D2: Reaching the end Consumer within a free market-retail (4)

Question 1

Supermarkets and hypermarkets (most important retail outlet for groceries and household goods, allowing the consumers to buy everything under one roof eg

Answer 1

1) Wal Mart (outlets in 26 countries outside s USA base)
2) South African Woolworths (outlets in many sub-Saharan African and southern hemisphere countries)

3) French Carrefour (outlets in 30 countries)
4) Britisch Tesco (outlets in numerous countries some as far from UK as Easterns Asia)

Question 2

In many markets such as the USA, UK and France, supermarkets have the largest market share when it come to wine sales:

Answer 2

1) there are therefore an attractive option for producers wanting to sell large volumes of wine

2) Supermarkets generally stock wines from well known and poplar regions and or grape varieties
- - they will be made in a style which appeals to a wide range of customers, many of whom have little iwne knowledge
- - in wine producing countries, the range will often be dominated by local wines

3) as supermarket will sell a range of well known brands (jacobs creek, barefoot and oyster bay) these brands help to attract customers to buy wine at the supermarket
- - these brands are available in a number of supermarkets, so the customer can compaire the price and as a result these brands do not promote customers loyalty to particular supermarkets

Question 3

In order that customers cannot easily compare prices, supermarkets like to stock wines bottled under labels exclusive to them (even if they are wines available elsewhere under different labels)

Answer 3

This is an approach favoured by Walmart in the Usa and Marks&Spencer in the UK
– alternatively some have an own brand tange of wines that clearly displays the supermarket’s name and branding on the label

Question 4

Private label wines need to be available in large volumes and therefore usually comes from larger producers:

Answer 4

but producers are facing a number of risks:

• retailers do not need a lot of wines from the same price pont
• they have a lot of negociating power
• • this will be a problem when there are a lot of producers wanting to sell to the supermarket (overdemanding of supply and demand)

Question 5

in addition producers are usually expected to pay substantial fees to have their wine stocked by the supermarket and for any additional promotion:

Answer 5

1) such as desirable product placement in store or coverage in the supermarket’s magazine
2) they usually expect producers to pay for any reduction in profits due to the reduced retail price

Question 6

The contracts between supermarkets and producers have very strict requirements regarding quality control, time and manner of delivery, packaging and labelling.

Answer 6

If these are not met, the supermarket can often simply refuse to take the wine or penalise the producer.

Question 7

Also as supermarket placement is competetive, if a wine does not achieve the expected sales volumes and profit margins, it may be delisted

Answer 7

oooooohly moly

** this can lead to producers who are left with a lot of wine that they cannot sell

Question 8

There are also premium supermarket chains (such as Whole Foods) which buy wines from artisan producers under the producer’s label.

Answer 8

1) these wines are bought under smaller quantities on the understanding that when the wine sells out, there is no more available

2) the range of wines in these supermarkets will appeal more to consumers with a strong interest in wine and may offer
* a usefull route into a new market for these artisan producers

** Whole Foods has been bought by amazon and it is unclear if this practice will continue under the new ownership

Question 9

A deep discounter shares many of the features of a supermarket but sells at lower prices: examples:

Answer 9

1) lidl (German) outlets in 26 countries
2) Aldi (German) outlets in 19 countries
3) danish based Netto who operates in a number of european countries

4) In USA traderJoe’s can be considered a deep discounter (subjected to the three tier system
5) Deep discounters are now succesful in a lot of countries

Question 10

The deep discounters business model is to offer permanent lower prices, they rarely, if ever, have any form of price promotion

Answer 10

this form is now adopted by many traditional supermarkets
They can charge these low prices by keeping their costs down:
1) taking a lower margin
2) he shops are often basic:
* goods may be stacked on pallets rather than shelves
* also tend to be away from prime retail locations, meaning lower rents

3) product range is limited: this offer a better maintaining of the product
* The wines are often private labels eg: Two Bucks Chuck was originally produced for trader Joe’s
- - this presents opportunities for producers to work with lthe deep discounters to develop such brands

Question 11

The deep discounting store rarely stock major brands (as these tend to be more expensive

Answer 11

1) they often work with less well-known producers with lower overheads
2) buying up whatever stocks may be available on the understanding that when the wine sell out, there is no more available

Question 12

Finally, deep discounter often buy directly from producers, cutting out any intermediary costs.

