Insanely mad for road cycling (as well as John Tesh's music). An interview with Rapha North America's new president Brendan Quirk.

Long before Brendan Quirk was announced to be Rapha’s new North American president, he had already had a significant impact on the world of cycling retail. As co-founder and CEO of Competitive Cyclist, Quirk was an early proponent of e-commerce, a shopping environment that is now ubiquitous for a surprising range of goods, but one that the bike industry is still struggling with. As Quirk prepares to begin at his new position with the British apparel company, we spoke about his trajectory in the world of bike sales, his take on the ongoing financial struggles of brick and mortar bike shops, and his unapologetic love of road cycling. And yes, his similarly unapologetic disinterest in other types of cycling.

As readers of his What’s New blog may well remember, Quirk’s take on cycling matters is direct, passionate, but also studied. Traits that his new employer no doubt expects him to bring to his new position. Thanks to Brendan for his time.


How did you get started in the world of selling bikes, and in the world of online retail in particular?
In the 90s, I was doing a lot of bike racing. Not particularly distinguished, but I was very much in love with the sport. Like lots of folks, I ate, breathed, slept, lived cycling. I was about 24 or 25, and I knew I was going to have to find a productive way to spend the rest of my life. Racing bikes as a cat 2 or cat 3 was not going to be it. I had an English Literature degree from a liberal arts college and no idea what to do with that. I thought about becoming a writer. Got a Master's in English with a focus on creative writing, and wanted to see if I could put that to use.

Eventually I said, "To hell with writing. I'm going to go to law school." The summer before I was supposed to start, I started turning wrenches at a bike shop in Little Rock called Chainwheel. It was started by the family of a guy named Tony Karklins, who brought Orbea to the United States many years later.

I could make a few bucks while I was racing bikes on the weekend, just waiting for law school to start. That's how I got into retail. Then just a few weeks before I was supposed to start law school, I got cold feet. I bailed on law school literally like 3 days beforehand. I kept riding, kept racing, and one thing led to another. I ended up in another retail store. Did that for a couple years.

And how did you make the jump from brick and mortar, to online retail?
Little Rock was a small market, geographically isolated. This was the mid-1990's, before the Internet had much relevance, so geographical isolation really meant something back then. We turned to the Internet as early as possible to find people who were interested in the same things we were interested in. Which is high end bikes, vintage Campy, vintage Italian steel frames, things like that. We were on listservs and usenet groups and whatever you could find. Just to find kindred spirits. We weren't really trying to sell much at that point. Transactions on the Internet were non-existent. We just wanted to talk to people who were like us.

This is like '97, '98. That led to us having a website before many other folks in the bike industry did. Right when credit cards could start to be processed online, we started doing that.

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So what you were selling online was very different from what you were doing at the physical shop?
In the shop, we were selling Cannondale bikes, Specialized shoes, and hybrid—typical IBD [independent bike shop] stuff. We were just a regular, old mom and pop, 1500 square foot bike shop. We were really hungry to find people who wanted to talk about high-end bikes. That's where this fixation with being online came from. The interest in vintage stuff, that kind of transitioned to being really interested in high-end racing technology be it frames, be it wheels. Then, interestingly, we were one of the first people in the US to import SRM's. We got in touch with SRM Germany and we just scraped up every available penny we had and bought 10 SRM's wholesale, which was the biggest bet we had ever made in our entire lives. For us, back then, it was a ton of money. You're talking about a wire transfer for 15 or $20,000.

SRM Power Control II unit (Photo: @shoey)

SRM Power Control II unit (Photo: @shoey)

That’s serious money!
I took my writing background and really put it to use. Starting with those SRM's—something so expensive, so technical, and so intimidating to buy—great writing became a key brand principle for us in selling stuff. . I mean, why is retail valuable? Just having stuff on the shelves isn't good enough. Retail is valuable when you can act as an educator to people who have difficult decisions to make. Do I want a Colnago or a Pinarello ? Do I want Campy or Shimano? Do I want an SRM or a PowerTap? Do I want a Zipp or do I want Hed wheels?

