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Sunday 5 July 2015

UK independent sector ‘far too cluttered’

1st August, 2014 by Gabriel Stone

The UK independent retail scene is too crowded, with new arrivals simply stealing each others’ sales rather then supermarket share, warns one merchant.

UK retail“The independent sector is getting far too cluttered,” Simon Taylor, managing director of Hampshire wine merchant Stone Vine & Sun, told the drinks business.

“Everybody thinks it’s growing because you have all these new businesses opening, but actually they’re just cannibalising off other businesses.”

In particular, Taylor argued that the recent rise of new independent wine retailers, often set up by former Oddbins or Wine Rack employees, posed little threat to the UK’s larger chains.

“They’re not necessarily stealing share from Majestic or the supermarkets, they’re fighting over the same customers who like to buy interesting wines,” he maintained. Then you’ve got all these hole in the wall internet businesses that think they can take a margin – it’s frustrating.”

Drawing a parallel with the restaurant sector, Taylor suggested that too many people were attracted to the wine trade without understanding enough about the commercial and logistical challenges involved.

“Lots of people want to run wine businesses and invest in wine businesses but it’s not actually that healthy,” he remarked. “There are far too many scrabbling along trying to make a living – it’s a cut-throat scene.”

As for his own business, which Taylor set up in 2002 after leaving his previous career as a director of Sotheby’s auction house, he acknowledged the challenge to stay afloat.

“The only thing that enables us to survive is that we like to take the whole margin by shipping ourselves,” explained Taylor. “We do carry a lot of stock but it means we can do a good wholesale business. Wholesale is probably 30-40% of our business now from less than 10% four years ago.”

However, in contrast to the situation outlined by Taylor in rural Hampshire, a number of London independent retailers believe there is still room to expand their operation.

Among these is Bottle Apostle, which opened its first outlet in Hackney in 2009 and has since added shops in Crouch End and Clapham.

“We can easily grow very quickly and would love to open another shop, in fact two or three really,” reported Bottle Apostle marketing manager Miranda Fong.

“It’s an incredible time for independents at the moment,” she continued. “There are more than enough customers.”

Another London wine retailer in the process of expanding is Vagabond Wine, which started in Fulham, opened a second branch in Charlotte Street at the end of 2013 and is now on the hunt for a third site.

Nevertheless, managing director Stephen Finch portrayed a trading environment that, in his view, remains very much in favour of the major multiple retailers.

“The way liquor laws are built favours the supermarkets and they don’t need any more advantage over the independents,” he remarked. “They can afford not to make money on wine, we cannot. It’s really hard for independents to find that unique value proposition to get customers to spend money with them and not the supermarkets.”

For Finch, the key to success lies in ensuring that Vagabond offers a very different level of service and atmosphere to its larger competitors, thanks to a hybrid bar and shop model based around Enomatic machines.

“It allows people to discover without fear of failure,” he summed up. “But it’s not just a try-before-you-buy transactional thing, it’s also selling an experience. People come with friends, they hang out and have some food as well. We’ve embraced people’s desire to come to a place that’s just a casual cross between a wine shop, warehouse and pub.”

UK independent wine retail customers by age group

UK independent wine retail customers by age group

Recent research by the Wilson Drinks Report indicates that the younger generation of wine consumers is more likely than older demographics to shop with independent retailers (see chart, right).

Despite this positive sign for the future of the independent sector, the report also noted that only 17% of consumers who drink red wine tend to buy it from an independent retailer.

According to Tim Wilson, managing director of WDR, “This must represent a significant opportunity for the independent sector, as we also know that drinkers who buy wine from independents tend to spend more on alcohol to drink at home.”

An in-depth look at the UK independent retail sector will appear in August’s issue of the drinks business.

One Response to “UK independent sector ‘far too cluttered’”

  1. Danny Cameron says:

    A very interesting article. As a one time (successful!) independent merchant, and now supplying the cream of the independent sector, it seems to me that the issue is less about cannabalism from within the sector, and more about how demand can be increased from without. As more independents do more interesting and creative stuff, this happens on a micro level anyway, but at a macro level, the industry needs to explore how the generic profile of independent wine merchants can be raised. Jancis’ current campaign on her website is a great and positive example, but it would be wonderful to see more wine (and general lifestyle) journalism really educating the consumer by guiding them to good independents (honourable exceptions, please look away now). I really believe that this would really engage the consumer more in the journalistic process too, and be good for ‘independent’ wine journalism, as well as the diversity of the UK wine trade. Personally, I’m not sure that any newspaper reader who takes the trouble to read a wine column is especially interested in knowing where the latest 2 for a tenner offer is, anyway.
    Let’s dare to dream. More wine consumers engaged in diversity-led journalism, so increasing the profile and sales for independent merchants (which won’t really affect the rest of the market anyway), and raising the profile of high quality wine journalism at the same time. And all that time, independents are becoming more creative, more engaging, more exciting places to buy wine than ever before. In many cases, this is already a reality, and hats off to those journalists who are getting out there and visiting the top independents, and talking about them and their wines already.

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