Answer 12

Whilst they strike just as hard a bargain (koopje) as the supermarket

• they tend not to charge their suppliers for stocking their products
• as producers also do not have to cover the costs of any price promotions, this means greater profits than selling their wine through a traditional supermarket

Question 13

Sometimes, deep discounters will buy a small amount of a more expensive wine, which they usually stok in stores in more affluent (welvarend) areas or ahead of times of increased spending such as christmas

Answer 13

This has started to attract consumers with a stronger interest in wines to their stores

• whilst there, many of these customers have also tried the less expensive wines in the range
• • and finally going back to their store

As a result, these retailers are now increasing their share of the wine market too
* ex: in 2013 25% of british wine drinkers has bought wine from a discounter, in 2017 this had rise up to 39%

Question 14

Convenience sector:

Answer 14

1) in contrast to supermarets and deep discounters which are usually located either in town centres or out of town shopping areas
* * convenience stores are found closer to where people live and are longer open sometimes 24h
- - local laws may not permit the sale of alcoholic drinks for that entire time

Question 15

Convenience retailers may be independently owned (eg india, where independently owned stores are a major part of the retail market)

Answer 15

Or part of a franchise group such as spar which has franchises in 34 countries
** in some countries, the major supermarket chains are moving into the cnvenience sector too

Question 16

Convenience stores stock brands popular with the local customers therefore in the case of wine, the range is usually similar, but even smaller than those of the supermarkets

Answer 16

okido, this may be dominated by major brands, however some convenience groups (eg eleven or spar) have their own exclusive brands

Question 17

Convenience stores can be more expensive than supermarkets:

Answer 17

1) partly due their premises who are smaller, making rent proportionately higher
2) they also tend to be premises which where designed for other purposes, making them less efficient

3) also they usually employ a higher proportion of staff relative to their size than supermarkets

4) finally the operator has to pay a fee to the franchise owner if there is an franchise arrangement
- - however 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

Question 18

Les Caves de Pyrène in the UK and La Cave des Papilles in Paris are specialised in ?

Answer 18

they are specialist wine retailes and specific for organic, biodynamic and natural wines

Question 19

Berry Bros & Rudd and Hendonism in the UK, or Millesima in Bordeaux are specialised in ?

Answer 19

Premium and super premium wines

– these retailers also often engage in en Primeur offerings

Question 20

Few specialist wine retailers have the purchasing power of the larger retailers,

Answer 20

Therefore whilst they may stock a few major brands
Particularly of sparkling and fortified wines

• • they tend to focus on wines from smaller producers, including those from less well-known wine regions and less common grape varieties
• • these retailers are very attractive retail option for such producers

Question 21

What are the attractions for a producer if selling his wine to a specialits wine retailer?

Answer 21

1) The average price of wine sold at the specialist is higher than at supermarkets and deep discounters
- - this is because the specialist cater (verzorg ) for consumers who are more interested in wine, and are willing to spend more per bottle than the general population
* ** this is called ‘high involvement’ consumer

2) for producers, they are likely to make a better margin by selling it wines to a specialist
* although they usually need to pay a distributor to sell and distribute the wine given the number of potential outlets

Question 22

Wine specialist employ knowledgeable and well-trained staff who can hand sell the wines

Answer 22

For this the consumer is willing to pay more.
* they tell the customer the story, foorpairing or more information about a specific region

** in return the customer will trust the staff to guide them to a wine that they will enjoy and will be willing to buy an unknown win on basis of the staff members recommendation

Question 23

Specialist further enhance their customers service by holding special events such as tastings (often attendd by the winemaker) and running education classes.

Answer 23

Bin there, done that

Question 24

What are hybrids retailers ,?

Answer 24

1) a specialist retailer, who also have a bar area
2) and can buy wine at the shop
3) usually they sell food, mainly cheese and delicatessen items
4) although some offer tapas and more substantial dishes

Question 25

The benefit for retailers of hybrid model is that consumers can try wines before they decide to buy, encouraging consumers, especially those with less wine knowledge, to purchase wines they might not otherwise have done.

Answer 25

Also some offers a varied selection by the glass.

Question 26

The downside for hybrid retailers is that they may need to stay open later into the evening and require additional staff to serve customers

Answer 26

There is also additional bureaucracy involved in opening premises in which people eat and drink than there is for a simple shop.

Question 27

Around 5% of all wine purchases are now made online and it will grow

Answer 27

okido

Question 28

Many retailers, from supermarkets to specialist wine retailers, offer online retailing in parallel with sales through their stores.

Answer 28

These are often referred to as ‘Bricks and Mortar’ retailers
* Particularly for specialist wine retailers, this enables them to connect with customers who do not live within easy reach of their shops

Question 29

Online only retailers:

Answer 29

1) The Wine Society and Laithwaite’s in the UK
2) Wine9,com and Pinju.com in China
3) wine clubs set up by newspaper: new york times wine club, sunday times wine club

Question 30

Also online retailers who sell other products like amazon or JD.com/Jingdong (China)

Answer 30

okido

Question 31

Many of these businesses require customers to order a certain amount of wine each year (this model was used in particular by the newspaper wine clubs)

Answer 31

however now the most online retailers let the customer choose to order what they want from the comfort of their home
* although some require a minimum number of bottles per order

Question 32

Advantages of online store:

Answer 32

1) no expensive retail stores
2) theyre in areas where costs of buildings are low

• this provides similar opportunities for smaller, niche producers as with specialist wine retailers

Question 33

Online retailers still need some staff to deal with customers queries, take orders and despatch orders.