Whatever the decision that a customer needs to make, the job of a retailer is to know his shit and to be able to say, "We have a point of view and our point of view is for you with your ambitions and with your capabilities and your budget, this is the best product you can buy." I learned over time the most powerful sales tool there is education. We wanted to provide education through writing and also photography. Back then we had better content than what the manufacturer's had, which was a huge advantage for us.

I think the success and reputation that Competitive Cyclist had was in line with that. Which brings us to what is likely the million-dollar question. Or some such figure…which is this: where do you think the bike business is headed in terms of online versus physical bike shops? Especially as you have large companies like Trek begin to shift toward an online sales model. And at the same time you have the companies like Canyon already selling direct in Europe.
I think there was a time, let's call it 2010 through 2013, when I firmly believed in pure play e-commerce. Pure play e-commerce means businesses that you strictly have an online presence like an Amazon or a Zappos. They have no retail presence. I drank the Kool-Aid on that. I believed that was the ultimate convenience for customers. It was the preferred way for affluent or time constrained customers to shop.

My beliefs have changed. I think that retail without a doubt, is very relevant. Retail, if you have a really good retail experience, I think it kicks e-commerce’s ass 99 times out of 100. That is, if you have the right inventory in the right amount of it, which is very difficult to pull off. In addition, it takes an incredibly educated staff. It's long hours of operation. A lot of people can't shop until 8:00 at night. You've got to check all of those boxes. So brick and mortar is compelling, and viable, but it's only if the retail addresses some very specific needs. 

There are certain bike shops out there that are just, you walk in there, and you feel like you're at home. People experience these amazing shops and they want those shops to thrive, to succeed, they want them to always be there even if the inner tube is $1 more expensive. Or, I guess more relevantly, the Grand Prix 4000's are $60 instead of $38. Of if you need to have maintenance done.

What shops come to mind?
Contender Bikes in Salt Lake City is one of the most incredible retail experiences you can have, regardless of industry. They've got the right product assortment. They've got it in stock. The staff is passionate and they know their stuff inside and out. It's good for the bike industry for shops like Contender to be there.

And yet most shops struggle, because margins are very thin.
You look at the NBDA [National Bicycle Dealers Association] data, and let's just say there's 4,000 bike shops in America. Single digit percentage of those are the kind of experience you get at Contender. There's 100 or 200 of these shops in America. That's the problem for brick & mortar retail. Mediocrity is the norm.

That's what I was going to say, I mean, the bike shop that you had, selling Cannondale hybrids, provided an experience that could be replaced by an online vendor. At least for some customers.
You can look at NBDA data to answer your question. In the past the NBDA broke out the world of bike retail into 4 categories—small, medium, large and high-profit retailers. What's so scary about bike retail is that high-profit shops have an EBITDA percentage [Earnings Before Interest, Taxes, Depreciation and Amortization] of something like 3%. What that means is that the best run bike shops in America that report to the NBDA, they are pocketing 3 cents of every dollar they sell. Their margin for error is pretty much nil with profitability like that.

That’s insane.
Insane. So these great shops, their owners are not driving Ferrari's by any stretch of the imagination.

The thing that's scary is that if the best shops have an EBITDA percentage of 3%, what does that mean for the industry at large? What does that mean for the fat part of the bell curve? It means is that you've got a lot of people who are making no money. They have no capital to invest and evolve, which is why the internet will continue to devour bike retail market share.

Of profits, rather than e-commerce versus brick and mortar.
You look at the amount of inventory that brick & mortar shops have to carry, to have what appears to be a decent representation of bikes, and you look at the profit margin that these guys are making on bikes, it's kamikaze capitalism. It's nearly impossible to make money. If they screw up their inventory assortment, if the weather isn't favorable, they are screwed. If Trek decides that it's not going to sell online and ship to a store anymore [as was recently announced], instead it's going to sell online and ship to directly to the customer, what happens to that business model? That's the fascinating drama we're all waiting to see unfold.

