Wide world of online wine

While small online wine retailers struggle to survive, the big names surge ahead with new ideas to keep their web customers satisfied.

024-026-uk-retail-online-1-DEWgs-1NOT LONG before penning this piece, one of the UK’s most promising online wine retailers went into voluntary receivership. Called Slurp, the business was one db had profiled just over 12 months ago – a little more than a year before the operation was declared bankrupt. Back then, CEO of the company Jeremy Howard had said his office was a “sea of smiles” such was the growth in web-based wine retailing.

He was also busy adding portals for northern Europe and France, claiming web-based wine retailing was the future. Indeed, he expressed surprise at Majestic’s decision to continue opening new stores, because, he said, there was no evidence to suggest bricks and mortar wine businesses would grow. Whether or not he was right about high street retailing, today it’s clear his own operation wasn’t profitable.

But is this a reflection of failings within Slurp or wider problems in online wine retailing in the UK as a whole? Well, latest CapGemini figures would suggest web-based wine sales aren’t on the slide. In fact, a report in April this year shows online sales of alcohol outpacing the total web-based retail market – beers, wines and spirits were up 19% year on year in April, compared to 16% for all sectors.

Part of the growth in drinks sales can be attributed to a period of warm weather – they were only rising by 3% for the first quarter of the year, but a 12% forecast for overall e-retail growth for 2013 is a sign there’s confidence in the longer term. Indeed, Tina Spooner, chief information officer at IMRG – the UK’s industry association for online retail – has said, “We expect UK.com to continue to dominate the retail picture as the recovery gathers greater momentum.”

In which case, what went wrong at Slurp? According to Greg Shaw, commercial manager at SH Jones, the company which bought the Slurp brand in the UK, the online retailer was struggling to trade profitably in the UK due to high overheads and low online retailing margins. It was also suffering from intense rivalry, mainly from long-established retail brands which are moving aggressively into the online arena.

Indeed, the former Slurp CEO said to db back in early 2012 that building an online wine business in Britain was like “doing all your training at base camp at Everest”, such was the strength of web-based competition. As a consequence, he also stated, “if you can make it here you can make it anywhere”.

But Slurp isn’t the only online operator to go under. Countless small web-based wine start-ups have come, then quietly gone over the last five years, each one promising to offer something different but failing to make enough of a mark, or profit, to keep trading. In Richard Halstead’s view, who heads up researcher Wine Intelligence, and who once worked for online retailer Virgin Wines, the businesses performing well on the web today are those with a legacy in mail order retailing, such as Direct Wines, or those with a strong off-line presence, like the supermarkets, above all Tesco.

Tom Chamberlin, MD of Slurp Asia

To focus on the latter, which sells one in four bottles of wine consumed in the UK, Tesco is both the UK’s largest offline and biggest online wine retailer, accounting for 50% of web-based wine sales in the UK, according to wine buyer Nick Juby.

Although he won’t reveal the exact amount of wine Tesco sells online, he does admit that online sales account for 10% of Tesco’s total wine business by value, and considering Tesco sells around £2 billion worth of wine each year, that would make its online business at least £200m. However, this sum seems rather less than 50% of the total online wine market, which is estimated to be between £600m to £1.3bn in the UK (or somewhere between 8m and 18m cases).

Nevertheless, Tesco’s online presence is impressive, with wine sold via the web either on Tesco.com alongside groceries, or through its Wine by the Case specialist wine website. And the supermarket is beginning to innovate online. Not only does the retailer list a range of 1400 wines on Wine by the Case, including a “fine wine” selection of over 300 labels, but it is also working on building its online “wine community” with a new “co-buy” option.

This is a form of co-operative wine buying in which a group of shoppers all opt to purchase the same product, and in the process, bring down the price. Juby explains, “It’s about getting customers together and it has been very exciting… and in the past few months several thousand have joined the co-buy community.” It has also allowed Tesco to sell “decent quantities” of products which wouldn’t necessarily move off the shelves quite so hastily in the supermarket’s stores.

Similar to flash sales on other websites, each “co-buy” only lasts a few hours and comprises a limited number of cases. If the entire quantity is sold, then each person who has signed up for the offer gets the wine at the best possible price. This means there’s the incentive for existing co-buy shoppers to encourage others to join the group – further helped by the offer of a free case for the person who signs up the most new users, who tend to be “slightly younger and a bit more affluent” than the average Tesco customer, according to Juby.

In other words, a potentially long-term and profitable shopper to draw in. Interestingly, wine is the first product to be sold this way at Tesco, and Juby admits that the product is being used as something of a guinea pig. “If it continues to work well for wine, we will try it for other products,” he says. Continuing, he comments, “We are trying to sell wine in a different way, while encouraging customers to trade up and try different types of wines.”

One Response to “Wide world of online wine”

  1. Derek secker says:

    Do you stock Ménage a’Trois Califonian merlot and how much per case.

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