Thorsten Heckrath-Rose, Managing Director of ROSE Bikes GmbH talks to Fusion Associates about the company’s roots, digital transformation and the remarkable success of the business through the Coronavirus crisis.

In conversation with Alex Pescott, CEO at Fusion Associates.

“Rose Bikes is a family business founded in 1907. It was a retail business when it started and then in the late 1970’s we began to focus more on sporty bikes like road bikes which were getting popular at that time, and also later on mountain bikes, sporty trekking and city urban bikes. “In that same period we decided to start a mail order business. This was because my father-in-law had good connections to Asia, in fact he was one of the first Europeans to start importing goods from Japan. He’s still in the company but these days he’s focused on doing ‘fun things’ like working on new road bike developments.

“The quantities were quite big obviously because it was container loads so we needed to figure out ways to get rid of larger quantities. At the same time because we were well known outside the borders of our city of Bocholt where our business and our store was located, people were asking how to get small spare parts and accessories without driving out to Bocholt. That was the catalyst for the idea to start a mail order business and quite soon after that our first catalogue was launched.

“We produced this catalogue twice a year until 2014 and it was like a bible for cyclists. Almost 1000 pages and I think the biggest quantity we printed was 800,000 copies, so it was truckloads of catalogues at that time. That was one of the key decisions in the company’s history, to go to mail order business.”

“Later on in 1997 we launched our first webshop which was at that time more or less just a platform to place the order for catalogue customers. It was like an online form to fill in your order so you didn’t have to send by fax or on paper or didn’t have to call. We recognised quite soon that this technology could be really ground breaking and that’s why we have been focusing since then on how to improve that digital platform. That proved to be a good decision to do that early because we have been able to collect a lot of experience since 1997 in the online market. That was another big milestone for us.

“What we also tried to do was get our hands more on the development of the bikes and therefore we started quite early to produce our own range of bicycle frames and specify and build our own bicycles. The assembly is still mostly done today in our headquarters in Bocholt. We have a production line with more than 60 people now and they assemble all those bikes.”

“In former years we had several trademarks that we had been using for bikes. In 2008 we made the decision to move away from these artificial names because we also owned the brand name Red Bull at that time for Germany. We had been mixed up with the drink many times and it’s quite difficult to get away from the image of the drink. That is why we decided to focus on our heritage and our history and use our family name for our bicycle brand range.

”What we also started some years ago was to massively invest in our technologies and into our own frame design. The design of frames and the complete bike design has become really important over the last couple of years. Now it’s more like a lifestyle object of desire and not only a technological product which is just for experts and for those who have been in the scene for a long time and are probably only looking for good functionality.

”These decisions to focus on our family brand name Rose and also to invest in our industrial design, can be compared to the automotive strategy, to have something which is recognisable. These decisions have been very important over the last couple of years because this is why we could form our own brand.

“What really makes us strong on bikes besides our own bike design and the engineering is that we always offer the best possible price quality ratio and that is for our online shop as well as for our stores. It’s always the same price and it’s always the best price. So we don’t give any discount but we always start with the best price right from the beginning.”

“Another thing which has been strong in the past is that we were able to customise bikes so you could basically choose your own configuration. We did that for almost all of our bikes. That was however killing the productivity and that is why we decided to step away from it and instead to focus on giving the best pack for the best price. For the really high end there will be configuration options in the future. The configuration we did in the past was also presented digitally so you could choose the configuration online and you could even see the result. It was of course quite stunning but it cost a lot of money that is why we had to move a little bit away from that.

”Right now gravel bikes in the market are really booming and that is also by far our strongest segment. It is incredible how fast this bike category has been evolving over the last couple of years as well of course e-bikes.

“We do also develop and sell e-bikes, but this is still quite a stationary thing because these days people still want to test ride. They want to have a look at the bike and talk to an advisor. Of course that will change in the future. At the moment 80% of our business is done online, however for e-bikes it’s probably only 15% online, so that shows how big the potential is for electronic bikes in the online world.

“We could see over the past weeks and months during the Coronavirus crisis that it’s all moving quite fast towards online and the online share has really been exploding. This is probably one of the big changes during the crisis, that online has really been evolving much faster than it did in the past.”