If the rough estimate is 3 cents on the dollar [as a traditional bike shop’s profit], how much can that figure be improved upon by an online retailer?
Back in the heyday, I'm going to speak in broad terms here, '06, '07, '08, maybe even through the recession of '08, '09, I think the belief was that a well run, scaled e-commerce company could have an EBITDA margin of 10%. It's still not great.

Which still seems slim compared to other industries.
Yeah. You compare that to a software company that has EBITDA margins of 50% or higher, it makes bike retail look like a crappy business to be in.

And while the gold standard for e-commerce was considered 10% for a long while, I think it's gotten adjusted in the last 3 or 4 years. Now, a good e-commerce company is making a margin of 6 to 8%. But there are many factors built into that, the most important of which is probably scale.

Right, because I always wondered about these seemingly huge online retailers that work within this space.
Take a company like Wiggle or Competitive Cyclist. One reason why they have strong EBITDA performance is that they have scale and they can leverage the infrastructure they've invested in. Your average million dollar brick and mortar retailer, if you just turn that to a million dollar e-commerce business, none of the advantages of scale would be there and so your bottom line profit wouldn’t improve and a similar set of risks would still weigh down the business. .

You paint a pretty grim picture.
It is grim. Let's be clear.

Even when it's good, it's bad.
It is. The inventory risk of owning a bike shop is so scary because your average unit of inventory is expensive. Bikes cost a lot to ship to the shop. They cost a lot to assemble. It's such a risky business. That risk is compounded by the low profit margin. If dealers were making 100% gross profit on a bike, it would be different. There are a lot of hidden costs to selling bikes, the shipping, the labor, the space it occupies on the retail floor and all that kind of stuff. The worst factor of all, though, is the gross profit margin structure. Even when they sell a bike for full retail (which isn't as common as anyone would like), the profit is barely adequate. Yeah, it makes it a bitch to be in bike retail. I did it for long enough in the pre-internet era to know how tough it can be. Delaying payments to vendors so payroll checks don't bounce—I've been there, and it's not fun.

You were actually trying to get out of it.
We shifted from brick and mortar to [internet] retail to try to cure our woes. The Internet was how we planned to find more customers. In a sense it was out of geographical necessity. If we'd opened our bike shop in Los Angeles, or Dallas, or Chicago, we never would have gone to the Internet because those cities had a decent population of bike buyers long before Little Rock did. We turned to the Internet by geographical happenstance.

Speaking of that shift in paradigm, in terms of high-end bikes, Canyon is an interesting example. I know that you sort of hinted at the fact that you were trying to bring Canyon to the US through Competitive Cyclist, or something to that extent. Can you talk now about what that was? What was going on exactly?
The guy who started Canyon is named Roman Arnold. In my view, he's in the top 10 or top 20 list of most impressive business people all-time in the global bike industry. The guy's just great when it comes to how bikes are engineered. He's great at how bikes are marketed. He's also very, very clever in terms of how bikes are distributed and sold. He is very entrepreneurial. He was hungry to find more customers. He had a regular old bike shop at one point too.

Anyway, back in 2009, 2010, we spent a lot of time trying to figure out whether we could bring Canyon to the US through Competitive Cyclist. Ultimately, it didn't work because Canyon's global sales principle is, "We sell directly to consumers." That's why you have beautifully engineered bikes that 30 or 40% less than other brands with same componentry. How can Canyon do that? It's because their supply chain is so much more abbreviated—there's no distributor markup and no retailer markup. And that's why Canyon couldn't work at Competitive Cyclist. By the time we made a decent profit margin, the Canyon value proposition no longer worked. Coming to the conclusion we couldn't work together was a really amicable process. The interesting thing is you look at the number of Competitive Cyclist alumni who are working at Canyon, it shows how good that relationship was. Matt Heitmann is currently the Chief Marketing Officer of Canyon, and he ran all the marketing for Competitive Cyclist for years.

