Weaving profit from the web

06 August, 2010

The move by Dragon’s Den’s

Peter Jones into the online wine business through Gondola is just one indicator of the increasingly important role e-commerce has come to play in drinks retailing.

There have been others: Majestic’s reinvention of its website with blogs and manager recommendations; Rowan Gormley’s post-Virgin wine buff gang Naked Wines; and the emergence of wine micro-sites within the online offers of major multiples have been some of the others.

There are plenty of other notable developments, and they mean the emergence of a bona fide online drinks retailing sector is an inescapable fact, rather than mere speculation. And the story’s far from over, with plenty of opportunity for growth – any traditional drinks retailer which wants to be a success would be churlish not to incorporate an e-commerce element in its package somehow.

Market research firm Mintel says 90% of people with an internet connection have bought something online in the past year and 42% bought more in the past year than they did in the previous one.

The British Retail Consortium says online accounts for a mere 7% of all UK retail sales, despite rapid growth in recent years, with internet, mail order and phone sales up 17.3% in June against the same month in 2009. The surface has just been scratched.

Whether you’re a bricks-and-mortar retailer heading into e-commerce for the first time, or an established e-retailer looking to develop your site, it’s still something with no real blueprint for what to do.

Majestic relaunched the transactional element of its website three years ago and played with the content significantly last year, introducing a blog and managers’ selections.

“It’s primarily about getting the involvement of the quality people who work for Majestic,” says e-commerce director Richard Weaver. “They are the real point of difference for us as a retailer and the number one reason customers come to us. You need to recreate some of that service online.”?Weaver adds: “Eight or nine years ago people were still working out how to have a transactional website, and in that time they’ve become very standardised. It’s very important these days to have a point of difference online.”?But doing things differently still needs to be the means to commercial success rather than an end in itself.

A business like Naked Wines – which signs up customers to an “angel” scheme, paying in regular amounts to get discounts and input into the direction of the wine-buying policy – is built around the importance of giving customers what they want rather than just a gimmick.

The recently launched Find Wine is also aiming for a difference but, again, with what the customer wants at its core – this time with the emphasis on searchability according to food matches and wine styles.

Mike Howes, who started the business with John Critchley, says: “We’d both worked in Oddbins and had advised people in a rush, who know they want a certain sort of wine and have a certain amount to spend. We wanted to create that sense of recommendation online.” He says a decent e-commerce site can be set up for as little as £10,000. “It’s a lot cheaper than setting up a shop in the high street. We used a web designer who has done a lot of e-commerce sites in the past, with a brief to fulfil our service ideas but to make it functional. Trying something different is 100% the right way to go – there would have been no point trying to compete head-on with Majestic.”?The Drink Shop has followed a different model: instead of a dedicated wine site, it’s aiming towards being the ultimate online off-licence – a destination “shop” for the weird and wonderful, in the knowledge that warehouses on light industrial estates have lower rents than Tesco Express-sized shops in town centres.

“We’re not going to make a business out of promoting Jack Daniel’s, Stella or Jacob’s Creek,” says managing director Tim Francis. “But when people come to the site because they’ve searched through Google for Domaine Ott Provence wines, Sierra Nevada Pale Ale or Mekong liqueur, they will then add other stuff they need for a party as well.”?It helps to keep costs down if, like the Drink Shop, you start out with in-house expertise to build your own hardware and software. “Certainly cost has been a central benefit,” says Francis. “If we were buying in everything we’d developed ourselves, we wouldn’t have had much change out of £300,000-£400,000.”?Building a website is one thing, but getting people to visit it in an increasingly crowded market – and to keep coming back – is another.

“Facebook and Twitter are very simple ways of getting your message out to people very quickly and building networks,” says Howes. “Blogging is a longer-term aim for us to get a consistent story that feeds back to customers. None of this is expensive even if it is time-?consuming – but it’s time well spent.”?Francis at the Drink Shop says customer satisfaction is the key to repeat purchase. “We’re extremely tight on delivery,” he says. “We offer two, three or next-day delivery and we’re at about 99.6% arriving on time. The biggest barrier to internet sales is people thinking they’ll have to go to a depot to collect a parcel,” he adds.

It seems that even when drinks retailing goes hi-tech, there’s still no substitute for good, old-fashioned customer service.

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