London’s most wine-friendly restaurants may be particularly difficult to get into next week, thanks to the influx of hundreds of winemakers and wine traders to the London International Wine Fair, now encompassing spirits, at the ExCel exhibition centre in the eastern wastes of the city. The themes being debated this year reflect the current preoccupations of the mass market: how do you make money from online retailing? Who is the consumer? How does wine feature in the digital conversation?
Something entirely new this year will be a group of 50 keen wine consumers roaming the fair under the aegis of online retailer Naked Wines. If Naked’s founder Rowan Gormley has his way, they will be laying the foundations of an entirely new departure for his company, while benefiting in an ingenious way from the present worldwide glut of wine.
“Our goal,” he explained to me recently, looking less than dynamic with a leg in plaster, “is to create a meritocracy for winemakers where the sales go to people with huge talent, not a huge marketing budget – and UK wine drinkers pay what they feel a wine is worth, rather than the result of some deal. We want to change Naked Wines from being a retailer to being a farmers’ market.”
Gormley used to run Virgin Wines for Sir Richard Branson, before falling out with the online retailer’s new owners and old rivals, Tony Laithwaite’s Direct Wines. He set up Naked Wines in opposition to this behemoth in December 2008 and has been running it as a reasonably conventional direct-mail retailer since then – although he has made waves by financing many of their 85 suppliers ahead of delivery, allowing talented young winemakers to set up on their own. =
Gormley has always had a particularly keen eye on the social media innovations employed in other fields. Visit the Naked Wines website and you will see that consumers (“our real asset”) are at least as important as the wines. There are reviews by the hundred, with ratings by value from the company’s 50,000 “angels”. These are Naked customers who pay £20 a month, and receive a cashback discount of 33 per cent into their Naked account when they place an order.
Naked’s customers have been recruited via partnerships with the likes of Jamie Oliver and BBC Good Food, and the company seems to have tapped into a seam of enthusiastic but distinctly non-nerdy wine drinkers who are typically, I was told, aged between 30 and 60, have an average annual income of £65,000 and regard wine as a minor, not major, interest.
“Value’s important, but they tend to like extrovert wines. They want to know with the first sip that this isn’t average. I imagine if you tasted them you might be a bit …” Gormley glanced at me. “Snooty about them?” I suggested. He grinned.
But now Gormley (“I don’t have a palate, but I do have a business degree”) wants to change the way Naked’s wines are chosen and priced by letting his customers decide. As a first step, small groups from the 50 “archangels”, the Naked customers who are the keenest reviewers and buyers, will spend a morning at the fair, visiting promising smallish exhibitors not yet represented in the UK. At lunchtime they will all gather and exchange views on specific finds. In the afternoon, the plan is that they will descend en masse on the most likely new suppliers and come up with a wish list.
The selected wine producers will then be given the chance to pitch for Naked Wines’ business by having the archangels’ notes and scores posted on the Naked Wines website. But it will be the customers who decide on the price, as it will be for all future transactions if Gormley gets his way. Working in competition with the giant retailers, his chief problem is finding suitable new products rather than new consumers. “I want us to become a fetcher rather than a seller,” he says.
The idea is that possible new wines are either suggested by customers or by Naked’s past route of scouring wine colleges and trade magazines and asking current suppliers for suggestions. The price is then decided mutually by producer and consumer.
“Say you have a New Zealand Pinot Noir that retails for $25 in Auckland. If our customers take 1,000 cases, say the producer will accept $15. We translate that into a UK retail price and if 1,000 of our customers agree to buy, then the deal is done,” Gormley explains. “Or, they can say no, and we’ll ask whether there’s a price at which they would take it. So the winemaker gets a demand curve and it gives them a chance to say whether they’d rather take the margin or the volume. So for the customer, the price may go down from what they have bid, since all customers get the same price.
“The winemaker then has to deliver the wine to our New Zealand agent. We test and check it and if everything’s fine, the winemaker gets our money. So for the winemaker there are no costs before sales. We want the winemaker to have no incentive to inflate prices, but a powerful incentive to make better wine.”
Naked takes 10 per cent of all transactions, and has consumers’ cash in the interim between committing to the purchase and agreeing the deal with the supplier. Each wine producer is profiled with photographs and cosy copy on the site. Typically, they are individuals without huge working capital who have already used Naked’s funding to reach a new market.
Gormley was inspired to instigate his new scheme by attending a mobile phone technology conference in Munich. “I was the oldest by 28 years. There were lots of programmers there who had left big companies and are now working in their bedrooms. The App Store has given them a way of selling their goods directly. I want to build an App Store for wine, where winemakers can pitch their wines direct to customers.”
Apple, of course, takes considerably more than 10 per cent on its transactions – but then the wine trade never was very good at maximising margins.