Wiggle room

It was a chance meeting at a school football match that would eventually transform Wiggle from a domestic online bike etailer into the global force it is today.

Wiggle co-founder Mitch Dall bumped into Fat Face co-founder Tim Slade at a football game where their children were playing on the same team.

Back in 2005, Wiggle was a small yet successful outfit wondering what its next move should be. Slade explained to Dall that he should look at private equity as an option to grow the business. Legend has it Dall had to ask what Slade meant by ‘private equity’, reflecting how new he was to this side of the business world.

A conversation with Fat Face’s then owners, private equity firm ISIS, followed, and a deal to acquire 42% of Wiggle was struck in 2006. The investment helped the business grow, and from the minnow it was in 2005, it now operates in 70 countries.

Flotation imminent

Five years on, and ISIS is seeking an exit. A sale to private equity or a trade buyer is being mulled, as well as a potential stock market flotation, valuing the retailer in excess of £200m.

Wiggle’s level of success continues to astound co-founders Dall and Harvey Jones, according to chief executive Humphrey Cobbold, who took over the reins in 2009. Cobbold says those employees who have been at Wiggle since the early days still gaze in astonishment when they walk around the etailer’s large warehouse and distribution centre.

And no wonder. Wiggle started from humble beginnings. It was 1999, and the web was just taking off. Dall and Jones, both keen cyclists, set up Wiggle.co.uk, selling items from the back of Butlers Cycles, a bike shop run by Dall in Portsmouth. They began offering anything they thought would sell well, including sex toys.

“It didn’t start out as a cycles store, they just wanted to sell some stuff online,” says Cobbold.

It was a year or so later that they began noticing that bike sales were growing fast, so they focused on the category. Cobbold says the decision to steer clear of using the words ‘bike’ or ‘cycles’ in the naming of the business was a clever move, allowing the Wiggle we know today to sell running and triathlon gear, both of which are strongly growing areas of the business.

“It was one of the genius moves not to call it ‘cycle stop something’,” says Cobbold, himself a cycling enthusiast. And the word ‘Wiggle’ also “brings a smile to your face”, he adds.

The growing success of the business must be bringing smiles to the faces of the founders. While Dall cashed in and sold his stake in 2008, Jones is still a minority investor, although is no longer involved in the day-to-day running of the business. In the year to January 31, EBITDA climbed from £7.5m to £10.5m while turnover rocketed 55% to £86m. Cobbold lured Andy Bond, former Asda boss and fellow sports fanatic, to the board as non-executive director last year.

HQ success

Wiggle shows all the signs of a company going from strength to strength, and that sense of success seems to be felt by the staff at the etailer’s new open plan HQ in Portsmouth. The head office move – so recent that the paint on the walls still smells fresh – reflects the etailer’s need for more space for its expanding team. 

A typical online business, the Wiggle workforce is young, casually dressed, and uses a variety of technologies to communicate with stakeholders, including Skype and video conferencing.

Responses to customer queries are done via email not phone, which Cobbold says is the fastest and most efficient way of answering a question quickly – arguing it is better for the customer too. As a result, there are no call-centre overheads.

While the business is growing quickly, Cobbold wants to retain the exciting sense of entrepreneurialism that got the business off the ground in the first place. It helps that some of Wiggle’s key members of staff have been there since the early days, including “bike nut and force of nature” Paul Bolwell, product and brand director.

In 2003 Wiggle became a pure-play etailer, moving out of Butlers Cycles and into a 10,000 sq ft warehouse premises as the business began to expand. The success shocked founders Dall and Jones, whose original idea was to grow the business to £1m turnover annually, according to Cobbold. By 2005, it was turning over £11m.

The ‘likely lads’ had created a business way beyond their ambitions. In 2006, ISIS acquired its stake, and invested to grow the business into the international player it is today.

Wiggle may have exited its store premises eight years ago, but under Cobbold, the etailer is mulling having a physical presence again. But he is not willing to rush into anything.

“I wouldn’t be surprised if we invested in stores,” says Cobbold. “We’ve done a fair amount of work – research, focus groups, design, proposition. Enough to know what we want to do.”

At head office, Cobbold gives Retail Week a sneak peak at the blueprints for potential stores. The designs are impressive. Cobbold says stores could lend themselves to the Wiggle brand, which he describes as “emotionally engaging”, selling product that people want to “touch and feel”.