You've got Drew Medlock who ran all of the buying and planning for Competitive Cyclist for many, many, many years. He left Competitive Cyclist recently. He is the guy who is going to bring Canyon to the US now. He's building Canyon USA.

What do you think will be the impact of Canyon coming to the US?
It will stir up a hornet's nest. Trek and Specialized can do whatever they want in terms of selling bikes online. It's overdue for them to come out of the dark ages and do that. But the problem is that they're profoundly reliant on their dealer networks. The problem is, you can't compete with the value of Canyon, because so long as you have dealers, there has to be dealer markup factored into retail pricing.

Canyon bikes will always be substantially less expensive and equally—if not better—marketed. Canyon marketing is outstanding. When Canyon gets here to the US, they're going to sell a boatload of bikes and it's going to be hugely disruptive to the mid and high-end US market. I'm really excited to watch it unfold.

A side question about Competitive Cyclist. People online couldn’t stop talking some years ago about the $1,000 wheelset that Competitive Cyclist sold, with Nemesis rims. The reaction to that wheelset was interesting, to say the least.
To break down the cost of what it takes to get a set of Campy Record hubs and really nice spokes. I forget if they were like DT Revolutions or whatever they were. If you really break down a high-end set of wheels that are really well built on a line by line basis, it's expensive, especially when you add in some nice sewups and the time it takes to glue them on properly.

In terms of Nemesis rims, they're a cult item. They were impossible to get in the US and through a friend we were able to score like 100 of them from Belgium. They were really expensive on a unit basis, and then the shipping cost was frightful.

Some people don't understand why a Specialized McLaren bike costs a bazillion dollars and all the engineering, R&D that goes into that. They're just going to hate on it. I get it. There's a small and loud population of people who don't have the emotional patience or don't have, frankly, the technical IQ to understand why some things cost what they cost. Sometimes the cost is due to technology. Sometimes it's due to other less tangible factors. Anyway, our Nemesis project was just like that—we sold most of them at full-pop despite the hating we dealt with.

Competitive Cyclist kit (Photo: Nate King)

Competitive Cyclist kit (Photo: Nate King)

How did the sale of Competitive Cyclist to Backcountry come about? How do you feel about it now that you’ve left the company?
I was aware of who Backcountry was from an early point in the growth of Competitive. It was founded by Jim Holland, he was an Olympic ski jumper and got into selling ski stuff online very early. He built up this incredible e-commerce business with a brand that was beloved by hardcore skiers, and sold it for a breathtaking amount of money.

The journey they went on as a business was like a seed of inspiration in the back of my head way before we ever had M&A discussions. My fundamental viewpoint for a long time about Backcountry was lots of respect for what they'd accomplished.

A key to Backcountry's success over time was how brilliant they were at acquisition marketing. That is, Google Adwords and organic search and comparison shopping engines, plus things like affiliate marketing. Over time Backcountry took this formula (which worked nicely for many years) and started to apply it to other verticals within the outdoor industry.

Eventually they tried to take the same formula and apply it to the bike industry through sites like HuckNRoll and Real Cyclist. It took a couple of years and a lot of investment, but they ran up against the hard truth that the bike industry is nothing like the traditional outdoor industry or action sports industries. It's a much more tribal environment. In the outdoor industry, money talks. End of story. If your checkbook is big enough, you can solve any problem. You write big orders and you're making friends and creating influence for yourself.

And in the bike industry?
It doesn't work that way. If it did, Competitive Cyclist would be selling Trek and Specialized. They're not. Wiggle would be selling Trek and Specialized. They're not.

This tribal way that business is done and relationships are forged is just ... It's one of the beauties of our industry. It's one of the things that drive outsiders crazy because they just can't understand it. The joke I would always say at work is: Backcountry had infinite financial backing, basically, because [owner] Liberty Media is such a massive company. Backcountry came into the bike industry sort of like the US Army descending into Afghanistan and they just thought, "We've got enough money and enough resources and enough big helicopters, big guns. We're going to straighten this place out."

