Brand champion at helm of Raleigh - BikeBiz

Brand champion at helm of Raleigh

BikeBiz talks to new Raleigh MD Phillip Darnton about his love for centennial brands, the ruckus over QXL.com and moving from Triumph Road
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BikeBiz: Welcome to the bike trade.

PD: Thank you very much.

BikeBiz: So, are you having fun?

PD: Yes, it's fantastic. It's a great deal better than lavatory cleaning.

BikeBiz: So, your previous job with Reckitt-Coleman wasnt the mustard part, then?

PD: No, my prime marketing thrust was on household cleaning.

BikeBiz: 'Mr Sheen' and that kind of stuff?

PD: Mr Sheen, indeed. And Harpic (Lysol in the US). Thats a very, very large brand. Four-hundred-million-dollar brand, in its own right. And a range of brands that we had in about forty-nine countries. So, yes, [coming to Raleigh] is a big change but it's terrific. I haven't met anyone here yet who doesn't love bikes.

BikeBiz: But passion doesnt put bread on plates, can bike companies make money?

PD: There must be a way of making money out of selling the number of bikes that we sell.

BikeBiz: Well, Gazelle [of the Netherlands, another Derby brand] make money, don't they?

PD: Oh yes.

BikeBiz: So, is that because they've got a tied market and we haven't?

PD: Basically, I think the opportunity for Gazelle is that they are based in a nation of people that use bicycles as a means of transport. They have road systems that are dedicated to bicycles so you don't take your life in your hands by getting on your bicycle, and they build very, very strong and robust bikes which people use a great deal.

I'm told it's the only country in the world where people wear out their saddles rather than just change them!

[Dutch bikes] carry a pretty high price and I imagine therefore they carry a pretty good margin.

BikeBiz: Theres also the fact that it's a cabal across there. Manufacturers and retailers conspire together to sew up the market. I mean that positively, because margins are high.

PD: Well, you would know more about that than me at the moment.

BikeBiz: You've been in the job a month. In your first week you made the annoucement about moving the Raleigh factory. How much of a briefing were you given by Gary Matthews [of Derby in America] and how much is your work?

PD: As far as the move is concerned?

BikeBiz: Everything so far, really.


PD: Well, I think as far as the move is concerned, obviously that is something that occurred quite rapidly. I think I was probably among the first people to know about it, sort of back end of last year, and we announced it as soon as we possibly could. I think it's a terrifically positive opportunity for us.

It's a really big opportunity after many, many years on this site and a site that's just grown like Topsy. Each individual [addition was] quite a sensible move. Of course, you end up with a thing that looks a bit higgledy-piggledy and isn't really efficient. So, I think that's a great opportunity. The leader of Nottingham City Council thinks it's such a good move too. They are very keen to help.

Beyond that, the opportunity is for me to weld a group of people together and the agenda is my agenda. Yeah, I feel very good about that.

BikeBiz: You've got four years to make the move, haven't you?

PD: Yes, we have got to be off the site by the end of 2003.

BikeBiz: When do you think you will be off the site?

PD: Um, I haven't the faintest idea. We haven't started and we promised all the people we will keep them advised as soon as we do. We haven't started any explorations at all yet, the city council seem to be very competent but their knowledge of developments over the next few years enable them to say yes, theyll find a suitable site.

I am sure they are going to be able to keep us in the city which is wonderful and I think that this is something that we get on with and we look around and we see what's available and my view would be that if the right thing comes up quickly, we take it quickly. My heart would be in my mouth if we get to year three and we haven't done it, because it is quite a big thing to move a factory. So, I think four years is a sensible timescale but I don't actually think it is a terribly luxurious timescale it will go really quite fast.

BikeBiz: Is it a cast iron guarantee that you will stay in the Nottingham postcode area?

PD: I once read an article called Good Managers Don't Make Policy Decisions. It is not in my remit to make guarantees because you can't deliver it. It is my firmest intention and it is the intention of Nottingham City Council, we don't want to lose skills that we have, we don't want to lose the workforce that we have got.

Raleigh staff are obviously anxious to know sooner rather than later where it is, how will they get to work, can they get home at lunchtime, where is the nearest bank, how can I do my shopping, all of those real issues are on their minds. So, I am keen to demystify it and settle it so that we can plan it properly as soon as possible. But exactly where it will be, honestly, its not in my remit to do that. We will have to look for the place and as commonsense suggests that it makes most sense for it to be near here. As near as possible. I think it would be daft to say anything other than that.

