But with everyone from independent retailers to major high street supermarkets also hailing the net as the key opportunity to grow sales, Gormley knew his business had to be totally unique.
Naked Wines is an online wine retailer which puts producers in direct contact with consumers, who then have a say in what wines the site sells.
By cutting out the costs of running a retail outlet?, margins are better and Naked Wines says it is able to pay small producers a “fairer” price.
Gormley and his team are also very hands on in terms of the look and taste of the finished product.
It’s this business model, Gormley asserts, which makes Naked Wines “more like a venture capitalist, than a wine?retailer”. Coming from the man who set up Virgin Money with Richard Branson, he should have the financial know-how to make it work.
Sponsor a winemaker?Just like a venture capitalist which brings managerial and technical expertise, as well as capital, to its investments, Naked Wines makes its money, time and industry knowledge available to promising winemakers or small wineries with growth potential.
This week the company announced a £5 million investment fund for “experienced, proven winemakers which are looking to go it alone”.
Gormley explains: “We will cover production costs, pay a salary, guarantee an order, market the wines, pay a profit per bottle sold – in other words, provide all the tools an independent winemaker needs to create their own wine, under their
own label, without the risks usually associated with being self-employed in the wine world.”?Once a winemaker is signed up, Naked Wines’ customers have the opportunity to sponsor them and become a Naked Wines Angel. In return for committing to spending as little as £5 a month supporting an individual producer, Angels qualify for discounts, 33% cash back on orders and a half-price six-bottle case of wine.
The Angel initiative has really taken off, Gormley says, with 20,000 people sponsoring individual winemakers. Some of these – the ones who he describes as the most active customers in blogging and social networking – have been promoted to Archangel status.
Archangels act like wine buyers for Naked Wines by helping to select new wines for the site and hosting tastings to support their winemakers. “It’s wine buying as it should be, it’s quick, direct and powered by both the customer and the winemaker,” Gormley explains.
From Virgin to Orgasmic?The decision to run Naked Wines in a similar way to a venture capitalist stems from Gormley’s previous experience in private equity where he worked for Electra Capital Partners in the late-1980s and in 1994 ran Virgin Direct, now Virgin Money, for Branson.
After leaving Virgin Money he set up Orgasmic Wines with the help of business partner Laura Knight and his brother, Clinton Gormley. The firm became Virgin Wines in 2000 when Branson bought into the business.
Naked Wines was established in December 2008 after Gormley persuaded 17 former Virgin Wines staff to come and join him in the new venture.
Its conception caused quite a stir in the industry, given Gormley’s surprise exit from Virgin Wines in June, when he resigned as chief executive amid rumours he’d been asked to leave.
The hostility between Gormley and Direct Wines, which bought Virgin Wines in 2005, reached boiling point last year when Gormley received a letter from Laithwaites’ solicitors – which is owned by Direct Wines – threatening legal action over some wording in a Naked Wines’ press release.
Naked Wines claimed its Angels scheme was unique in supporting individual winemakers and cost? consumers £60 a year to take part.
?However Laithwaites’ lawyers argued it also supports independent winemakers and customers are not charged a monthly fee.
Gormley’s blog at the time was refreshingly open and honest, and in it he even invited readers to vote on what he should do – retract the press release and apologise, hire a lawyer to write a similar letter back again, or ignore it.
Such public interaction with readers was designed to generate some noise around Naked Wines, but Gormley says he wanted to stand his ground and not give in to a company that dwarved him in size.
“We’re just a pin prick to them, so I sent a letter saying: ‘don’t you think we would both be much better off just getting on with our respective businesses?’” Gormley says.
Overall, Naked Wines has a customer base of 65,000, the bulk of which Gormley describes as the “give-a-shits”. “They give a shit about what they’re drinking,” he explains.
“They’re not as fussed by external appearances, or how flash the bottle is. They like the story behind the wine and buy it because it tastes nice.”?For Gormley, sharing customers’ verdicts on a wine are what matters, “not Parker points or lots of medals – that’s crap”.
It’s this honest feedback from customers and a transparent rating system which Gormley believes sets Naked Wines apart from its rivals.
“One of our competitors started letting people rate wine but they had the reviews taken off if they were bad. It’s obviously false,” he says.
But with more and more retailers attempting to break into the online market, what has been the secret to Gormley’s success? “Be original. If you are a sheep you will get slaughtered,” he says.