But…
But there are too many caves and tribes and native languages and crazy shit that has been going on since the beginning of time. Might alone can’t cure those things.

Backcountry hit a brick wall in the bike industry. They were really all in. They really tried to come in and kick our ass. I think they rightfully thought they could because they knew how to acquire customers and they knew how to write big checks.

We went toe to toe for a couple years. We knew the industry up and down and Backcountry was trying to figure out can you master multiple markets at once. They didn't really understand the customs and the traditions. They didn't have the relationships. I think they didn't really understand the customer they were trying to talk to and the ways in which they could do great things for those customers.

So Liberty Media came to us. "Hey, we're really trying to make the bike thing work for Backcountry and we just can't quite crack the code. Would you guys be interested in helping us making this a meaningful part of the Backcountry business?"

If you Google Liberty Interactive or Liberty Media or, God forbid, Google Jonn Malone, just to be in the same zip code as those guys, for me, was intoxicating as an entrepreneur. The track record of these guys is spectacular. If you love capitalism, being around these guys is an opportunity to learn like nothing else. Yet, they were very humble, very eager to have us come in and teach them about things that they couldn't figure out on their own.

We did a 9-month romance trying to get the deal done. Ultimately we got to the finish line. It was crazy. It was just a crazy process.

How did it feel to sell the company?
Competitive's my baby so to sell it was ... I think I definitely discounted what the emotional cost of that would be. My entire sense of self was immersed in the business and my whole identity was as its Co-Founder/CEO. Detaching myself from this was way harder than I would have ever expected. I didn't even really think about it as part of the process. Yeah, the loss of autonomy and the dilution of my identity was an ass kicker for me.

Typically CEO's of companies, when they're acquired, if they last 6 months, people are surprised. Usually people like that don't last in a corporate environment. But I stuck around for two and half years. In reflecting on why I stayed so long, it's a for a few reasons. I loved the Competitive brand so much, number one. Number two, I cared about our original employees so much, many of them whom moved with the company [from Arkansas to Utah] to be part of Backcountry. Then number three, I'm a retail guy. If you sell something, you're very concerned that your customer is getting the full value and has high satisfaction of the thing that they bought. I looked at Competitive and I wanted to make sure that Backcountry and Liberty were really stoked about what we were doing with the business once they bought it and we integrated it.

How was it to be in a corporate environment, coming from one you had built for yourself?
Founder CEO's tend to be impulsive and emotionally driven. They want to do things with the business based on instinct. Eventually, I saw that Backcountry culture was cautious and data driven, mostly a function of its need to hit short term financial benchmarks. This wasn't Competitive's culture and I had a hard time adjusting. Even more problematic for me was that Backcountry is fundamentally an outdoor business and not a bike business. I like to walk my dog on trails and I'll go camping with my kids a couple of times a year. I'm happy to hop on a stand up paddleboard now and again but in my heart, I am one thing and one thing only. I’m insanely mad for the sport of road cycling. I’m a roadie snob to the marrow of my bones. It's what my life's been built on. That is my DNA.

I could sit here, talk about the Ziploc baggie that got sucked into Wegmuller's wheel in the 1988 Paris-Roubaix and I get teary thinking about the injustice [see video below]. The '89 Champs Elysses TT or the Chambery Worlds or the sight of the US Postal team hitting the bottom of Alpe d'Huez at 100 mph in the '03 Tour. Memories like these — this is the stuff I daydream about all the time. . How can I bear to be surrounded by tents, sleeping bags, camping stoves, and fucking skis and snowboards? Mountains are for the summer, not the winter Outside Magazine—that's not who I am. I don't give a fuck about Mt. Everest. Honestly, I don't even own a mountain bike. I don't want to be around knobby tires. I don't want to be around cyclocross bikes. I'll just spend the winter watching & re-watching La Course en Tete and putting my John Tesh music on an endless loop.

