5. Wine Sales in the Retail Sector Flashcards
What % of wine is sold BY VOLUME through retail in the UK?
What % by value?
80% by vol.
60% by value.
Identify the different types of retailer in a Free Market :
Types of retailer in a Free Market :
- Supermarkets (regular and premium)
- Deep Discounters
- Convenience Retailers
- Specialist Wine Retailers
- Hybrids
- Online Retailing
Define Supermarket:
some e.g.s?
A larger store selling groceries and household goods, allowing consumers to buy everything they need under one roof.
e.g. Wal-Mart (USA), Woolworths (S. Africa), Tesco (UK), Carrefour (France).
NOT to be confused w/Deep Discounters e.g. Aldi, Lidl.
What types of wine do Supermarkets typically stock ?
Types of wine do Supermarkets typically stock :
- Inexpensive to mid-priced wine
- Wines from well-known/popular regions, made by well-known brands e.g. Jacob’s Creek, Barefoot, Oyster Bay.
- Wine styles that appeal to wide range of customers, many of whom have litte/no wine knowledge.
- In wine-producing countries, selection often dominated by local wines.
What are the Advantages of selling wines at a Supermarket :
Advantages of selling wines at a Supermarket :
- Attractive option for producers wanting to sell large volumes of wine
- High levels of market exposure
- In many cases, supermarkets buy directly from producers, meaning there are no intermediary costs.
- Many supermarkets also employ winemakers who work closely with producers to supervise production and ensure quality control – such expertise may help producers to improve the quality of other wines which they sell elsewhere.
What are the Disadvantages of selling wines at a Supermarket :
Disadvantages of selling wines at a Supermarket :
- Enormous price negotiating power as more producers want to sell to a supermarket than the supermarket needs (i.e. an excess of supply over demand)
- Additional fees : Wine stocked by the supermarket + any additional promotion.
- Very strict requirements regarding quality control, time and manner of delivery, packaging and labelling. If these are not met, the supermarket can often simply refuse to take the wine.
- Wine may be delisted if it does not achieve the expected sales volumes and profit margins.
How do Supermarkets reduce the consumers’ ability to compare prices of wines ?
By using Private Label :
Consumers will often seek the cheapest price available and therefore buy where the price is the lowest.
In order to reach higher margins, supermarkets will reduce the ability from customers to compare prices of wines by selling wines bottled under labels exclusive to them (private label)
Supermarket’s name may not appear on label, and actual wine itself may be available widely under different labels.
Some supermarkets have an own-brand range of wines (that clearly display the supermarket’s name and branding on the label), such as Sainsbury’s Taste the Difference in the UK.
How does wine offered by premium supermarkets differ from that offered by standard ones ?
Premium supermarkets :
- Mid-priced to premium wines
- Appeals to consumers w/strong interest in wine
- Wine from artisan producers sold under producer’s label.
- Bought in smaller quantities w/understanding that once wine runs out = no more available.
What is the business model of Deep Discounters?
4 e.g.s?
Deep Discounters :
- Similar to supermarkets, but rely even more on volumes
- Prices are set permanently low, rarely (if ever) offering any form of price promotion.
e.g.s Aldi, Lidl in Germany, Netto in Denmark, Trader Joe’s in USA (subject to 3-Tier system).
How do Deep Discounters manage to keep their costs down?
Deep Discounters manage to keep their costs down :
- Relying on volume with lower margin
- Basic shops presentation
- Lower rent : Locations far from prime areas.
- Limited product range : usually only 1 type of each thing, most wines are private label, e.g. Two Buck Chuck.
- No major brands : Tend to be more expensive. Instead buying up stock of lesser-known producers for less $$
- Cut intermediaries : Direct purchasing from producers
What are the Advantages of selling wines at a Deep Discounter :
Advantages of selling wines at a Deep Discounter :
- Most product sold are private labels, e.g. Charles Shaw’s ‘Two Buck Chuck’ for Trader Joe’s.
- Usually buy the entire stock of small producers
- No additional fees : Unlike supermarkets, DD do not charge producers for stocking their products and they don’t offer price promotion at the charge of the producer.
What is an exception to the rule that Deep Discounters only stock inexpensive wines?
What has this resulted in (2)?
- deep discounters may buy small amounts of more expensive wine in stores located in more affluent areas, or ahead of times of greater spending, e.g. Christmas.
- this has attracted customers with a strong interest in wine, many of whom purchase inexpensive wines in addition to the $$ one.
- in Britain, wine purchases at deep discounters are increasing:
2012: 23% of drinkers purchased from DD;
2018: 37%
How do Convenience Retailers differ from supermarkets/deep discounters ?
What is the typical product range offered by these ?
Why do prices tend to be higher ?
Why do consumers still buy knowing the prices are higher ?
Convenience Retailers :
- Located in prime areas (where more people live) and are usually open longer (sometimes 24 hrs).