“Also even more people started cycling. They want to do some sports, they want to do individual sport and that was possible still in many countries like Germany. We have not been forced to stay at home so we could still do sports.

“People started looking for bikes, bike accessories and clothing online. That is also one part of our business as a bike dealer. We do not only produce our own bikes, which is 40% of our turnover, but we also trade clothing, parts and accessories. Partly this is our own branded stuff but the really technologically complicated products like shifting group sets or hydraulic brakes, we leave that field to the experts. The parts on the bike which are a little bit easier to handle and where more comes from the design and construction but not from specific technologies like braking technology, we do those, such as cockpit parts, stems, handle bars, saddles, rims, wheels. We can manage those with our engineering team.

”60% of our turnover is accessories, clothing and spare parts. This kind of business is of course a little bit different from the bikes. So for the bikes it’s quite a small range, we have around 100 bike models. However with all the parts, it’s forty to fifty thousand items we carry in stock now.

”We also do our logistics by ourselves. So we buy the stuff and we sell the stuff, it’s classical dealing. This kind of business has been under price pressure for the last decade and there we always have to offer the best possible price every day, changing many prices each day to be competitive and to stay competitive.

”Also the way of selling, especially selling online, is completely different. People are coming through for example Google searches and they know exactly what they want or you have to guide them quickly through the range on our website and then it’s just about getting a quick conversion. On the other side, the bikes are not quick conversions at all. On average the customer comes back maybe two or three dozen times before he buys the bike, so these two things are completely different. For the bikes it’s more like you have to inspire, to emotionalise, to build trust. For parts, clothing, accessories, it’s just about being quick and having an easy to use process. This makes it quite a challenge to have all that on one website and to have all that in one physical retail store.

”To improve this we took over a UX company last year. They are focused only on user experience, user intelligence and how to guide the customer through the journey. They are located 50km away from our headquarters, with 25 experts in the user experience field. We hired them last year, acquired the whole company, integrated the management into our structure and matched our leadership. That was also one of the very important decisions of the last years, to integrate that technology into our business.”

“In total we are now a fully vertical company, so we do everything from engineering through logistics, production, customer service, after sales service, and we also do the whole digital journey. We have our own team of software engineers who do the web shop for example, and the integration of all external systems, who are connecting all the different pieces of the digital world. Then we have the user experience experts who are responsible to make it as easy as possible and to make the purchasing really a highlight. I think that is probably one of the special things about Rose that we are doing all of this in-house.

”In total we have 480 people now, mostly in our headquarters in Bocholt. Around 200 of those are people working in logistics and then another 60-70 in our flagship store in Bocholt. We also have two more stores, one of which is in Munich.

”We have been opening pop-up as a cooperation during the Coronavirus crisis with a travel agent in Munster, and another cooperation will open in Berlin soon. We are preparing other cooperations as well with fashion and sports dealers. We are really opening up our system and understanding ourselves more like an ecosystem and as a connector. That is also quite unique in the market because none of our competitors are doing it the same way that we do. We are really true multi or Omni channel because we don’t focus only on ecommerce and maybe one or two stores, we do almost all the concepts which make sense and are open for any kind of cooperation which brings us forward.”

“Of course what has changed during the last weeks and months for all of our employees is the way of working but I think these kind of stories you hear from everybody now, that home office is really a fixed part of the daily business. For us it’s really what we want.

”Our IT has been preparing that for a couple of years already so we were able to quite easily send everybody home just within one day and follow the government instructions. That was really good because we just had to invest in a couple more laptops and that was it, the digital infrastructure was there already. “People really embraced this new way of working. Large group workshops through Microsoft Teams have been very efficient. I think that some eyes are even more open now than they were before and the change we were talking about for many years is coming faster now.

”Because we tried to make our people ready for it, it was not such a big challenge for us as a company. We were lucky that the virus did not hit our core business and that we were prepared for another way of working. That is why the crisis did not really hit us except the close down of our physical stores. On the ecommerce side it has been booming since then, we are chasing record after record and that is why for Rose we can say we came out much stronger and much more powerful, and hopefully it continues like that.”

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