New look shop

Cobbold is clear about one thing – if Wiggle does open stores, they have to look completely different from your average bike shop, which he says are “small and crammed with stock”, and often intimidating for women.

The blueprints show off a different kind of bike shop that is large and light, with displays showing off product.

“Good brands have to offer something that isn’t readily available,” says Cobbold. “What’s missing in this sector is a destination store. These would be brand building stores, with theatre.

“If Wiggle does a store it has to reflect the values of the brand – passion, range, and value.”

Cobbold says any store would most likely be on the fringe of a town, on a retail park. The stores would offer a “very technically enabled retail experience” says Cobbold, with iPads and ordering points being considered. “It would be designed with the internet in mind. Customers should expect to try and sample, not to take away with them. They can order and then get it delivered.”

However, with a change of ownership imminent, Cobbold says Wiggle will not be making any bold moves into the store space just yet. But the idea again reinforces the growing view that it is those retailers with a multichannel offer that will thrive, with even etail giant Amazon opening collection lockers, and House of Fraser opening click-and-collect stores in recent weeks.

While Wiggle has plenty to go for in the UK, particularly if it decides to go down the store route, it is its overseas business that is really motoring.

Wiggle first began selling overseas in response to customer emails from outside the UK asking if the company delivered internationally. Wiggle spotted a growth area and began setting up the processes for international delivery in 2007, including providing the right payment methods in the correct currency.

International sales now represent 60% of overall revenue. Wiggle has a dedicated team of translators and multilingual customer service advisers, in languages including Dutch, Italian, Russian and Chinese.

It is investing in marketing in overseas territories too, which has even included flying a banner over the Sydney Opera House, to coincide with the Sydney marathon this year.

“The net is a borderless medium,” says Cobbold. “Internet retail is all about scale.”

Enthusiasm undiminished

Back in the UK, Cobbold says there is a “fair amount of growth left”, with the average bike enthusiast spending anywhere between £500 to £1,000 a year on bike gadgetry including carbon pedals, inner tubes, and nano tech bike cleaner.

Cobbold wants to capture more of that spend. Currently, Wiggle’s market share stands at 2% to 3% in cycling goods in the UK. “We’ve still got room to grow,” says Cobbold, who explains one route to growth is m-commerce.

A year ago, between £25,000 and £30,000 was spent a month through its mobile site. Now that figure stands at £300,000. In a bid to improve the look and feel of its main site, Wiggle is building a studio in its warehouse to produce its own product shots.

Mobile and site development is one of the key planks of investment for Wiggle, along with overseas expansion and customer service. On the latter, it has developed an improved returns policy through a tie-up with Collect+, which allows customers to drop off products at 4,000 convenience stores across the country.

The move has reduced returns costs for the customer from £5 to £2.49, although in a business like Wiggle, says Cobbold, return rates are relatively low anyway. “We’re dealing with enthusiasts who know what they want and have selected carefully,” he says.

Wiggle’s own brand offer is strong too. Its DHB clothing brand – named after the surnames of Dall, Harvey and Bolwell – is a top-five cycling clothing brand in the UK.

It makes its own brand bikes, Verenti, which won an Oracle Retail Week Award in 2011 for product innovation. The components of Wiggle’s own-brand bikes are made in Taiwan and assembled in the workshop at its head office.

Each bike mechanic builds 50 to 70 bikes a week to be delivered to customers the world over, meaning 650 bikes a week are being made and sent to customers overall, including own-brand and branded.

Before being sent they are driven around a test track in the warehouse to check for quality. Wiggle sends out 100,000 items of stock a week, including accessories. Each with their own packet of complimentary Haribo sweets – a little treat the etailer gives its customers with every order.

The etailer prides itself on its breadth and depth of range – it offers 40,000 SKUs – but also ensures good value. “We’re not overly competitive on price, but people expect to get better value online, and we’re big enough to drive prices down,” says Cobbold.

So with the chief executive also a bike nut, what about the rest of the 230 staff? “Half the people in the business are keen cyclists,” says Cobbold. “Once you get in here, you feel a bit weird if you’re not.”

It is reassuring to know that, despite the extraordinary expansion of a once small online business, some things have not changed.

• Click here to view Retail Week Knowledge Bank’s Wiggle profile