D2C05 Reaching Consumer In Free Market - Retail Flashcards
List major retail outlets to end consumers
Supermarkets Deep discounters Convenience retailers Specialist wine retailers Hybrids Online retailing Global travel retail Wine investment companies
Give a few examples of major supermarkets
Wal-mart - USA
Woolworths - South Africa
Carrefour - France
T’escortait - British
Which outlet has the largest share of wine sale?
Supermarkets, in USA, UK and France
What kind of wines can be found at supermarkets
Large producers
Well-known and popular regions and varieties
Style that appeal to a range of customers, who may have little knowledge
Local wines in producing countries
Small amount of wine from artisan producers under the producer’s label - on the understanding that when they sell out, there is no more available - attract to consumers with a strong interest in wine
Compare the use of well-known brands and private label wines in supermarkets
Well-known brands: attract customers; do not promote customer loyalty
private labels: promote customer loyalty; need to be available in large volumes and need to be from large producers
What is private label wine
In order that customers cannot easily compare prices, supermarkets stock wines bottled under labels exclusive to them (even if they are available elsewhere under different labels)
Promote customer loyalty
Need to ba available in large volumes, from large producers
Advantage of private label wine for producers
Attractive opportunity to sell large volume
High level of market exposure, sometimes in more than one country
No intermediary costs
Supermarket-employed winemaker may work closely to supervise production and ensure quality control - help improve quality of other wines
Disadvantage of private label wines to producers
Competition to stock in supermarkets means that supermarket wine buyers have enormous negotiating power, esp when it comes to price - low profit
Substantial fees to have wine stocked, and desirable placement
Cover price promotions
Contracts with strict requirements regarding quality control, time and manner of delivery, packaging and labeling - or may be refused or penalized
May be delisted if not selling sufficient quantities
What are deep discounters? Example?
Share many features of supermarket but sell at lower price
Offer permanently lower prices, rarely offer price promotions
E.g. Trader Joe’s; Aldi and Lidi (Germany) ; Netto (Danish)
How do deep discounters achieve lower price points
Lower profit margin, rely on volume
Shops are basic: goods stacked on pallets rather than shelves
Away from prime retail location - lower rent
Limited product range - more streamlined, easier to maintain
Many private label - opportunity for producers
Rarely stock major brands, work with less well-known producer with lower overheads, buying up whatever stocks may be available
What kind of wine can be found at deep discounters
Private label
Small-producer wine with low overheads
Small amount of expensive wine in more affluent areas or before holidays - attract customers with stronger interest in wine, who may discover other product they like
Benefit of producer working with deep discounters
Private label-large volume
Work with less well-known producer with smaller overheads, who have a surplus of wine to sell
Buy directly from producers, cutting intermediary costs
Though strike hard bargain, do not charge suppliers for stocking their products
No promotion costs
Features of convenience stores
Closer to where people live
Open longer
May be independently owned or a part of franchise
Store popular brands, similar to supermarkets but smaller
Tend to be more expensive
Why do convenience stores tend to be more expensive than supermarkets
Smaller premises - rents proportionately higher
Premises designed for other purposes, less efficient
Higher proportion of staff relative to their size
Franchise arrangement - fee to franchise owner
What kind of producers are attracted to specialist wine retailers? Why?
No purchasing power of larger retailers - focus on wine from smaller producers
Average price sold is higher - high involvement consumers
Can have hand sell
What are high involvement consumers
Who are more interested in wine, willing to spend more per bottle than the general population
Major features of specialist wine retailers
Specialise in wine, sometimes premium spirits and beers, some sell cheese and delicatessen foods
Most independently owned
Some specialise in particular styles of wine; some deal with premium wine, en primeur
Small producers, high involvement customers, higher price
Personal service: hand sell, build up relationship with regular customers, learn about likes and dislikes, suggesting new wines and let them know when their favorite wine is on offer; customers trust staff
Special events such as tasting and educational class
What is hand sell
Tell story of wine
Provide information about wine, variety, food pairing
Disadvantage of producer working with specialist wine retailer
Smaller quantity
Need to employ distributor
Highly dependent on retail staff
What are hybrids
Specialist wine retailers with a bar area where customers can drink the wine they buy in the shop
Usually sell food too
Benefit and downside of hybrids
Adv: consumer can try wine before buying; wine by glass - showcase new wine and wine from less well-known regions or varieties
Dis: stay open later; additional staff; additional bureaucracy where people eat and drink
Adv of online retailer
No need for expensive retail stores
Warehouse with lower rent - lower overheads - stock a larger and more varied range of wines
Chance for small niche producers
Larger and more varied customer base
Major issues of online retailers
Delivery expensive: use click and collect
Need to ensure easy to use, reliable website: distinctive and convey retailer’s band image; make sure content is well presented and helpful to customers; kept up to date
App management in some countries
Advantage of global travel retail
Passenger has leisure time
After arrival: Do not have to carry and stow extra hand luggage
Why has the concept of duty free become less important
Introductions of free-trade zones such as EU
Customers look for high-quality and high-priced goods not available in their home market - premium wines
Disadvantage of global travel retail
Expensive - high cost of retail space - lower profit margin to producers
Supplier may choose to leave it
What kind of companies are involved in wine investment
Specialist wine retailers (Farr Vintners, Fine & Rare, Berry Bro’s & Rudd) who are allowed a small allocation
Companies which only deal with investment-grade wine (Amphora Portfolio Management, Cult Wines)
Brokers
What are investment-grade wines
Most sought-after and expensive wines in the world
E.g., Bordeaux Premier Cru Classés, Burgundy Grand Crus, top Napa Valley wines
Rarity value
What are “fine wine”
From prestigious regions
Made in small quantities by leading producers
Command super-premium prices
There is a secondary market
Routes to buy investment grade wines
Purchase en primeur
From specialist retailers
Trading exchanges that work like stock exchanges: for retailers and brokers who want to find buyer or seller of particular wine
Companies that manage wine portfolios of clients, sourcing and selling
Auction houses: not possible to know storage condition; wine fraud
Give two famous examples of wine fraud
Hardy Rodenstock: sell wine he claimed to be Thomas Jefferson collection
Rudy Kurniawan: caught when selling vintages of Clos St. Denis from Domaine Ponsot that have never been produced
