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

"We'd taken our eye off the ball" admits founder Simon Mottram...

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.”

Simon has been news editor at since 2009, reporting on 10 editions and counting of pro cycling’s biggest races such as the Tour de France, stories on issues including infrastructure and campaigning, and interviewing some of the biggest names in cycling. A law and languages graduate, published translator and former retail analyst, his background has proved invaluable in reporting on issues as diverse as cycling-related court cases, anti-doping investigations, and the bike industry. He splits his time between London and Cambridge, and loves taking his miniature schnauzer Elodie on adventures in the basket of her Elephant Bike.

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