How did you deal with leaving?
I would say the first six months, completely unexpectedly, were probably some of the toughest months of my life. It's all on an emotional level. My sense of self was just completely subsumed in Competitive Cyclist. When I was finally done this, "Holy shit. Who am I? I'm 43 years old. I've accomplished my life's greatest dream which was to build this inspired e-commerce company, to have a lot of influence on my industry. Now what? What am I supposed to do with the rest of my life?"

At what point do you begin to move on and how do you arrive to your new position at Rapha?
As I was preparing the leave Competitive Cyclist, I could count on one hand the number of bike industry companies I deeply admired. Canyon, Strava, Skratch Labs and Rapha. Each is looking at products and distribution in a visionary way, and each has a brand that evokes a super-passionate customer following. That combo is super-compelling to me. I knew if I was going to get back in the bike industry at some point, one of these companies was the one I really wanted to get involved in.

In terms of Rapha, we've known the brand since barely after its inception. We started selling its clothes very early on, and I have a friendship with Founder/CEO Simon Mottram that goes back a decade.

What will your job entail?
I will be trying to build on substantial momentum that the company has in America. What the team has built over time—first under [now-Specialized CMO] Slate Olson, and then under Hillary Benjamin—is unbelievable. I'm serving on the Executive Team for the business, acting as the eyes and ears of North America. Rapha is preparing to make a very serious financial commitment to the US, and ultimately I'm here to craft and drive the strategy, and ensure that Rapha's investments here are most deeply and most persistently delighting, influencing and engaging with the US road riding & racing population. It's just super exciting. I'm in love with the brand. I'm in love with its focus. It's strictly road cycling. It's a perfect fit. From a personality perspective, the environment of Rapha is still very youthful and entrepreneurial. Just super charged. It's not this corporate environment where playing defense is so important.

Of course you, more than perhaps anyone else, knows that there are some detractors when it comes to Rapha.  Do you have any interest or pay much attention to that sort of thing?
It's just like the Ambrosio Nemesis situation—the internet lets small groups make a big ruckus. Success, particularly in the high-end part of the market, can act like a dinner bell for the haters. We certainly ran into that at Competitive, and Rapha deals with the same. Do I pay attention to it? Sure, I'm aware of it. But it's hard to name a single business that found success in altering its brand or its products due to nonconstructive criticism. Venom is an easy thing to see, to disregard, then to move on from.


Marginalia

1. Are you a Tinkoff-Saxo rider looking to get our of your contract, and perhaps your name rhymes with Pontador, or Hagan? As it turns out, getting out of the contract is easy, and as simple as writing your own terms, whatever you want them to be. Don't believe me? This guy did it to Oleg TInkov, and it seems to have worked!

Rapha apparel designer Graeme Raeburn (Photo: Alps & Andes)

Rapha apparel designer Graeme Raeburn (Photo: Alps & Andes)

2. If you enjoyed this post, you may also like this one and this one.

3. Living in a country other than your own must do funny things to your brain chemistry. How else can I explain the fact that I became emotional while watching the video below (fans greet and sing Colombia's national anthem as Esteban Chaves exits his team bus), when I'm normally leery of patriotic displays?

By the way if you want to know more about Chaves, you can read the two interviews I've done with him. He's a funny, upbeat and interesting guy. Here and here

4. Speaking of Esteban Chaves, I did a fair amount of writing for Manual For Speed about his family and the cycling academy that his father runs in Bogota (that content is not up right now, as they go through a site redesign). I should remind you that part of the proceeds of all Alps & Andes sales go toward sending academies like Esteban's clothing and bike part donations. In fact that last two shipments have gone to his academy. Since the articles I wrote about the academy aren't up right now, I'll at least share some of the photos that went with them, by Manual For Speed. 

5. With Rigoberto Uran signing to Garmin-Cannondale, I'm seeing comments and questions about his name, specifically why he has the same last name repeated (his full name is Rigoberto Uran Uran). If you want to know why this is, and how names are structured in countries like Colombia, check out this post