This post belongs to an ongoing series about the Naked MarketPlace, a website that allows any winemaker to pitch wines to the UK market
Another big topic of discussion regarding the Naked Marketplace is how it compares to the Advanced Booking system it replaced.
How Advanced Booking Worked
Naked Wines used to offer one special advanced booking deal at a time. This would be an opportunity similar to wine futures where customers bought wine that hadn’t even been bottled yet. Sometimes, they bought wine before it had even been picked.
By buying very early, customers would receive preferential pricing. The longer they waited, the more the price went up. Sort of like booking RyanAir flights. 😀
The adjacent screenshot shows what a typical offer interface looked like.
Note that the price in the screenshot is identical for the vine, winery and bottle pricing. This just means that the wine had already been bottled when the offer went live on the website, so the earliest you could buy was in bottle. Sorry I couldn’t find a better example in my archives!
Naked Marketplace Similarities
The new MarketPlace system works on a similar concept since winemakers are pitching their wines before the bottles even enter the UK (or before Naked has committed to buying the bottles for that matter). There’s a similar sense of delayed gratification. If you commit your money a few weeks ahead of time, you get the wine at a discounted price. And this is rooted in the similar basis of commiting to buying a wine early on to let the winemaker save on the cost of production, bottling, storage and shipping.
There are also smaller technical similarities that will only make sense to people who are used to the NW interface (eg no cashback on advanced bookings, only one case per customer, advanced booking cases can’t be grouped with other orders)
Naked Marketplace Differences
There are a host of differences in the innovative new system too. Otherwise it wouldn’t be very innovative! 😀
The biggest source of conversation I’ve seen has been this notion that the Marketplace deals don’t always succeed. In the old Advanced Booking system, if you made a bid, you knew you’d get your case at the price you bid. Because even if hardly anybody bought the advanced booking, Naked would be able to sell the wine at full price once the shipment arrived. On the marketplace, if people don’t buy enough wine to hit the winemaker’s minimum quantity, then the deal is cancelled and bids are refunded. Some people find this is disappointing or frustrating compared to the old system where a bid meant you were getting your wine.
There’s a reason for the system to work this way though. Customers are dealing directly with winemakers to try to broker a deal. If the winemaker and angels fail to drive enough support for a wine, that’s life.
And honestly, the results speak for themselves. Despite the fact that some people are resisting the change, a look at the list of successful purchases on the MarketPlace shows they’ve sold 8916 bottles since the marketplace launched its first deals on the 17th of May (30 days ago).
In the old advanced booking system you had one deal at a time. And those deals often lasted three weeks on the site. Often deals were just for a couple hundred cases (as they are on marketplace as well). That means the advanced booking system would often take two or three weeks to move just 600-1200 bottles. The marketplace clearly offers more selection.
Gatekeeper versus Platform
Instead of acting as a gatekeeper who selects which deal to feature on the advanced booking section of the site, Naked Wines now allows all the world’s winemakers to simultaneously make offers in the marketplace. Some people might argue that having more choice is bad, but they can always go to the other section of the site and buy one of the pre-mixed cases that have been selected by Naked Wines or personalities like Jamie Oliver.
I personally love the idea of a wine importer stepping back and giving the market a chance to decide to bring in new wines.
There are hundreds of gatekeepers in the wine business. Critics, importers, and so on. But there are virtually no opportunities like this one that are a truly open platform anybody can use to promote their wines in the country.
Sure the site mechanics are a little more sophisticated and therefore complicated. And auctions are more complicated than retail shops, but there are benefits to auctions that make the model attractive for a lot of people. Since the wine business is entirely too legislated and closed, it can benefit tremendously from this kind of open platform system.
And the usual suspects at naked wines (winemakers who have already established a fan base) no longer have to wait and hope that their wines go up on advanced booking. We can choose to offer a special discount whenever we want. And maybe I’m getting ahead of myself, but customers could start reclaiming certain winemakers or wines too. If enough people posted on my wall asking for a certain wine to come back, I would definitely pitch it on the marketplace.
Innovation is a bumpy road
I know the new system is ruffling some feathers, but I think the sales show that a lot of people are enjoying the new system! It might be useful to remember that the advanced booking system launched just one year before the marketplace. It seemed weird and new back then too. But now we’re used to it. And I bet that in 12 months, Naked will have discovered some new way to innovate the wine business and we’ll be talking about how we really got used to and love the marketplace! ;D
Elin McCoy wrote her Bloomberg column about my UK importer Naked Wines, and her article uses a lot of my personal experiences with the company.