BikeBiz: What was your knowledge of the bike trade before you joined? Why did you come in?

PD: I came in for two or three reasons. One, I love brands. I absolutely love brands. They have a life of their own. It is not by accident people talk about brand personality. Raleigh has a fantastic personality. There was nobody who, before I joined, who when I said I was looking for a job with Raleigh didn't know exactly what I meant. It's a phenomenal brand heritage. I have actually worked on two brands before that are older than a hundred years and Raleigh makes the third...

BikeBiz: Centennial brands?

PD: Centennial brands, yes. And I do think that is very, very exciting. I do think that also, associated with that, I have worked on a lot of brands, particularly for Reckitt and Colman, that were half asleep and great brand names like, for example, Dettol, which I think is a household name, but somehow or other has got rather lost on the way and I think that Raleigh have got some of that quality to it, which is that it is a terrific name, but I think it is one that could do with a bit of reviving and that's exciting.

Secondly, I came and met the people and I found the people really both very competent at their functional expertise, very charming as people, which is important if you are going to spend your life doing it, and thirdly I think people who were very open to the idea of forming a team and forming a new sense of direction and purpose after a turbulent period and I feel both that as an honour and a bit of a responsibility to them and I think that's good, that's terrific, I like that.

I also met the Chief Executive of Derby Cycles, Gary Matthews. He's got a real strategic vision and I don't think that you can take on a job like this if you are not working with a group of people who have a very, very clear strategic view.

BikeBiz: You also have a seat on the board of Derby?

PD: Yes.

BikeBiz: Does that involve meetings every quarter, or is it more often than that? In the States or do they come to you?

PD: A bit of both. The next meeting is in this country and the one after is in the States.

BikeBiz: This is a leading question, how does Derby view Raleigh?

PD: Well, it is a good question. Its a hackneyed phrase but I think they view Raleigh as a great jewel. I think they also regard it as a business that hasn't realised its full potential in the recent past.

The mindset that says that the future is all down hill is quite wrong. I don't mean downhill racing. You see, we must be able to learn from the past, we certainly don't need to live in it and so why aren't we talking about growth? Why aren't we thinking about growth? What are the barriers to growth? What sort of brand would we have to have? And so, I believe that the Derby Cycle Corporation would see us as a business with a lot of potential.

We are very, very well known, [but] we have been somewhat neglectful of our brand name. We must put some of those things right and understand the consumer extremely well, make sure that you are offering what I guess I'd call best value, and there is absolutely no reason why the business can't start to set its heights a bit higher.

BikeBiz: You're quite lucky coming in right now because a lot of the old faces have gone and you can appoint a lot of peope into the new positions.

PD: I haven't made a proper assessment of this yet, but I think there is a nice balance between people with real experience, who know the business inside out, [and outsiders]. You can't afford to have too many people like me, obviously, because I may have something to bring in terms of fresh business practice, hopefully I have something to bring in terms of building a brand, about what are targets and reasonable objectives and I hope some skill in leadership and giving people a sense of purpose and belonging, which matter a great deal to me. But I must have lots of people who really, really know bikes and so that there is always, always a downside if you lose people with a lot of experience. Sometimes you can say, I don't need the baggage of the past but I would like to [hang on to] some of the experience.

BikeBiz: What's your view on the various distribution channels that Raleigh are currently using and how that might change in the future?

PD: Well, I think to make a really considered view after three-and-a-half weeks is a bit soon! I believe the model the industry works on is something along the lines, or something parallel to, motor cars. If I want to buy a motorcar, I have a pretty good idea of what sort of car I want to buy. I will go along to a dealer who promises me certain sorts of things. He promises me, presumably, that the car when it is delivered to me is in excellent working order and is ready to go, he does all the necessary administration and support and he does the final checking and servicing of it before I buy it. If I have a problem I go back to him and if he gives me good service I probably will go to him again when my wife wants a car or my children want a car. And so he builds a real relationship with me, he is prepared to listen to what my particular needs are and can help me in maintaining the sort of car that I want. I think that's a fair model. And I think that words, therefore, like knowledge, skill, experience and service, rate very, very highly indeed and I think that is the nature of the partnership that we would certainly want to build with people who are wanting to offer those things to customers.

BikeBiz: Where does Halfords fit into that equation? And what about the Raleigh bikes that appeared on QXL.com, the internet auction site?

