A premium cycling retailer looking to expand its stores across London and the South East
Velorution is one of London’s leading premium urban cycling retailers. We aim to bring the most innovative and unique urban cycling products from around the world to our customers, the Velorutionaries. We constantly seek to surprise, delight and satisfy our patrons by curating the most superb and select range of urban cycles, apparel and accessories.
Over the last 3 years, we feel that we have thrived at our locations in Great Portland Street and Selfridges and we now want to expand on our success.
Our strategy is simple. We want to open more stores across London and the South-East, increase the circulation of our Velorution magazine, and invest in expanding our online offering so that we can serve both our UK and international customers.
Velorution's goal is to celebrate all the wonderful forms of urban cycling and encourage people to fall in love with riding through cities on beautiful and innovative cycles equipped with the highest specification and most stylish apparel and accessories from around the world.
Substantial accomplishments to date
We aim for Velorution to be London’s #1 retailer for the discerning urban cyclist. Since the acquisition of the Velorution brand in 2012, the business has more than doubled revenues. As well as launching a seasonal concession in Selfridges, the business introduced a premium cycling publication and an international online e-commerce platform. Revenues of £1m, profitable EBITDA of £35k and a strong balance sheet are testament to the continued strategy of offering London’s urban cyclists a curated collection of innovative, premium, exclusive and semi-exclusive brands from around the world *.
The company has applied for advanced assurance of EIS tax relief and is awaiting the decision of HMRC before they categorically mark the deal as an EIS eligible investment. For the time being you should assume that it is not eligible for EIS.
Management’s plan to capitalise on Velorution’s success to date is to replicate what has worked well for the business in the past. We believe that the main drivers of growth over the next 3 years will be: continued store roll-out across London and the South East, growth in e-commerce, expanded own-brand sales, and wider circulation of the Velorution magazine.
1. Store Roll-Out.
Velorution has built what it believes is a successful and replicable store and concession offering at Great Portland Street and Selfridges. The plan is to roll-out this model to suitable locations across London and the South East, and the business has already prospected a pipeline of prime sites.
Velorution has already invested in a scalable e-commerce offering and plans to capitalise on the online opportunity for its urban cycling brands both in the UK and internationally through this channel. The business already has a Marketing Director and media team that will continue to focus on both organic and paid online customer acquisition strategies.
3. Expansion of Own-Brand.
Velorution has successfully launched its own premium cycling apparel and footwear range and will look to introduce a range of entry-level, stylish urban cycles to complement the retailer’s current offering. Investment in this line will be small to begin with, as was the case with the apparel line, in order to test and improve the product with consumer and industry feedback, before scaling the proposition.
4. The Velorution Magazine.
Velorution’s magazine has proven profitable and is a multi-purposed activity for the business*. As well as generating a profit, the publication serves to raise brand-awareness and repeat sales for both the stores and its e-commerce site. The growth plan sees the magazine moving to a quarterly publication over the next few months.
Use of proceeds
Velorution is seeking to raise a minimum of £500k in order to fund its growth strategy. The financing will be invested as follows:
Use of Funds:
2x New Store Openings planned for 2016 - £200k.
Recruitment of key team members over 2016 & 2017 - £140k.
Working capital to scale inventory and drive online sales - £160k.
Total - £500k.
New store metrics have been planned on a conservative basis, assuming the same cost structure as the Great Portland Street store, but with lower revenue targets. It has also been assumed that stores will take up to 24 months to reach their mature level of profitability, however the team believes this should be achieved within the first 12 months.
After this initial £500k investment, we expect that new store openings and working capital will be funded through organic cash flows from business operations.
The company currently has £216,043 worth of directors loans. None of the funds from this raise will be used to repay this debt.
Velorution's target customers are both those who are thinking about taking up urban cycling and those that have been doing it for years. It is consumers who are looking for something a bit more special; bicycles and apparel that are unique and reflect a wonderful sense of individuality and personality. Equipment that is both high quality and innovative.
Characteristics of target market
In 2010, The London School of Economics sized the British cycling market at £3.0bn per annum. The success of the British cycling team at the London Olympic Games and massive Government investment in urban cycling infrastructure, including the Boris Bike Scheme, has only served to fuel the popularity of cycling, particularly in the Capital.
Cycle-retail is dominated by a few national chains, such as Evans, CycleSurgery and Halfords, who cater to the mass-market. Velorution, however, is targeted at the under-served urban cyclist who is looking for something special. The estimated average selling price of a bicycles in the UK is c.£250, whilst at Velorution the average order value is closer to £1,000. This is a smaller segment of the overall market, but it is expanding and can be profitable.
Velorution reaches its consumers through several channels. Its stores on Great Portland St and in Selfridges are destination sites that attract many walk-in customers, whilst its website and magazine extends its reach on a global basis. We feel the magazine in particular, has been a highly successful marketing and re-marketing tool to drive past and new customers into stores and onto its online shop.
Velorution's 2 sites in central London are near many competitors, including outlets of many national chains. This has not hindered the company's growth or profitability, as the unique curation of inspiring cycles and apparel are difficult to find elsewhere in the capital. The focus on knowledgeable and friendly customer service also serves to differentiate Velorution from the competition and makes sure customers leave happy and satisfied with each purchase and come back time and again for their cycling needs.