Chapter 3: The ‘Middle Game’ (2012-2015)

Chapter 3: The ‘Middle Game’.  Understanding ‘Economic Gravity’ and the value of marginal economics (2012 to 2015) – £120m to £200m

2012 was an incredible year for Wiggle and British cycling with Bradley Wiggins becoming the first Briton to win the Tour de France, shortly followed by 19 (15 golds, 2 silvers and 2 bronze) British cycling medals at the London 2012 Summer Olympics. Wiggle’s traffic, sales and profits continued to soar.

Then in 2013, it all changed, as the pound started to rapidly strength against all of Wiggle’s 3 main currencies; the Australian Dollar, Japanese Yen and Euro. For two years the pound continued to strength, which eroded all previous overseas pricing advantage and created a significant sales and margin headwind on international sales for Wiggle and all UK based online retailers.

UK Cycling Industry Visits

GBP / Australian Dollar Exchange Rate

In September 2013, Humphrey Cobbold stepped down and Stefan Barden (former CEO of Northern Foods and former CEO of Heinz UK & Ireland) took over.

Bridgepoint wanted to take Wiggle to be an international platform capable of turning over £1bn.  Stefan’s plan was to deliver this by expanding the management team, sharpen the brand and consumer experience, put in a minimal structure to allow delegation and drive its cost base to be the lowest in the industry.

I have a massive amount of time for both Humphrey and Stefan. They are both fantastic CEOs and carried out equally brilliant stewardship of Wiggle but from different perspectives in totally different trading times.

Humphrey (aside from having a sharp CEO strategic mind) was an inspiration, energetic, always leading from the front and fully prepared to muck-in to get the job done. There was one particular time that stood out when Wiggle was snowed-in. Humphrey cancelled all his meetings, picked up a shovel and cajoled the team to go out with him to clear all the snow, ensuring all deliveries went out on time.

Stefan in comparison joined Wiggle at a time where the company’s overseas fortunes were wilting and tailwinds turned to headwinds. Stefan introduced a number of strategic concepts (explained in the rest of this chapter), which aside from helping Wiggle adjust to challenging trading conditions, have helped me to provide powerful frameworks for my own directorship and consultancy.

GBP / Yen Exchange Rate

GBP / Euro Exchange Rate

In 2013, Stefan and Andy Bond (Wiggle’s chairman) realised that the strengthening pound would lead to a shake up in the UK industry and that margins would fall to the point when the marginal players were losing money. Hence a shakeout would occur. Industry margin would fall to the cost difference between the lowest cost and highest costs players, as the higher costs businesses would be pushed to 0% margin as they went bust. (Or sold themselves). Hence the industry winner would be the definitive lowest cost player. For Wiggle to be that player it had to become no.1 in size and aggressively leverage its scale and scope synergies to take out costs.

But before that the proposition had to be honed: Scale only comes with increasing sales!

Stefan Barden

  • The brand moved from being ‘The emporium of everything’ to being ‘For the Good Stuff’.
    • This focused the whole company on getting what was ‘hot’ into the company and onto the website,
    • Rather than what brands wanted to off-load – generally last year’s stock.
  • Improved service, including:
    • Product ‘not in stock’ taken off the website
    • All language sites now 100% fully translated (no English left on them)
    • All key 11 countries to have all major payment types
    • All delivers tracked for free
  • A ‘Never Beaten On Price guarantee (if we had the best product and service; we had to also give our loyal customers the best price in the market)
    • This promise was backed up by uniquely developed in-house industry leading price scrapping capabilities
  • Refreshed brand (the fantastic work of Rachel Moffatt and Adam Ryan) to communicate this ‘best in class offering, including a new web-site.
    • The website moved from 65th in the Which? annual comprehensive UK ecommerce review to joint 4th with Amazon

Wiggle’s game-changing strategy was energetically delivered by Mike Snell (Commercial Director), Rachel Moffatt (Brand Director), Harvey Bennett (Marketing & Sales Director), and Nicholas Pink (Operations Director). Mark Dermody (I.T Director) and then Jeff Wollen (I.T. Director) delivered the IT systems upgrade. Plus the many great managers and execs reporting into them.

For the Good Stuff

A key channel for attracting customers and making sales is digital Marketing. And a key question is how much to spend. Vital to our success was our strategy to ‘spend to the marginal £’. The approach Stefan and I took was simple and ruthlessly effective:

  • Payback on every purchase (i.e. no life-time value models’
  • Bid on the basis of gross contribution (ie sales less cost of good less distribution)
  • Bid to the marginal pound (i.e. until the marginal contribution of the marginal sales the same as the next incremental bid.
  • How we did this is proprietary (and part of my consultancy ;-), but had a major impact.

Black Box Online Strategy

Marginal Pound Forecasting

With Wiggle’s consumer offer enhanced, the company still had to lower costs.

  • Firstly, the physical distribution capabilities were consolidated and relocated to Wolverhampton (Midlands), the input costs in the UK (rent, capital and labour), which is near some of the lowest international plane transport costs; which all Wiggle international despatches went by.
  • The business was then redesigned from first principals around a few core processes. Data flows were then mapped and data bases designed and lastly an Oracle ERP was installed
  • Anything that was repetitive was automated and colleagues did tasks that required thinking and ad-hoc decisions.
  • The aim of this was to lower Wiggle’s cost base to enable the business to be in a position to make acquisitions!

Wiggle’s Wolverhampton Warehouse

Inside Wiggle’s new warehouse

In 2015, Andy Bond’s other interests became full time and he stepped down as Chairman. Brian McBride, former CEO of Amazon UK and Chair on the online clothing retailer ASOS and the SID for AO (formerly Appliances Online) took over.

When Wiggle was sold for £180m in Dec 2011, the Chain Reaction Cycles (CRC) owners, the Watson family, was apocryphally offered £200m but rejected it. However the Irish Sunday Times valued the family’s wealth at that number[1]. In 2016 the family, out-competed by the Wiggle strategy, sold to Wiggle for just £65m[2]

  • Since 2013, CRC had suffered under Wiggle’s strategy (losing share) and top line sales had fallen, also reducing profitability.
  • It also had to respond to Wiggle’s supply chain and infrastructure investment if it wanted to keep pace in its customer offer.
  • In 2015, the Watson family decided to sell to Wiggle, though it wasn’t officially completed until Feb 2016.

Wiggle’s sales overtake CRC’s

Wiggle overtake CRC Market Share

Off the back of Wiggle’s widely known successes,  I received many great opportunities. I was reluctant to leave the ‘University of Wiggle’ but was offered one role which was too good to refuse. In Jan 2016, after 8 ½ exciting years at Wiggle, I left for horizons new. From £10M to £200M, was one hell of a voyage!

But the Wiggle story continues. What would happen post CRC integration?

Chain Reaction Cycles

[1] Companies House: Wiggle £205m, CRC £155m



[4] Companies House: MAPIL TopCo Ltd, 2016, P2

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