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Chain Reaction Cycles – Their Legacy to Ecommerce in Ireland

  
12 December 2017
  

Chain Reaction Cycles – Their Legacy in Ecommerce

Northern Ireland's great hope for ecommerce was derailed on the 31st August 2013 when Chain Reaction Cycles (CRC) re-platformed from the IRP platform to a new ecommerce system.

For almost 13 years, from 2000 to the 31st of August 2013, the numbers using IRP technology were very impressive, not just for United Kingdom or Ireland but on the world stage of ecommerce.

No inward investment, £178M transacted in the final 12 months on the IRP platform (Aug 2012-Aug 2013), 170 countries sold to, 8 languages managed, 50 currencies handled, 13-year compound growth on the IRP of 69%. The Number 1 online bike shop in the world.

So how did it go wrong so quickly?

On August 31st 2013, CRC re-platformed from the IRP and saw their compound growth wiped out overnight. For the first time in its online history, in a market that was booming, CRC saw online sales not only stop growing but contract year on year.

CRC — in one move — had taken a successful online business with a great future and unwittingly smashed it into the wall.

Post Aug 2013 various case studies, people and tech companies tried to associate with the former success built up over 13 years, but it was not backed by commercial reality. The thing to take seriously in the totally unregulated ecommerce industry is qualification by results. And qualification by results in ecommerce essentially means one thing — proven profitable sales growth rates — and little else. Growth had well and truly disappeared in CRC.

In 2016, the CRC website had significantly LESS sales than in its final 12 months on the IRP in 2013. Wiggle, their main competitor — whom CRC had outperformed since 2000 — saw the opportunity and swooped in to buy CRC for a fraction of their 2013 value.

Northern Ireland's great ecommerce hope disappeared overnight from events started by a single technology stack move. In a few years, hundreds of jobs had disappeared and the Chain Reaction story had gone from 'boom to bought' following one decision.

So how can bad decisions happen so easily in ecommerce?

From 2013 to 2016, as CRC struggled to understand and recover from what had happened, public statements after account filings by CRC explained the downward spiral in terms of 'currency issues'. But the change was nothing to do with the bike market slowing or currency headwinds — the bike market was still booming. On the inside the few who understood ecommerce knew: the crash occurred because of the technology change.

People do not set out to make bad decisions, so how do these happen in ecommerce so easily?

In simple systems, where performance can be measured, there is not much room to manoeuvre: who was responsible, what the causes were, what the effects were. In very complex systems like politics or economics — and ecommerce — causes and effects are much harder to pin down. People can look at the exact same information and form totally opposite opinions.

Due to the complexity of ecommerce, if reporting and alignment are not set up in a very concise and particular way, decisions can actually become political rather than rational — because there is far too much room to move. When analysis is flawed, people attribute the success to the wrong thing — and serious mistakes start to happen.

It may come as a surprise for people to hear this but — because of the huge complexity — ecommerce is generally a very “political” environment to work in. In many ways, success means being assigned credit for the good things and avoiding blame for the things that go wrong - and people moving career at the right time.

This is where I believe things went wrong for CRC — and many other companies in ecommerce. They did not get on top of their accountability, reporting and alignment — and unwittingly, decisions were then based on factors other than their impact on sales and profits. When decisions are not made for the benefit of the shareholders — they are surely made for someone else's benefit.

Where would CRC be in 2018 if they had not re-platformed in 2013?

I was there on Day 1 when we switched on the CRC site together and I was there 13 years later when CRC moved off IRP technology and the growth crashed.

It is history now as CRC has been bought, but what if we were to ask the question 'Where would CRC be if they were still on IRP technology and an independent company?' I believe they would still be an owner-led business, one of the leading companies in Northern Ireland, and one of the leading ecommerce companies in Europe. They had a strong founding team and there is no reason to suggest that they would not have continued to outperform their competition and lead their market.

Based on their historical IRP performance, the compound growth would have continued unchecked as the online market was very strong and deep. This would have put annual sales round £500M for 2018.

Chain Reaction Cycles' legacy to ecommerce in Ireland

There is no doubt that Chain Reaction leave a legacy in cycling and in how they impacted the entire cycle industry.

In ecommerce, the thing that remains from the CRC story is the IRP technology that was developed by IRP Commerce to run their ecommerce operations. In 2018, adoption of IRP technology is growing faster than at any time — and once again IRP Commerce is working with companies on the global ecommerce stage.

IRP technology is CRC's legacy to Ecommerce in Ireland.

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