their line up.
I really enjoyed reading this. It’s a very well thought out analysis, especially given the fact that the company is not public and information is difficult to get. One thing that caught my eye (or to be honest, more like a “are you kidding me” level shock) was that the company aims to restore positive EBITDA by 2027. To be in the negative for that figure is usually a pants-on-fire level problem. You can’t even finance your working capital through a bank. One has to right the ship before even thinking about growth. As a former CMO for some well-recognized brands who has spent a chunk of his life in turnarounds, there are always “I wish I didn’t have to do this” type of cuts to marketing and other types of spending in such a situation. Rapha needed to reorient their business a long time ago if the business got to the point in which the EBIDTA went negative.
Thanks for the perspective, all very good points! In my Pas Normal article where I compared them to Rapha, I was able to pull Rapha's historical financials from Pitchbook. I agree with you that action was needed a long time ago.
Rapha seems like one of those companies run by MBA students.