Online wine bargains
Everyone loves a bargain and with this in mind, online wine sites are jostling for attention using discounted wine to lure foot-traffic to their sites.
What is supporting this business model is the ongoing glut of wine in the industry, as well as the overwhelming number of wine farms (600-odd) all trying to attract consumer attention.
While wine makers do not like discounting their wine, and better-known cellars would rather pour it down the drain than discount it, plain economics suggests that this business model could prevail for the foreseeable future.
Getwine
“The bottom line for some wine makers is that they need to move stock in order to raise capital for the next harvest,” says Johan Wegner, owner of Getwine.co.za.
In other cases a less well-known wine farmer may be prepared to take a hit in order to move the wine and benefit from the marketing exposure. Getwine recently sold off 840 cases of Jean Daneel’s superb Signature Red Blend, which is made in the French style, at a 60% discount. It took less than three weeks to sell the lot, and customers were not able to order more than six bottles.
Wegner saw the opportunity for discounted wine sales in 2003 when a farmer asked him to move a surplus of unlabelled wine quickly. In those days he and his brothers operated traditional liquor stores and sold wine via email and telephone. They moved their business online in 2005 and sales slumped overnight.
“Those were the days of dial-up connectivity, limited bandwidth and a distrust of online payments,” says Wegner. Since then online business has matured and South Africans are showing a gradual willingness to shop online. Getwine still sells unlabelled wine at big discounts, but this is no longer the biggest part of the business. Now it’s about finding great deals and offering these to customers.
CyberCellar
CyberCellar is South Africa’s oldest wine retailer, having started out in 1998 (and survived) with Kalahari.com. Although its focus is not discounted wines, the business did move into this area in order to boost foot-traffic. “It works, there are no two ways about it,” says chief technology officer and co-owner David Muller.
Along with COO Johann van Tonder, the pair concluded a management buy-out of CyberCellar two months ago, freeing founder Fiona Phillips to play golf. Muller says the business model is transitioning back towards its heritage, which is to offer customers the widest selection of wines available, at cellar door prices.
“We have grown our traffic by 300% in the past 12 months, but we believe that along with the discounted wines, customers want a rich experience and will pay a little more for better product curation, access to wider choices, good and reliable customer service, quick and free delivery and knowledgeable wine staff. People love Yuppiechef.com, but they will also tell you it is not the cheapest.”
Salewine.co.za
Arguably the most aggressive is Salewine.co.za, founded by Ryan Sowray who has worked across the wine industry for almost 20 years. His was the country’s first online flash-sale website for wines. A flash-sale means that every 72 hours or so, Salewine offers wines that are discounted – sometimes by as much as 70% – for the next 72 hours, or less.
After three years in the business, Sowray has built a reputation for selecting quality wines at good prices. “The business is small and I do the tasting myself. I focus on wines that I like and I think my customers will like.” He too is adjusting his business model away from pure discount to include wines that ‘Ryan Recommends’. “It is nice to move away from just driving a discount,” he says.
5ounces
The latest to enter the market is 5ounces which was launched by former chartered accountant Trevor Gosling, a year ago. “I believe the e-commerce market is where South Africa will see some of the biggest commercial sector growth over the next five to ten years,” he says. The company has muscle behind it, in the form of Naspers e-commerce division MIH.
5ounces, a name derived from the imperial measurement for a standard glass of wine, is similar to US website Lot18. The model also provides consumers with access to high quality wine (preferably wines with 4 Platter stars) at discounted prices via a ‘flash-sale’.
5ounces also supplies gourmet food and accessories.
Tough competition
In the US, sites such as Groupon and Lot18 have not always covered themselves in glory. The regular retail price punted is sometimes grossly inflated and the special price offered is not the cheapest available. However South Africa is a small market and a little comparative shopping will quickly expose those that take chances.
There is no denying that the game is hugely competitive. These sites are just the tip of the ice-berg. Johan Wegner estimates there are about 22 online wine sites operating in SA at any one time – although not all are discounters. Competition is tough, and with input prices – like petrol and toll fees – rising, margins are skinny.
Muller questions the sustainability of a pure discount model. “When you start a fire you use small pieces of wood and paper. These are the discounts. But to keep the fire going you need big logs. This is the value that brings customers back. The discount game is a very intensive game to play.”
However, customers, who are spoilt for choice right now, would beg to disagree.
Where there is a bargain there is usually a buyer.
Source: Moneyweb
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