It’s a bit strange referring to Naked Wines as a wine importer. The more I work with them, the more I realize they have many many roles in the wine trade. Calling them a wine importer almost feels like I’m neglecting their role as retailers, financers, communicators, and innovators. Some of the projects described in Elin’s article like the MarketPlace can’t be classified as a traditional ecommerce site. Naked isn’t buying wine and then selling it. They’re instead providing a platform where other people can sell their products like eBay or GroupOn. If this project succeeds and draws enough attention, it could totally marginalize the import and retail side of the business.
Anyway, it’s always fun talking to journalists about Naked Wines because they’re constantly trying new things. So every interview, there’s a slough of new questions and answers. I never get bored! 😀
I met Elin last October at the European Wine Bloggers’ Conference and she got to taste some of my wines back then.
She had this section in her article about O’Vineyards:
Joe, Ryan, and Liz O’Connell at their winery Domaine O’ Vineyards in Cabardes, France. The O’Connells, from Florida, purchased the vineyard in 2004, and their cabernet-merlot blend Trah Lah Lah has won fans among Naked Wines’ Angels. Source: O’Vineyards via Bloomberg
Recap: What is the MarketPlace
The MarketPlace allows winemakers to pitch wines at any price, and the software will automatically calculate shipping, excise, Naked’s cut, VAT, and so on in order to show you the final retail price. But the MarketPlace also allows for some degree of haggling between the winemaker and the consumer.
Offer Lower Price feature
The feature that allows this haggling is the “Offer a Lower Price” button. When a customer clicks this button, they are given the option of choosing between 5 prices (the options decrease by 4.75 £ each time). So you can offer the winemaker’s full asking price, 4.75 less, 9.5 less, 14.25 less, or 19 less.
If you place an offer at the lower price, that bid is binding. The winemaker can accept to lower the price and you are already commited to the purchase at that price. But if the winemaker lowers the price, it lowers for EVERYbody, even the people who bid at the full price.
The adjacent image is a screenshot of the customer interface for my reserve which is on sale as I write this post.
As you can see, a lot of people are using the bidding system to say they wouldn’t buy at the full price, but they would buy at a lower price.
When to Lower Price
This system has generated a fair amount of confusion. People commonly question why the winemaker would ever accept the lower price. Others question why consumers would ever pay the full price. I understand the skepticism, but I hope we can overcome it. Because it’s really pretty straightforward business.
Let’s assume a winemaker offers a case of 6 bottles at 60 £. Only ten people bid the full price. But twenty people bid at 50.50 £. And forty people bid at 41 £.
The winemaker can choose to
- sell 10 cases at 60 £ to make 600 £
- sell 30 cases at 50.50 £ to make 1515 £
- sell 70 cases at 41 £ to make 2870 £
Looking at these options, the winemaker might decide to lower the price of the wine.
Rowan Gormley, founder of Naked Wines, explains:
“The answer is that winemakers will often trade price for volume…and we wanted you to benefit from that. By you bidding, you PROVE to the winemaker that the demand is there at a lower price.”
People don’t realize that winemakers like me are constantly asked by importers to make price concessions based on some vague hope that this will increase sales. On the other hand, the MarketPlace shows concretely how much my sales will increase if I lower the price per bottle. And it’s not theoretical. The lower offers are binding purchase agreements. If I lower my price, then those bottles are sold. Pretty fancy. Pretty powerful.
Will the customer ever pay full price?
In my personal experience of putting the Reserve on the MarketPlace, we see that (as of June 4 2011) 137 cases were sold at full asking price. Another 120 cases would be sold at various lower prices. So, here’s proof. A lot of customers are willing to pay the asking price. A majority of them. But why?
A couple reasons:
- The asking price is already discounted from the regular retail price
- The Proprietor’s Reserve is rare and this price is rarer still
So it looks like a lot of customers just take the deal in good faith. From a game theory perspective, you could say the fear of missing out on the deal entirely outweighs the potential benefit of saving a few pounds. But if a wine is less established on the site, this fear of missing out might be mitigated and the potential benefit of saving a few pounds might win out.
In this next part, I get bogged down in pseudoscientific psychobabble, so you might want to skip ahead. . .but we could imagine three kinds of users on the MarketPlace.
- Sounds great – Tends to bid full price
- Think about it – Tends to weigh all options
- Minimumista – Systematically offers lowest price
The “Sounds great” customer tends to accept the deal at face value. You could also call them the good faith bidders. They just assume the winemaker is doing their best to get the wine to the UK. A lot of the winemakers with established reputations on the site elicit a higher number of “sounds great” customers. We’re trusted, people know the quality of our wines, people know the usual prices, and they see we’re making an effort. So they say it sounds great.
