Internet pawn

21 January, 2011

M ost independent wine merchants seem to fall into two categories these days: those who sell online and those who plan to. But perhaps the frenzy to grab a piece of the internet action is misguided. Maybe the future for specialist wine sales will not be via electronic portals but in the familiar, usually rectangular, buildings we call shops.

And there is certainly some evidence on which to base this argument. A You Gov poll last year found that just 14% of all British adults buy wine online. The main objections among those who don’t were that it’s too expensive (25%), costs extra for delivery (21%) and involves a wait (14%).

More options?According to Wine Intelligence data, the proportion of regular wine consumers buying wine online has barely changed in three years: it was 12% in September 2007 and 13% in September 2010. Yet over the same period, the number buying from local independent wine merchants has risen from 17% to 20%.

The obvious explanation is that consumers simply have more local options these days. Five years ago, the number of independent wine specialists was just above 400, and in many parts of the country the internet provided the only realistic means of sourcing unusual or small-estate wines. Now there are about 600 such merchants and thousands, if not millions, more wine lovers have a specialist wine retailer nearby.

Several of the new shops have been set up by retailers that began life online. These include Grapeland in St Albans, Harrisons Fine Wines in Crieff, Perthshire, and Ten Green Bottles in Brighton.

Another is Juckes Fine Wines, of Ombersley, Worcestershire, which is an offshoot of the Evertons Wines web business. In its first three months, says owner Ian Juckes, the shop has achieved sales 25% higher than the website has in the past year. He argues that the online business is performing fairly well, largely thanks to the attention he has paid to search engine optimisation, which means his site is easily found, even by people who aren’t necessarily looking for it.

Juckes believes there is some momentum away from web-based wine sales, and is planning more bricks-and-mortar expansion.

“People will want to support their local independents rather than go online,” he says. “You know what you’re getting and you can get a bit of advice. Most people in the trade say their sites aren’t doing so well. Mine is doing OK.

“We’re fairly new to retailing. We’re only three months in, so we’re a bit of a novice, but people are coming in, asking for advice and looking for things they don’t see on supermarket shelves. Now we’re getting repeat business, which is quite pleasing. From our point of view it will grow and if the right site comes along we’ll look at opening another couple of stores.”?John Hattam, owner of HC Wines in York – which sells wine via its website and at tasting events – does not have a shop. He says his sales have risen 1.5% in the past year – “not a bad result in the economic climate” – which reflects a small fall in volumes but an increase in average prices.

“There are some people who find it easier to go online and read the descriptions and put together a case that is then delivered, rather than expose their ignorance to someone in a wine shop,” argues Hattam, who is also a spokesman for the Association of Small Direct Wine Merchants.

He says some shops confuse consumers with the breadth of their range. “There’s a sense that too much choice can be bewildering,” he adds.

Hattam also points out that online merchants have lower overheads, and hence lower prices. “We check our range – via sites such as Wine Searcher – against competitors, and where the same wine is stocked we find we are often 15% to 20% cheaper than independent retail outlets,” he says.

There’s no doubt that competition is hotting up within the independent wine market, both online and through traditional retail. But the bigger challenge comes from the multiples and established online players. Majestic’s tentacles continue to spread: almost 10% of its wine sales are online, up 8% on the previous year.

Tesco, which claims around 40% of online UK wine sales, sells

around 15% of its wine through the internet. And Virgin Wines and Naked Wines have recently issued bullish trading statements.

Ultimately, all specialist wine merchants are competing for the same customers. Nick Dobson, owner of internet wine supplier Nick Dobson Wines, says: “There is a limit, simply because most people do not take sufficient interest in wine to buy anywhere other than the supermarkets. What I do see is polarisation between cheap high-volume stuff – supermarkets and high-street majors – and more expensive specialist stuff. There is a big squeeze in the middle ground where high-street shops try to compete with supermarkets and fail because of higher overheads.”?Recent data from consultants Capgemini points to a 30% year-on-year increase in online alcohol sales, but there is a growing realisation that traditional merchants can’t simply bolt on a transactional website and hope to claim their slice of the action.

Juckes is realistic about where the future of his business lies. “We’ll continue to develop the website without spending too much money on it,” he says. “We’re pleased with how it’s gone without trying too hard. If you do the right thing with your website you will see some effect, but you have to spend an awful lot of money to compete with the big boys.”

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