Naked Wines on the continued shift online, supply chain disruption – and subscriptions - The Entrepreneurial Way with A.I.

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Thursday, November 18, 2021

Naked Wines on the continued shift online, supply chain disruption – and subscriptions

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Naked Wines says customers are continuing to buy wine online following the Covid-19 pandemic

Naked Wines says customers are continuing to buy wine online following the Covid-19 pandemic

Naked Wines today reports first-half sales just ahead of last year’s pandemic peak, as the wine retail market continues to shift online. The pureplay wine retailer says its membership has expanded by 25% to 947,000 members over the last year, and that that reflects “sustained consumer desire for an attentive to traditional wine distribution”. Currently, it says, it is the largest direct-to-consumer wine business in the world, supplying its customers with wine from 226 independent wine makers.

 

Despite the growth in customer numbers, the retailer says supply chain challenges have held it back from growing faster.

 

Naked Wines today reported sales of £159.3m in the the 26 weeks to September 27 2021. That’s 1% up on the £157.1m it reported a year earlier – and 82% up on the £87.5m it reported at the same time in 2019. Pre-tax profits came in at £1.3m, up from a loss of £8.9m a year earlier.

 

Nick Devlin, group chief executive of Naked Wines, says: "We have a large long-term value creation opportunity driven by a disruptive business model, an underpenetrated $25 billion total addressable market (TAM), exceptional winemakers and wine, and a loyal customer base with attractive unit economics and recurring revenues. Our disruptive business model connects consumers directly with winemakers, stripping out the cost of traditional sales and distribution and delivering consumers exclusive world-class wines at fair prices and with a genuine connection to their maker.

 

“I’m delighted by the progress we have made so far this year in further strengthening our winemaker lineup and customer proposition. We are now serving a global community of 947,000 members - an increase of 25% over the last year - reflecting sustained consumer desire for an alternative to traditional wine distribution.

 

“I’d like to thank all our teams for their hard work in a challenging supply environment for ensuring we are well stocked and prepared for what we anticipate to be a record holiday season. We are focused on delivering an incredible experience for our members and on continuing to invest to grow Naked Wines and connect more wine drinkers to the world’s best independent winemakers.”

 

Now, it seems, the challenge is to ensure that it wins customers for what it does differently, rather than through a general shift online in wine retailing. Devlin says: “Certainly Covid-19 has further accelerated the shift towards online wine models and as such the growth profile of Naked Wines, but underlying that is a differentiated consumer experience and a business with a consistent track record of generating improved underlying customer economics and margins as it grows.”

 

Supply chain challenges

Naked Wines says supply chain disruption has affected its ability to move both wine and materials - such as glass - into markets on time, while skills shortages have increased its costs in its warehouses and in transport. While it has been able to mitigate the effects on profit margins, this has affected customers since items have been out of stock, and it has also meant the retailer has had to limit its growth in the UK market in order to ensure wine remains available. Now, it says, availability is at 90% in both but UK and US in the run up to peak trading.

 

Nonetheless, it says, “too many” customers have seen delivery delays or had items substituted. It has met these challenges by, in the US, remodelling its distribution network from a central location in Napa to smaller distributed warehouses closer to its distribution centres. In the UK it has brought in automation to its UK distribution centre, and in all its markets it has used more ways of transporting goods. Now in the medium term it plans to hold higher levels of stock.

 

Operations and logistics

The retailer is now bringing in new projects that build on its growing scale in order to create value. In the US, for example, its wines are now delivered direct to one of our fulfilment centres before distribution - giving its extra capacity, faster replenishment time, and improved customer availability as well as a lower cost per case. The project cost an extra $1.5m to put into place.

 

Winning new customers

The retailer today says it has had challenges in areas including customer acquisition - spending £2m to win customers that did not pay back at the rate it expects. It has now changed the way its growth, finance and analytics teams work together, while altering its approach to testing new channels.

 

Approaches to subscription

New subscription models now including ‘never miss out’ and ‘wine genie’ subscriptions, enabling members to reserve the wines they like for the future. This, it says, was a “key area of success in FY21 and this success has continued throughout the first half of this year.” Its 341k ‘never miss out’ subscribers have an average of 1.8 active subscriptions from longer-standing customers who have favourite wines, while its ‘wine genie’ creates a tailored case of wines from its customers.

 

Naked Wines sells online to the US, UK and Australia, having moved from a multichannel strategy to an online-only one shortly before the Covid-19 pandemic.



via https://AiUpNow.com November 18, 2021 at 07:38AM by Chloe Rigby, Khareem Sudlow,