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
Online retailing
What kind of content / support needs to be enabled for websites?
- Description of wine
- Food & wine pairing suggestions
- Scores
- Suggestions based on previously bought
- Ability to leave own reviews of wine
- Technical support in case of error
Global travel retail
In what 2 locations are shops located? What is the advantage of each?
- Departure area - has time before flight
- Arrivals area - don’t have to carry hand luggage
Global travel retail
How has global travel retail evolved in recent years?
Evolving from “duty-free” to a place to look for high-quality / high-priced goods can’t find in own market
Global travel retail
What is the primary disadvantage of global travel retail?
Cost of retail space
Cost passed on to suppliers leaving lower profit margins
Wine investment companies
List 5 business models involved in wine investment
- Specialist wine retailers who buy then sell on
- Brokers
- Companies that manage portfolios (e.g. Cult wines)
- Managed wine investment funds (e.g. Sommelier capital advisors)
- Auction houses
Wine investment companies
What are 2 problems (and solutions) of wines sold at auction?
- Provenance > Houses carry out detailed investigations
- Fraud > Anti-counterfeiting techniques by producers