The minimumista is a person who systematically offers the lowest price on a wine. I don’t want you to think I dislike this person. I actually think it’s very intelligent for a casual drinker. If there’s an unknown wine on the site and you’re not sure whether you want to buy it or not, then you should probably put in the minimum bid. Assuming the wine is decent, you’re going to get a real bargain when a winemaker actually accepts the lowest price. And if they don’t accept the low price, nothing is lost because you weren’t exceptionally interested in the wine in the first place. But you have to realize that most winemakers will not accept the lowest price. So this strategy only makes sense if you can afford to miss out on the wine.
And now we’re getting into the realm of thinking about it. This customer is going to weigh the chance of getting a lower price against the risk of missing out on the deal entirely.
“I want to save 20 pounds, but I also really want this wine. Maybe I’ll just bid 10 pounds less.” or
“I want to save 20 pounds, but I kind of want this wine. Maybe I’ll just bid 15 pounds less.”
Hopefully this all makes sense. Again, looking at my marketplace offers, this seems to be justified. There are a significant number of full price bids. There are a significant number of minimum bids. And there are some in the middle who are thinking about it.
Is there a demand curve?
Rowan has a lot more data than me and he insists that there are definite sales trends that are heavily affected by price. A rule of thumb that gets thrown around a lot is “Lowering the price of a bottle by 1 pound will double sales”. The offer lower price option allows us to check if this is true.
Here are the bids on other wines in the MarketPlace.
While most of these offers (including my own which was screenshot at the top of this post) display an increase in volume as price descends, I’m not sure that we have enough data to draw any conclusions. Although I would point out that the box in the lower right has a clear anomaly with 51 offers at 45.79 but only 12 at 43.25. This suggests to me that people are not just deciding based on what the wine is worth to them. Because most studies suggest that more people would buy at a lower price. Instead, it would seem that people are distinctly weighin in the fear of missing out on the deal completely. Or this could be a total fluke. Either way, interesting anomaly.
Will I be lowering price?
All of this said and done, it’s safe to say that I’m not lowering the price on my Reserve 2006 (any more than I did in the initial offer). Essentially I’m selling 137 cases at 95.04 for a total of 13,020.48 pounds. If I lower my price to 85.54 I will only sell 8 additional cases. And the price will be lowered for all the people who offered full price too. So I’d sell 145 cases at 85.54 and actually receive less money (12,403.30 pounds). Of course, all this math is based on the retail instead of wholesale, but it gets the point across.
And again, I should stress that we already lowered the price significantly in our initial offer. Which is why so many people accepted the “full price”.
Hope some of this was interesting. I think it’s a great feature and I can’t wait to see more and more data piling in. It’s a valuable resource to winemakers and a great tool for wine drinkers.
This is part of a series on the Naked MarketPlace, a new initiative from my UK importer that allows any winemaker on earth to sell wine to members of their site. This first post will explain the basic premise of the MarketPlace. Future posts will explore how exactly the marketplace works and how it might affect the future of the wine business. I’ll specifically be looking at my first experience placing 100 cases of my Proprietor’s Reserve 2006 on sale through the Naked MarketPlace.
What is the MarketPlace?
MarketPlace is a platform like ebay or groupon that allows wine producers to “pitch” their wine to the UK market. It’s not EXACTLY like ebay or groupon, but it has a lot more in common with those style websites than with traditional wine importers. Traditional wine importers buy wine and resell it, assuming a large amount of risk, marketing costs, storage costs, and so on. The Marketplace puts producers in direct contact with a group of final consumers and wine doesn’t get shipped until its all presold.
The MarketPlace launched at the London International Wine Fair in May 2011.
Specifically, the site allows producers to put a wine on sale at any price and offer it to the UK market. If enough people buy the wine at that price, than Naked Wines (the importer) pays for the wine and brings it into the UK, sending it straight onto the consumer. Naturally, Naked will be charging a commission and some of their overhead (excise, transport, etc), but all that is made abundantly clear when the producer goes through the pitching process. If I pitch a wine at 2 euros per bottle, the site will tack on all the charges and commission and change the currency and display the final consumer price. So I’m paid the 2 euros I asked for and I see the final price offered to the customer.
If a wine fails to sell its minimum amount, then something else happens. Throughout the bidding process, customers at Naked Wines have two options: “Bid current price” or “Offer a lower price”. This second haggler’s option allows a person to speak up if they would have bought the wine at 1 pound less per bottle. If a pitch is unsuccessful, the producer can look at the lower offers. And hopefully, the producer will realize what price point the wines need to be in to make a splash in the UK market. I’ll look more at this specific aspect of the marketplace later on.
Who shops at the marketplace?
Naked Wines has a rather large customer base (175,000 drinkers). And we’re not talking one time buyers. Naked has customers who are paid members of the site. They pay 20 pounds per month and get that money in cash back on future purchases in addition to certain member-only discounts.
