Second chance saloon

10 April, 2009

Stephen Founder was determined to open a second outlet of Essentially Wine, despite the economic downturn.

Laura Clark discovers how he did i



these recessionary times, financing and opening a second shop is hardly on every retailer's agenda. But for Stephen Founder, an IT consultant turned wine merchant, the credit crunch hasn't stood in his way of fulfilling an ambition to establish a nationwide chain of Essentially Wine.

While other independent retailers cut overheads and postpone new projects, Founder opened the doors to his second shop in Richmond upon Thames in

January. OLN met the man with self-proclaimed "nerves of steel" to find out how he hopes to make money as the economy falters .

How has an IT consultant become a wine merchant?

Wine has been a hobby of mine for

years. I had my own IT company in Switzerland, which I sold in 2000. I was


- I had been in IT for 20 years

and I wanted to do something different. I was

looking for something I would like to do, something I would enjoy - wine was one of those and the idea just snowballed.

Why did you choose Chipstead for your first shop?

Every time I came back to the UK from Switzerland I was disappointed with the quality of the wine shops . There were a lot in central London, but not many outside . My methodology was to look at areas in the UK with an above average income, at least 10% above. I shortlisted those, and then looked at the number of shops in that area. Then I studied the ratio between the number of wine shops and my target population to compare like for like. Many retailers set up in the area they live in

- that's a mistake. I kept an open mind as to where I could settle down. Chipstead was an ideal location with 30 to 65


olds with above average earnings.

How have you financed a second shop?

I got the shop for a substantially cheaper price

because of the current environment. Luckily I had the capital to invest and I've funded both shops myself.

Around £100,000 of investment has gone into each shop. Bespoke racking is expensive


our shelves are made

from Malaysian mahogany

in the US. I'm really passionate about lying wine on its side

and I have to rotate them at least once a week to stop the cork drying out. At any one time I have between 300 to 400 wines on show

- I don't like cluttered shops very much, there tends to be a

"pile them high and sell them cheap " mentality.

How do you decide what to stock?

If you wouldn't drink it yourself, you shouldn't sell it. The portfolio reflects my palate. There's a high concentration of French and Italian wine - I think those countries make better wine than the New World. New World winemakers use too much fruit and aren't able to replicate Old World winemakers' craft and skill. Having said that, we've got a reasonable amount of New World - I stock wines that customers like. We tend to have new wines on show for tasting before we take them on permanently

and I don't take it if the multiples have it.

What's your average bottle price and how is it changing?

People are down grading - rather than spending £12 on a bottle, they're spending £8 or £6. My average bottle price is still £12 though. There's a variation between the shops -

my best seller at Chipstead is different to Richmond, it all depends on the clientele. In Chipstead I sell a lot of good Chablis, for around £10 - £12 a bottle.

You specialise in wine accessories

and wine cellars that range from around £1,000 up to £12,000 - is it hard to sell such expensive equipment at the moment?

The cellars are made to order

and in the shop we have three demonstration models. People are prepared to spend that amount of money and I've sold a lot of the units, mainly to private individuals. They're a very good idea if haven't got a cellar. The accessories have a gross profit margin. Perhaps on average profit margin they're a relatively small part of our business. Eighty per cent of turnover is wine, but we do a lot of cross-selling. People get glasses and they'll also buy wine.

What's your secret

to success?

My philosophy in business is that you need two things for success. One is a good understanding of the finances, and two is be passionate about the product or service you are selling. The key to being a successful retailer in today's environment is owning your own property

to eliminate lease rates. It does mean I can't afford to be in a primary location, but in a secondary location I have good loading bays and space for parking outside and I can be the freehold of the property.

You also have to make sure staff incentives are allied with your business. I will offer stock options to staff, then the person has the incentive to stay and make sure the business succeeds. I would offer them the option to buy the share in the future at a price determined today. I'm not going to give away the equity but if they stay with me they should benefit. The success of a business is down to every member of staff and it's only fair they share in that success.

What are your plans for expansion?

I'm always looking out for opportunities - when they arrive you need to grab them. I'm looking to acquire a wine -importing business as the next step. To be successful in wine, the larger part of the supply chain you have control of, the better, as it enables you to keep costs down. It would be an acquisition, although I'm not in a position to do it now.

The idea has always been to own a chain of shops, maybe five to 10 initially. It's very difficult as a retailer to survive with a single shop because costs are so high. Forty per cent of costs overall go into the central business plans, 60% goes into the retail shop. I'm always looking for new locations for other shops and I have some tentative ideas

for areas in the UK in mind. There are some places outside London, at least an hour away from existing shops. But I won't be doing anything in the next six months, not until the economy shows signs of improving.

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