Elevator Pitch: Chappelli Cycles

Elevator Pitch is a regular feature on Lifehacker where we profile startups and new companies and pick their brains for entrepreneurial advice. This week, we’re talking with co-founder Tom Davies from Chappelli Cycles.

In 128 words or less, explain your business idea.

Chappelli Cycles designs, manufactures and sells beautiful yet practical and affordable bicycles for the modern urban rider.

The initial idea for the business was born out of our frustration with paying too much money for ugly bikes with brand names all over them. We decided to create eye-catching, clean looking bicycles that we wanted to ride, that reflected our lifestyle needs yet were attainable for the average person. To do so we decided to go direct to the consumer via the internet to keep prices low and solicit immediate feedback.

As the business grew we expanded the range in line with customer needs and have also started building a network of Chappelli concept stores to allow people to understand our brand and test our bicycles.

What strategies are you using to grow and finance your idea?

Chappelli Cycles is self-funded, which has had a major impact on the way we have grown the business. It has meant our growth has been slow and steady, with every investment decision carefully weighed up against other opportunities. Although we have doubled our revenues every year since inception, we are still often unable to meet demand due to lack of inventory, particularly for new models. Like any physical goods retail business it is very cash-flow intensive and we need to purchase inventory months before we sell it without knowing how well it will sell.

Over the years we have expanded our product range from one model to seven with another two planned later this year. We did so in response to our customer’s needs. We started off selling fixies but quickly realised that people in hilly Sydney loved the look of our bikes but needed gears, hence we developed a three speed ‘fixie style’ bike. This then lead to a women’s version and then an eight speed which became later our Design Award winning Chappelli NuVinci.

The evolution of our product range has been an important part of growing our revenues. The other key driver of growth has been our expansion into physical outlets. We realised that only selling our bikes online meant potential customers couldn’t see the superior quality of our bikes against other brands on the market. They were just comparing our prices against our competitors. By opening up stores where people could understand our direct-to-consumer business model and see the quality of our products for themselves we have been able to grow our business much faster than if we’d just stayed online. It is expensive to open up stores and the payoff isn’t as quick as online but it has become a critical part of our long term growth strategy.

Initially we were only online in Australia and our growth was mostly driven by SEM. Now we have stores in Melbourne, Sydney and (soon) Brisbane, as well as distributors and partners in France, Sweden, Singapore and soon also the UK and USA. Many of our sales now come from word of mouth and referrals, which is really positive and something we take great pride in. However, we remain at our core an online brand in the way we go about our business, we just happen to have offline stores also.

What’s the biggest challenge facing your business?

Access to capital is our single biggest challenge. We are self-funded and often can’t meet demand for our products so managing the working capital needed for growth is a real issue. Unfortunately, no one seems interested in funding a fast- growing retail business unless it’s pure play e-commerce! They don’t seem to realise that by opening up physical stores we are building up a defensible position in the market that will be more attractive in the long term.

How do your differentiate your business from your competitors?

We place design at our core. One of the founders of Chappelli Cycles, Pablo Chappell (pictured) was on the original design team for Dyson. He then went on to win design awards for other consumer products companies and was working as the head of innovation and design at Breville before leaving to start Chappelli. He loves bicycles and has always wanted to start his own bicycle company. It was his idea to build the Chappelli NuVinci in collaboration with Fallbrook Technologies, for which we won an Australian International Design Award for best sporting product in 2012 – second only to James Cameron’s $15 million submersible for the major competition prize!

When we started Chappelli we made a conscious decision to build a bicycle company we could really take pride in. We’ve sacrificed margins to ensure better quality components and special features, but the results have set us apart. One small example is that each of our bikes comes with hand stitched leather grips with a tessellated Chappelli pattern on them that we had designed by one of Australia’s leading graphic designers. It costs us a lot to do but no other bicycle on the market has that.

The other way we differentiate ourselves is through product innovation. We are always developing new products and looking at new ways of doing things. We were the first bicycle company in Australia to start selling our bicycles online direct to consumers, we were the first to start manufacturing and selling modern-looking 3-speed internal hub commuter bicycles, and we were among the first manufactures worldwide to start using the ground breaking Nu-Vinci hub infinite gearing system. We spend a lot of our time on new product development and research and testing, which is integral for growing the brand and expanding into new markets.

What one phone, tablet or PC application could you not live without?

Dropbox. It’s awesome. All our companies’ images and important documents are located there for everybody to access as needed no matter where we are or what device we are on. Now, everything is always up to date and our various stores, distributors and partners can have access to the latest documents or images at any time.

What’s the best piece of business advice you’ve ever received?

Plan for the best, prepare for the worst and always have an exit plan.

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