Retailers have differing views on how to exploit social networking channels, but the founder of online wine specialist Naked Wines believes his business is the very definition of social commerce.
Rowan Gormley, who was one of the founding members of Virgin Wines and Virgin Money before launching his latest venture at the end of 2008, told Retail Gazette why he thinks his current business has what it takes to be a retailing success story using the power of online communities.
“The definition of social commerce for a lot of people is ‘a way of emailing loads of customers’, which is actually a form of direct marketing,” he explains.
“Naked Wines is not like this. It is a social commerce company that gets people together to make things happen that they couldn’t achieve alone.”
A dozen former Virgin Wines staff established Norwich-based Naked Wines in 2008 and the new firm was set up with the aim of allowing talented winemakers from around the world to successfully serve the UK market.
The company gets thousands of customers to commit to paying for products and then acts as a conduit between them and the winemakers, agreeing the best deal for both parties.
Gormley explains: “Good winemakers have to spend more time and money selling their product than actually making the wine, which means the bestselling wines aren’t made by the best winemakers - they are made by the best salespeople.
“That’s a sad state of affairs - we wanted to reverse that by funding small winemakers. We buy the wine from them in advance so they don’t have to sell it.
“At the beginning, we gave them the working capital and gathered 100,000 customers, saying ‘if you give us your money in advance we’ll give you better wine for your money’.”
Being online-only has a number of distinct advantages for Naked Wines, with various social networking avenues allowing customers to effectively have direct contact with the winemakers.
This is something that cannot easily be replicated in a bricks and mortar wine merchants, and the lack of property portfolio also ensures Naked Wines can keep costs and overheads low.
Naked Wines uses its position at the heart of the e-tail industry to exploit the full possibilities of social media, through creating competitions and garnering customer feedback.
“It’s not just a case of a traditional wine merchant advertising wine and telling people to drink it, we’re saying to customers ‘it’s your money, you decide where we are going to invest it’,” Gormley states.
So, what do the statistics look like two years since the business launched?
The founder reveals that Naked Wines now works with 85 winemakers across every wine-producing country apart from England; the company’s presence has actually fundamentally changed the way around 22 businesses function.
“These 22 firms account for three-quarters of all the wine we sell and it is fair to say that three-quarters of the wine we sell would not exist without the support from our customers,” he said.
In 2009 sales totalled around £4 million and rose to just over £10 million last year as 2.5 million bottles of wine were sold.
Trading has gradually increased each year and 2011 is expected to be the company’s first profitable 12 months with initial investment starting to bear fruit, but what does Gormley think the future holds for his enterprise?
“We are working in a rapidly growing sector and we are up against some big players such as Tesco, but the model we have created has attracted attention from the right kind of people,” he said.
“I’m confident about the future. The more customers we can acquire, the more independent winemakers we will be able to invest in and the further down the supply chain we can go.”