D2W2 QUIZ on Getting Wine to the Point of Sale Quiz on Getting Wine to the Point of Sale Flashcards
Wine sales are usually split into two broad categories: retail and hospitality. For the hospitality sector, the abbreviation HoReCa is often used. What does this abbreviation stands for?
Hotels
Restaurants
Cafès | Catering
Briefly outline the benefits and problems a producer may encounter if they try and sell their wine directly to a retailer in a foreign market. You may use bullet points in your response.
Advantages
- There’s the option to sell the wines en primeur, which can create a steady cash flow.
- Introducing the wines to new markets can create increased sales/interest in the producer’s wine.
- Having their wine available in different markets spreads the risk if one market is to fail (if wines are only sold in one territory this could be a problem).
Disadvantages
- Paying import duties and taxes will be the responsibility of the producer - which takes time and resource.
- The producer is responsible for making sure packaging and labelling comply with the relevant laws in the country where the wine is to be sold - which again takes time and resources, as well as costs associated with potentially producing different labels.
- It takes time and effort to build relationships in other markets with retailers on an individual basis.
- There is also a significant cost associated with visiting different regions, either to visit retailers or for trade fairs.
- The producer will need to be aware of local legislation, customs and consumer preferences.
- The producer may be responsible for any wine that is lost or damaged in transit (although the cost of this can be alleviated).
For more information on this topic please see chapter 5.1 Different Options for getting the Wine to the Point of Sales: Selling Directly to Retailers in the D2 textbook.
Briefly outline how, by employing a distributor, it might help a producer alleviate some of their administrative tasks.
- A distributor will take on the burden of approaching multiple retailers and the administrative work that this involves.
- The distributor will be available to attend trade fairs in the market they are based and to organise their own trade fair to represent the producers and their wines.
- Local knowledge of a market that a producer from another country is hoping to gain a presence in, is a distinct advantage.
- Local knowledge of the market means more contacts and targeting retailers that would suit the wine they are representing.
- The logistics of transport is generally managed by the distributor which reduces the administrative burden on the producer and they absorb any damage to goods.
- Have knowledge of labelling requirements and taxes to advise the producer.
- The language barrier becomes less of an issue.
Please refer to chapter 5.2. Appoint a Distributor in the D2 textbook for more information.
The volume of wine sold in the retail sector is ____lower/higher____ than the volume sold to the hospitality sector. In a free market, consumers ____have/don’t have____ many options to choose from when it comes to retail outlets. For example, in the UK in 2016, _____% of wine sales by volume came from retail. In countries such as the USA, UK and France, ____supermarkets/restaurants_____ dominate wine sales.
higher
have
39%
supermarkets
To which countries are the next major supermarkets most closely associated. All of these supermarkets have substantial wine sales.
- Woolworths
- Wal-mart
- Tesco
- Carrefour
- Woolworths — South Africa
- Wal-mart — USA
- Tesco —UK
- Carrefour — France
What is the correct definition of a private label wine?
Select one:
A. Wines bottled under a supermarket’s name, that may be available elsewhere under a different brand/name
B. Wines sourced by a broker
C. A wine from a private vineyard
A. Wines bottled under a supermarket’s name, that may be available elsewhere under a different brand/name
These wines need to be available in large volumes and therefore usually come from larger producers.
True or false?
Well-known brands try and promote loyalty to particular supermarkets.
FALSE
Well-known brands will be sold in many different supermarkets. Therefore, loyalty to the brand, not the supermarket is promoted. Consumers will have the options to compare and contrast the prices of their chosen wine/s at different retailers.
For more information on this topic please see chapter 6.1 Reaching the End Consumer within a Free Market - Retail: Supermarkets in the D2 textbook.
True or false?
There is often an excess of supply over demand for supermarkets (more choices of wines available than they require).
TRUE
Although supermarkets give the opportunity for good exposure of a wine, supermarket wine buyers have enormous negotiating power, especially when it comes to price. This means producers may not receive much money for their wines.
For more information on this topic please see chapter 6.1 Reaching the End Consumer within a Free Market - Retail: Supermarkets in the D2 textbook.
True or false?
Supermarkets are usually responsible for marketing producer’s wines and covering the cost of price promotions.
FALSE
This is a risk to producers as they can incur substantial costs when selling their wines through supermarkets. Margins can be very tight.
