As the first month of 2023 draws to a close, Nigel Huddleston rounds up recent findings from both ecommerce and bricks and mortar retailers

The pandemic brought a boom in online retailing, but the increased competition in digital and general pressures on consumer spending mean that specialist wine websites are now finding things as tough as businesses in the physical world. 

Naked Wines changed tack at the end of last year, shifting from a strategy of overall growth from the recruitment of new consumers, in favour of improving margins and profitability from existing ones, including its angel subscribers.

The costs of marketing to recruit new customers have been just as susceptible to inflationary pressures as those in wine, packaging, energy and other areas of business. 

Naked Wines indicated in a trading update in January that it is on the road to recovery after issuing improved profit guidance on the back of what it called a “solid” Christmas trading period. Margins from purchases by repeat customers have improved, but revenue in Q3, to December 26, was merely flat versus the previous year. 

Naked’s sales growth from repeat customers was 3% in Q3, but sales from new customers dropped by 27%. Its spend on customer recruitment in the current financial year is 40% down on FY2022 and group chief executive Nick Devlin said: “The consumer and marketing environment remains challenging and opportunities to invest in new customer recruitment at attractive payback levels continue to be limited.” 

That Naked’s flat revenue update was seen as a relative success is indicative of malaise in the wine market. It came days after online rival Virgin Wines reported a year-on-year fall in sales for the second half of 2022, from £40.5 million a year earlier to £33.7 million. The company blamed several factors, including the cost of living crisis, bad weather, postal strikes and its implementation of a new warehousing system. 

Virgin also said September sales were significantly affected by the pause on marketing activities following the death of the Queen – with an estimated impact on sales of around £1.7 million. 

Online retailers have also been facing a renewed desire among consumers to get out and into stores. Sainsbury’s reported a 7.1% rise in pre-Christmas revenue, even though online sales were down 10%. 

Chief executive Simon Roberts said that as the rising cost of living bites, shoppers were keen to “come in and see what they are buying”. 

In wine, Majestic said shoppers “flocked to stores” as it recorded the best trading day in its 42-year history on December 23. It said it aims to add five stores in 2023 as part of a longer-term target to increase its physical estate by 20 branches. 

Evidence of the increasing allure of bricks and mortar has been seen in other retail sectors too. The Booksellers Association recorded a 10-year high in the number of independent bookshops in 2022, up from a low of 867 in 2016 to 1,072, though it admits that high street footfall experiences are mixed among its members, with similar numbers seeing their footfall rise and fall in 2022.