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
Tesco - UK
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; attractive 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 be available in large volumes, from large producers
Advantages 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
> this could help improve quality of other wines
Disadvantages 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.
> Producer usually covers cost of price promotions.
> Contracts have strict requirements regarding quality control, time and manner of delivery, packaging and labelling - or may be refused or penalised
> Producer/wine may be delisted if not selling sufficient quantities
What are deep discounters? Examples?
> 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
May have subscription model (e.g. Costco) to finance lower margin.
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 e.g. Christmas; this attracts customers with stronger interest in wine, who may discover other product they like
Benefits to producer of working with deep discounters
> Private label wines can represent a large volume order for producer, in turn developing brand (e.g. success of Charles Shaw’s ‘Two Buck Chuck’ at Trader Joe’s).
Deep discounters often work with less well-known producer with smaller overheads, with no expectation of future supply of the same product; can be attractive if producer has a surplus of a given wine to sell.
Deep discounters 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, so less efficient
Higher proportion of staff relative to their size
Where there is a franchise arrangement, fees to franchise owner must be paid
What kind of producers are attracted to specialist wine retailers? Why?
> Largely do not have the purchasing power of larger retailers, thereby creating better economic outcome for producer
Average price sold is higher due to high involvement consumers
Can have hand sell of wine due to staff expertise