These members are all encouraged to take a look at the deals offered in the marketplace and they will hopefully all bid on the steals they find there.
Who will sell on the marketplace?
Literally anybody can access the marketplace producer platform.
I imagine that producers who already have a track record on the site will be eager to use this platform to move lots of wine at a smaller margin than what Naked Wines normally takes. Essentially, as Naked cuts its mark-up down to a 10% commission, it’s left to the customers and producers to haggle over the savings. That means a little more money for producers and a little less cost for the customer. Having a proven track record on the site guarantees a certain level of quality for wine on the marketplace.
On the other hand, producers who have absolutely no track record might also benefit from this. They’ll have to fight a little harder and maybe offer the wines at a lower price to get things started, but these producers will eventually build up a reputation. Alternatively, they can send a few dozen sample bottles which will be given to the most vocal members of the Naked Wines customer community in the hopes that this will start some buzz on the site. I’ll address this in more detail later too, as early experience make me slightly hesitant about the potential to build up a reputation.
No more whining
Essentially, the most important development regarding the Marketplace is that wine producers no longer need to depend on traditional importers. If you think you make great wine and all you need is a chance to be on the UK market (there are a lot of us in that boat saying “If only an importer would give me a chance”), you now have that chance. Pitch a wine on the marketplace. See how things go.
Frequently Asked Questions
There are some FAQ on the naked wines site.
Of special interest to my readers, here is the winemaker section of the FAQ:
Q&As for winemakers
Who are Naked Wines?
Naked Wines is an online wine retailer who supports independent winemakers from around the world – with over 150K customers. On average, we ship over 10,000 bottles of wine a day.
What’s Group Buying and who is it for?
Naked MarketPlace is an online farmer’s market where winemakers can pitch and sell their wines directly to UK wine drinkers – at a price which works for everyone. Winemakers name their price, based on selling a minimum number of cases – and wine drinkers can either accept the price and bid OR they can suggest a lower price (which the winemaker may or may not accept!).
What are the costs?
There is NO cost for pitching your wine to our 150,000 customers. Simply 20 minutes of your time to upload your product on our website! We charge 10% commission if the pitch ends successfully – and if the pitch falls through, we won’t charge you a thing.
What are the risks?
There are no risks. You set the price, you set the volume. If enough customers want to buy your wine, great – the deal is done. If not, you walk away.
Who decides on volumes and prices?
As above, you’re in control and you set the price and minimum and maximum volume. Customers can bid to pay a lower price, but it’s up to YOU whether you accept or not.
Once I’ve uploaded a product, can I change my mind and remove it?
No, once it’s live you cannot remove your pitch. BUT if you’ve made a mistake then please email us at email@example.com and we can help.
Can I change the price and volume once a pitch is live?
Customers can reject your price and suggest a lower price. IF you agree with their suggested price, you can accept their new price BUT you can’t change prices yourself once a pitch is live. You can’t increase or decrease volume either.
Does Naked Wines provide technical support and selling advice?
Yes. If you need any help or advice you can contact us on firstname.lastname@example.org
How long does each pitch last for?
Seven days. It will end automatically after this time – whether you’ve reached your minimum number of orders or not.
Can my agent (or someone else) manage or set-up a pitch on my behalf?
Yes. Although this is NOT the place for agents to offload dodgy old stock that they can’t shift – as customers simply won’t buy it.
Can I set-up more than one pitch?
Yes, you can sell as many different wines as you like.
Can I mix up wines in a case?
No, your pitch is for 6x one type of wine.
Will it affect my brand and can I work with other retailers in the UK?
You can work with as many other retailers as you like – and charge whatever price you like elsewhere. Group Buying is NOT a traditional retail channel, so you’re not compromising your brand in any way. In the same way restaurant prices and retail prices differ for the same product, Naked MarketPlace prices differ to normal shop prices.
How can I drum up excitement about the product?
Make sure you upload interesting product information and a good picture! It’s also a good idea to chat to customers on the website. We will email you every time a customer asks you a question and explain how to reply. You can also ship our customers free samples if you want them to try it. We have a group of customers called Archangels who are a very powerful sales force – and will spread the word!
When will I get paid?
Once the deal has ended, you need to deliver your wine to and our hub in your country within FOUR weeks. Once delivered, we will get the wine chemically analysed to make sure it’s EU compliant. As soon as we’ve got the certificate, you will get paid within 10 days. If the wine doesn’t pass the test, we will return it to you and you won’t get paid. N.B. If you don’t stick to the deal and deliver the wine on time, we won’t want you pitching any more wines in the Naked MarketPlace – as we don’t want to let customers down.