- Can be independently owned, e.g. common in India, or part of a franchise, e.g. Spar, found in many countries.
- Product Range: similar to but smaller than supermarkets; popular, major brands (some, e.g. 7-Eleven have their own exclusive brand).
- Prices: tend to be more expensive vs SM/DD; rents proportionately higher, less efficient (originally designed for other purposes), larger staff relative to size, franchise arrangement = fee to franchise owner.
Consumers are often willing to pay a little extra for the convenience of a local store to save them having to go further to a supermarket, or when everthing else is closed
Define Specialist Wine Retailer :
Specialist Wine Retailer :
- Retailers that specialize in wine, often from mid-priced to super-premium.
- Some sell other premium alcohol such as spirits and beers.
- Some sell artisan products : cheese and deli
Using examples, identify some different types of Specialist Wine Retailers (4):
- some are larger chains (Oddbins, UK or O’Brien’s in Ireland).
- most are independently owned/part of small chain.
- some specialize in particular styles, e.g. organic/biodynamic wine (Les Caves de Pyrène, UK, La Cave des Papilles, Paris).
- some specialize in premium/super-premium/’en primeur’ wines, e.g. Hedonism, UK, Millesima, Bordeaux.
What are the Advantages of Specialist Wine Retailers :
Advantages of Specialist Wine Retailers :
- Opportunity for smaller producers from less commn regions/grapes. SWR usually do not sell major brands (too much competition with SM/DD)
- Average price is higher than SM/DDs; clientele willing to spend more per bottle (‘high involvement’) = higher better margin.
- Knowledgable/well-trained staff to ‘hand sell’ wines, build relationships w/regulars, suggesting new wines, etc…
- Special events, e.g. classes, tastings = good opportuntity for marketing, broadening consumer base.
What are the disadvantages of Specialist Wine Retailers :
(for consumers and producers)
For consumers :
- Prices will be higher : SWR lack the purchasing/negotiating power of larger retailers
For producers :
- Producers usually have to pay a distributor to sell/distribute the wine, given the number of potential outlets.
Define Hybrid Retailer:
Advantages / Disadvantages ?
Hybrid Retailer:
- Wine retailer that also has a bar area for drinking wine bought at shop (slightly higher price). Also sell food, cheese, deli, tapas, etc…
Advantages :
- Consumers can try wine before buying, encouraging lower-involvement consumers to try lesser-known wines.
- Offer a regularly-changing selection of wines by the glass. This is also a good way to showcase new wines and wines from less well-known regions or grape varieties.
Disadvantages :
- Need to stay open later and employ additional staff to serve.
- Additional licensing involved w/on-premise consumption.
Describe current trends in Online Retail (2):
Significant growth in online retailing for ALL goods.
Varies by market: China: 20% of all wine sales vs USA: 2%.
Identify the 3 main types of Online Retailer:
3 main types of Online Retailer:
- ‘Brick and Mortar’ retailers who offer online retail in parallel with store sales, e.g. supermarkets or specialist shops.
- Online-only Retailers, e.g. Laithwaite’s (UK), Wine9.com, Pinju.com (China).
- Online-only retailers that sell other goods as well, e.g. Amazon.com, Tmall and JD.com (China).
What are the Advantages of Online Retailers :
Advantages of Online Retailers :
- Significant growth in online sales
- Much larger customer base
For ‘brick and mortar’ retailers :
- Option of ‘click and collect’ = no extra delivery/shipping costs.
For online only retailers :
- No need for expensive retail stores. Although stock has to be stored in warehouses, these are located in areas where the costs of leasing/buying buildings are lower than in town centres.
- Extra space means larger range of wines can be stocked = good opportunity for smaller, niche producers.
What are the Disadvantages of Online Retailers :
Disadvantages of Online Retailers :
- Lower but still expensive labor costs : some staff still needed for customer service, order processing, etc… some retailers, e.g. Laithwaites, also employ specialists to assist customers on a deeper level.
- Expense of delivery; bulky, fragile, heavy product; risk usually assumed by retailer, customer expectations are becoming more demanding, e.g. amazon.com (chilled wine w/in hours).
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Website Creation/Maintenance : Significant Costs
- Creation/design of a reliable and easy to use website
- Maintainance : ensuring the website has fresh interesting contents and deal with any issue customers can experience.
What factors must be considered when it comes to an Online Retailer’s website :
Online Retailer’s website :
- Must be easy-to-use, reliable and stocks up to date. Otherwise customers will easily leave the website without buying anything
- Must display information to guide the customers (low and high involvements) : Descriptions, food pairings, critic scores/awards, suggestions of other wines based on past purchases, opportunity to write reviews.
Describe the use of Mobile Apps for Online Retailers (3):
especially popular in China, e.g. WeChat, Pinduoduo, Bottles XO.
- tailored for mobile device used as opposed to laptop/desktop use.
- must be quick, easy to use, high level of service.