For more information on this topic please see chapter 6.1 Reaching the End Consumer within a Free Market - Retail: Supermarkets in the D2 textbook.
Identify differences between supermarkets and deep discounters. Think about how their business models differ. You may use bullet points but ensure answers are clear which retailer category is being referred to.
Differences
- Deep discounters sell at lower prices.
- Deep discounters rarely stock major brands (due to costs associated with marketing) and often don’t have more than one option from a brand.
- Often deep discounters will buy up the stock of wine from a producer. This means the offerings in the stores will be constantly changing.
- Premium lines are only really introduced around holidays, etc.
- Deep discounter retail outlets tend to be more sparse, with products being displayed in pallets rather than shelves. This saves costs from overheads.
- Deep discounters rarely have price promotions, as costs are already low.
- Although supermarkets and deep discounters have low prices, supermarkets rely on profit margins whereas deep discounters rely on volume of sales.
Fill in the gaps in the statements comparing convenience stores and supermarkets.
- Convenience stores tend to be ___less/more___ expensive than supermarkets.
- Overheads like rent are often ___lower/higher___ for convenience stores as they’re often located ___inside/outside___ town/city centres, whereas supermarkets tend to be in ___less/more___expensive areas.
- Convenience stores are ___often/rarely___ independently owned, whereas supermarkets are ___often/rarely___ part of chains.
- Convenience stores ___often/rarely___ stock similar brands to their nearby local supermarket.
- Local consumer tastes have a ___small/large___ influence on what’s stocked in convenience stores.
- It is fairly ___common/rare___ for convenience stores to have their own brand of wine.
- more
- higher, inside, less
- often, often
- often
- large
- rare
Identify the pros and cons of selling through a specialist wine retailer for a producer.
Pros
- Smaller brands will likely get better exposure as specialists tend to focus on interesting grape varieties/producers/regions rather than big brands.
- Specialists often cater for consumers that are more interested in what they’re buying, and are willing to pay more for wine. This means they are likely to get a better margin.
- Producer’s wines will often be ‘hand sold’ by knowledgeable staff, which helps create brand loyalty.
- There’s the option for producers to showcase their wines at events etc. held by the specialist.
Cons
- Producers will probably have to employ and pay a distributor to sell their wine to specialists as there are many outlets to target. trying to do business on an individual basis with all of them would be very time consuming.
- Major producers may not be appropriate for specialist retailers, partially as they don’t require the stock that supermarkets/discounters do, and specialists don’t have the buying power.
Give two supporting example points for each of the following topics.
- How do hybrids differ from specialist retailers?
- Why might a retailer choose to follow the hybrid model?
- What are the downsides of the hybrid model?
- How do hybrids differ from specialist retailers?
- They often have a bar area in the shop where customers can drink the wines on sale at a slightly higher price.
- They usually also sell food (often cheese or tapas).
- Why might a retailer choose to follow the hybrid model?
- Consumers can try the wines before they buy them, which gives the opportunity for upselling and encouraging consumers to try different wines.
- Consumers can be encouraged to buy bottles of wines after trying them by the glass. This is a good way of getting customers interested in different regions/grape varieties/producers.
- What are the downsides of the hybrid model?
- Stores that allow consumers to drink alcohol and eat food on the premises are often subject to more strict legislation and legal practices.
- The stores will usually have to stay open later to cater to consumers wanting to eat and drink outside normal working hours.
What are the main problems facing online wine retailers? You may use bullet points to answer.
- Need specialist wine knowledge, but don’t have the face to face interaction with consumers. Therefore, it can be difficult to give advice on consumer preferences.
- Delivery can be expensive as wine is a heavy and bulky product. Consumers aren’t always happy for the cost of delivery to be passed onto them. Consumers also expect delivery to be fast and convenient, which can be a challenge.
- Online retailers usually have to retain the risk of wine being lost or damaged in transit.
- Websites must be well-designed, clearly laid out, functional and easy to use. This comes with significant design and development costs, as well as the cost of technical support and hosting.
- Content online can quickly go out of date, so keeping the content interesting, correct and relevant is a significant task.
True or false?
The concept of ‘duty free’ has become more important over the last few years.
FALSE
More recently, with the introduction of free-trade zones such as the EU, ‘duty free’ has become less important and customers in these stores are now looking for high-quality and high-priced goods which they cannot find in their home market.