Answer 33

Some, including Laithwaite offer their customers a wine advisor

Question 34

Disadvantage of online retailers:

Answer 34

1) costs of delivery
2) wine is heavy, bulk, fragile product
* * therefore more expensive than books, cloths or even groceries .
3) also consumers are expecting a quicker delivery
* amazon offers in major cities, the delivery of chilled wine within as little as one hour of ordering

Question 35

Easy to browse websites are needed.

Answer 35

Studies have shown that customers are ealily putting off the website if it is not easy to browse

Question 36

also the online retailers need to be ensure that the website is well presented and helpful to consumers

Answer 36

Because the consumer might be buying wines they have not tried. a detailed description of the wine is important

• many websites provide additional information, such as food and wine pairing suggestions, scores from wine critics or medals from wine competitions
• other suggest other wines they might like on the base of browsing the current wine

Question 37

The content must also be kept up to date with new wines being added as they become available and out of stock wines being removed

Answer 37

okido

Question 38

Apps:

Answer 38

1) We chat and Pinduodo
- - these are apps that are easy to use and offer a high level of service and sell a wide range of products
2) Bottles XO is an app who is specialized in wine

*** all of these apps are operational in China

Question 39

Global travel retail stores:

Answer 39

1) located at places where customers are travelling from one country to another
2) most are found at airports
3) some at sea ports and international railwaystations and on board ships

Question 40

What is the advantage to have aretail at airports?

Answer 40

1) The passenger has time after check in and boarding a flight
- - to view a store products at leisure (op het gemak)

2) another option is to have a store in the arrivals area between the point where a passenger arrival and the point the passenger passes through border controls
- - the advantage to customers is that they do not have to carry and stow extra hand luggage on their flight

Question 41

Duty free:

Answer 41

1) still used in some countries
2) national taxes (duty) were not chargeable on goods sold for personal use in another country
- - consumers therefore looked for lower prices, especially when travelling from countries with high rates of taxes on goods such as alcoholic drinks, tobacco and perfume

3) more recently with the introduction of free trade zones such as the EU duty free becomes less important
* * the consumers in these stores are now looking for high-quality and high priced goods which they cannot find in their home market

*** wine retailers has seen the advantages of global travel retail for selling a range of wines, including super premium wines

Question 42

The negative side:

Answer 42

1) selling through global travel retail is expensive
2) the cost of retail space is high and retailers pass a percentage of that cost on to their suppliers
- - resulting in lower profit margins compared to other routes to market
- - that could weaken the global travel sector if suppliers choose to leave it

Question 43

There are many companies that specialise in sourcing and selling wine for investment (rare Bordeaux premier grand cru classés, burgundy grand crus and top napa valley wines)

Answer 43

A number of specialist wine retailers (such as Farr Vintners, fine&Rare and Berry Bros & Rudd) are allowed a small allocation

Question 44

There are also companies which only deal in investent-grade wines such as

Answer 44

1) Amphora Portfolio Management

2) Cult Wines

Question 45

Wine has also been shown to be a safer investment than, for example:

Answer 45

stocks and shares in times of financial uncertainity
– nevertheless, there is an element of risk: as has been seen in Bordeaux, the Price of even the most prestigious wines can fall

Question 46

Some retailers, such as Berry Bros &Rudd, specialise in selling investment-grade wine and also provide a brokering service for investors who are looking to sell their wine

Answer 46

Okido

Question 47

For those who want to find a buyer or seller for a particular win, there are a number of trading exchanges who work exactly as stock exchanges.

Answer 47

The most well known of these is liv-Ex, based in London but which deals with sales around the world

Question 48

Companies like Amphora Portfolio Management and Cult Wines, manage the portfolio of their clients:

Answer 48

1) Sourcing wines which the investors wants to add and selling those which they want to dispose of

** there are even managed wine investment funds which investors can buy into without needing any knowledge of wine

Question 49

Hong Kong and London are the hubs for the wine investment world.

Answer 49

okido

Question 50

Auction houses sell a broad variety of wines (eg unused stock from retailers who have been forced to close.

Answer 50

The big houses such as Sotheby’s and Christie’s, specialise in selling investment grade wines at headline grabbing prices
* in 2018 Baghera Wines of Geneva sold 855 bottles and 209 magnums of Henru Jayer for CHF (Zwitserse frank) 34,5 milion

Question 51

What is the risk of buying wines at the auction ?

Answer 51

it is not possible to know whether the wine has been kept in appropriate conditions
* however, top auction houses now carry out detailed investigations to try and ensure the wine has been properly stored since their release

** Wine fraud has always been there,
The most high profile wine frauds of recent years have involved supposedly investment grade wines being sold at auction

The most infamous cases are Hardy Rodenstock:
He sold bottle of wine that he claimed had been part of the collection of Thomas Jefferson (even managing to get them authenticated by an expert)
– also Rudy Kurniawan, who was eventually caught when trying to sell vintages of Clos St Denis from Domaine Ponsot that have never been produced

Question 52

Producers of wines at all price points are using increasingly sophisticated anti-counterfeiting techniques to protect their wines, with the producers of investment grade wines leading the way.

Answer 52

Auction houses and fine wine retailers also seek to validate the provenance (herkomst of the wines they offer.