PD: There are two sorts of aspects of that really. One of these is what the consumer, the ultimate purchaser, wants to do. I mean, people will do what they want to do and people who go to a particular sort of outlet presumably do that knowingly.

Where the consumer shops, in the end, is something that is up to the consumer. The independent bike dealer who sees that his competitive edge is around knowledge, skill, experience, and building relationships with his customers should have a very strong and lively future. But he is in competition, you are right.

BikeBiz: Many Raleigh five star dealers have traded on the Raleigh name but didn't actually offer any of those things. They were fairly lacklustre shops and it seemed as though Raleigh kept these people going. Is there any chance of any pruning in the future?

PD: Ha, ha, you honestly wouldn't expect me to ever say anything like that and certainly not after four weeks! Sorry, the answer to the question is I think really truly the one I've just given you which is, any kind of retail outlet in any market which provides a service that the consumer is looking for, whether that service is based on best value or super service and building a relationship, will find their niche in the market place.

If people don't, in a free market economy, make an effort, don't make themselves attractive, don't have eye appeal, don't invest in their business, the free market economy says those people are losers.

BikeBiz: Losers in that consumers don't go to them? Or potentially a supplier refuses to supply?

PD: Because consumers don't go to them. People are free to spend the money they earn however they like. The marketplace, in that sense, does prevail. I do like to buy some of my things in shops that really look after me. I think twice about where I buy my shoes. I might actually just economise on shirts and buy them in Marks [& Spencers]. But those are all choices as a consumer that I make. If I really hate shopping in gloomy, dingy, dirty shops, then I won't go to them. And you know, if I like shopping in shops like Next and Principles and shops like that that's where you'll find me, because I like the lighting. If, however, the service is rude or people don't care or they don't know what they've got in stock, I won't go there just for the lighting. That is one of the pleasures of being a consumer market. The consumer is always right and votes with her purse or his wallet.

BikeBiz: But sometimes you've got just maybe a couple of bike shops in a small town, and one of them happens to be the main Raleigh stockist and has become flabby but consumers are pretty much tied in to it because they've got to go there because that's where their Raleigh bikes get serviced. You said you were a great lover of brands before, I'm just wondering how a brand leader can let some shops drag its name through the mud?


PD: I think that's a perfectly legitimate question, which is how far does the brand and the outlet go together? And the answer is that I honestly don't know because I have not worked in a market like this before, I've only worked in markets where, you know, the goods were sold to the people who wanted to buy them who then sold them on.

BikeBiz: The reason Im pushing you on this one is because it's always perplexed me that there are some flabby [Raleigh] dealers out there, who aren't doing a good service, their shops are getting more and more run down but they have a monopoly on the local area and it's bad for Raleigh and it's always surprised me that there hasn't been this gradual pruning back. Is there some sort of blockage in the sales department eg weve been dealing with Joe Bloggs Cycles for forty years, we can't get rid of them, yes we know they are rubbish but we will work with them to improve them.

PD: I genuinely really like the example you've given. Of the things that have come across my desk so far, that isn't one. It's been in the back of my mind, I don't think that I want there to be any blockages to the consideration of issues that help or hinder the business, I really want to make sure that there is a proper debate and that the debate is based on facts and on numbers and if we are doing things that are not in the best interests of the Raleigh brand name that we stop them pretty sharpish. So, I think the honest answer is that it hasn't come up on my agenda yet but I think it is a perfectly valid observation and question.

BikeBiz: It's not a Raleigh problem alone; it's very much a bike trade problem. We do have lots of dealers who really oughtn't to be there, but they survive because they have got paid up leases, they only need to sell two inner tubes a week and they are happy. These bad dealers tar the good ones with the same brush.

PD: A good example is the resurgence of corner shops. The service element is different, with corner stores and what happened to them in the mid-sixties and how the resurgence of corner stores was really only possible when a large influx of Ugandan Asians in the Idi Amin era, who had to leave everything behind and were prepared to work incredibly hard to get started again, said I'll pick up that store by the scruff of the neck and I will offer something that nobody else offers and that is I will be open all hours and I will make sure I have a good stock of things and of course we won't be quite as cheap as they are in the supermarkets but I will always be here and I will get to know my customers and I'm on the corner.

I think the consumer decides those things for you.

BikeBiz: Next point, e-commerce, bikeshop.com. Its a good model because it puts sales via a portal through to individual bike shops. The other model manufacturers going consumer direct isnt so good for IBDs, naturally. Any plans to roll out the bikeshop.com concept in the UK?

