Reaching the End Consumer Within a Free Market - Retail Sector Flashcards
What % of sales in the UK are to the retail sector?
80%
List the 8 operators within the retail sector
- Supermarkets
- Deep discounters
- Convenience retailers
- Specialist wine retailers
- Hybrids
- Online retailing
- Global travel retail
- Wine investment companies
Supermarkets
What are the 4 advantages to producers of working with supermarkets?
- High-volume
- High market exposure (sometimes in multiple countries)
- May be direct purchase (fewer intermediary costs)
- Improved quality (e.g. if supermarket provides winemaker to work with them)
Supermarkets
What are the disadvantages to producers of working with supermarkets?
- Excess of supply over demand > negotiating power for supermarkets
- May need to pay fees
- Strict contractual requirements
- Risk of delisting if doesn’t meet volume or margins
Supermarkets: Disadvantages: Fees
What fees might a producer need to pay to a supermarket?
- Stocking
- Promotion (e.g. placement, appearance in mag)
- Price promotion (producer pays for reduction in profit)
Supermarkets: Disadvantages: Strict contractual requirement
What contractual requirements might producers have if they work with supermarkets?
- Quality control
- Time and manner of delivery
- Packaging and labeling
Suoermarkets
Why do supermarkets sell private label wines?
- So consumers can’t easily compare prices (even if available elsewhere under different label)
- Can promote customer loyalty to the supermarket
Supermarkets
Describe the 2 types of private-label wines
- Supermarket name does not appear prominently - e.g. M&S
- Own-brand (clerly displays name and branding on label) - e.g. Sainsbury Taste the Difference
Supermarkets
Outline 3 key features of premium supermarket chains
- Buy wines from artisan producers under their label - useful route into market
- Small quantities
- Appeal to consumers with strong interest in wine
Supermarkets
What are 4 features of wine typically stocked by supermarkets?
- Wines from well known regions / varieties
- Appeal to wide-range of consumers - many have little knowledge
- Well-known brands
- Local wines (if from wine-producing country)
Deep discounter
Outline 2 features of the deep-discounter model
- Permanently low prices
- Rarely any time-limited price promotion
Deep discounter
Give 6 ways deep discounters keep prices permanently low
- Take lower profit margin
- Basic shops
- Away from prime-retail locations
- limited product ranges (one brand per product & many private labels)
- Rarely stock major brands (cheaper due to less marketing budget)
- Buy direct from producers
Deep discounter
What are the advantages to producers of working with deep discounters?
- Can be useful if have surplus of wine to sell (Deep discounters happy to purchase until sold out)
- Don’t have to pay for promotions (greater profits than supermarkets)
- Opportunity to develop private label brands
Deep discounters
When might a deep discounter stock a more expensive wine? What has been the result?
- To stock in more affluent areas
- Times of increased spending (e.g. Xmas)
Attract consumer with more interest in wine > also buy less expensive wines while in shop then go back to buy more
Deep discounters
How has the % of people who’ve bought wine from deep discounter in the uk changed in recent years?
2012 - 23% > 2018 - 37%
Convenience retailers
Why do convenience retailers tend to be more expensive than supermarkets?
- Higher rents
- Less efficient
- More staff
- Franchise fees
Convenience retailers
What type of wines do convenience retailers stock?
- Wines popular with local customers (similar to supermarket but smaller range)
- Major brands or exclusive brands
Specialist Wine Retailers
What are the advantages of specialist wine retailers for producers?
- Attractive for smaller producers or those from less well known wine regions, producing from less common varieties
- Average price of wine higher > make a better margin (although usually have to pay distributor)
- Customers willing to spend more
Specialist wine retailers
List 3 types of specialist wine retailers
- Large chains (e.g. Oddbins)
- Independently owned or part of small chain
- Fine wine retailers
Specialist wine retailers
What are some advantages of specialist wine retailers for consumers?
- Get personal service (e.g. suggesting wines based on preferences)
- Learn from well-trained staff about story of wine, info about lesser regions / varieties, food pairings
- Be invited to special events / wine education classes
Hybrids
Define a hybrid
What are 2 advantages and 2 disadvantages for the retailer?
Specialist wine retailer with a bar area - may offer snacks and wines by the glass
- Try before buy encourages consumers to buy wines they may not have bought
- Can showcase new wines and less well-known wines
- Need to stay open later and have more staff
- Beuracracy of hosting eating and drinking
Online Retailers
What % of wine sales are online in a) China and b) The USA?
20% / 2%
Online Retailers
What are the advantages for online retailers?
- Connect with customers from anywhere
- No need for expensive retail shops
- Can stock larger and more varied range of wines - opportunity for smaller, niche producers
Online Retailers
What are the disadvantages for online retailers?
- Still need staff to deal with queries, logistics etc
- Expense of delivery
- Risk of wine being lost or damaged in transit
- Expectation of very quick delivery
- Have to maintain website / apps / shop-in-shop