PD: It is only just starting now in a test in the US so it's pretty new there. I must say, I do like... there's a wonderful phrase,'clicks and morter' and I think thats a great expression for it. I do think it's a great idea. What we are good at is making bikes and we wanted to actually make sure they are distributed to the consumer in the best possible condition and serviced properly and so on, so I think the idea of saying we will direct the consumer to their nearest dealer is a terrific idea, and it ought to please the dealer enormously. So, all of that is absolutely fine. I suspect that the test will have two parts: one, that it actually works, whether anybody is interested in truth and really does do it and secondly whether or not we have the distribution skills and abilities to make sure that the bikes that they order are delivered in good time to the store in which they expect to see it. And so I think there are lots of logistic issues that need to be sorted out as well.

My own view is a bit conservative, only because I think that Raleigh in the UK have lots and lots of things to do which are about supply chain, about service, about level of service to customers, about efficiency, about working capital, which come before that. Because while I do think it is very interesting and I think it is absolutely appropriate that somebody should be doing that, I don't think it needs to be done ten times over or in a random pattern. I think it needs to be done, measured, organised, understood, evaluated, spread out and it should be done in the places where it is most likely to succeed first, which clearly is the United States. So I think, intellectually, it is a very intriguing idea but I think that Raleigh UK has a number of priorities before it has the luxury, frankly, of doing too much on that.

BikeBiz: Some months ago on the BikeBiz website we carried news that Raleigh Cycle Centres would become Derby Cycle Centres in that they would offer a broad range of Derby products. Is that something that has progressed?

PD: The idea of the re-vamp/re-launch of cycle centres along those lines is absolutely under way and a couple are already in progress.

BikeBiz: Is it a test or a slow roll out?

PD: Well, I think pilot is probably the proper word. [We need to find out what] it costs? What impact does it make? Does it make good money for the dealer? Does it repay our investment? Is it over elaborate? Are there simpler things that need to be done first that should be done on a wider scale? I think there will be a lot of questions. How many people would be prepared to put that degree of investment and effort into it (themselves), to come with us on it and so on. So, I think there are heaps of things we are going to learn from it and I think we need to find a number that allows us to say, fine, let's experiment. There may be real, geographical differences. I think there are a lot of issues that people will want to look at together and see, but I think it is an initiative that is an exciting one. I think it is an appropriate retailing initiative.

BikeBiz: Which Derby brands would be available to IBDs who joined the scheme?

PD: Truthfully, I don't know how far that's got and I know people are talking about, for example, stocking Gazelle and Musing as well Diamondback and Raleigh. I haven't been involved in that so far, but I do think that one of the things that we need to be a bit crude about is what I'd call our 'portfolio' of brands.

There are things that any brand is and there are some things we can never be and Raleigh quite clearly is an utterly reliable, well-respected, high-quality, family bicycle. Diamondback is brilliantly different from that. It can do things for the total offering of bicycles that you could never do under the Raleigh name. I'm convinced of that. So, if I honestly think the answer to that is right, we don't want to just bring in other brand names and say, well actually, you could have a city bike that's either a Raleigh or a Gazelle and nobody could really see the difference between them - sorry, the lay person hardly sees the difference between them. That's not offering real choice. So, I think that I would, starting from no knowledge, I would say, let's take a look at the brands we've got and what they represent in the portfolio.

I don't see any point in just saying you can stock six brands but actually, in the end, the consumer says well, I'm sorry what's the difference between this one and that one and the answer is well, one's called 'A' and one's called 'B'. They ought to stand for something.

BikeBiz: Market share cannibalisation could be a problem then?

PD: I think the short answer to cannibal questions is if your market market share is there to be cannibalised and you don't cannibalise it, somebody else will. I've never, ever in any market, been interested in arguments based on cannibalisation. What it suggests is - if somebody can take it off you, you'd better take it off yourself. If you do it yourself, chances are you can do it and make an attractive margin out of it. If Gazelle bikes really cannibalised Raleigh bikes, then I'd rather sell Gazelle bikes because they actually have a better margin. So, great, fantastic.

BikeBiz: The auction of Raleigh bikes on QXL.com caused quite a stir before Christmas, what was going on there?

PD: Where we have bikes surplus to requirement, obsolete bikes, old models and things of that kind which have been offered to dealers and dealers have no further requirements for them, and somebody is prepared to take them from us and we can do that at a profit for ourselves and they are genuinely models that everybody else has had their fair go at, then indeed we will do that but that is all that we are interested in doing.

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