Next week is the London International Wine Fair, probably the biggest gathering of the wine trade in the world. It is a forum to discuss anything and everything relevant to the wine world with anyone and everyone involved in wine world wide. As is increasingly the case, online wine conversation and online retail will surely be one of the favoured topics discussed by many at the event.
It is widely regarded that to a great extent the online world is going to play an ever increasing role in world of wine, whether it is blogs and website slowly but surely replacing the traditional newspaper wine column or whether it is companies such as my own replacing the traditional small independent high street wine merchants. There are many topics that could and should be discussed about wine moving online but there is a specific issue that I want to raise today prior to the Wine Fair next week and that is discounting wine in order to draw in customers.
Now, I am certainly not too naive to think that we can entirely do away with discounting in the wine world. It is a classic commercial incentive to draw customers to a product, I have no issue with companies giving discounts in general, it works! However as more online wine merchants spring up there is increasing need for them to vie for customers, often wanting them to sign up to their subscription so they remain locked into their website. However in return for the subscription they are offered wine at massive discounts in order to make the subscription fee seem good value.
There is a problem with this model and I am not including supermarkets in this, as they can afford to lose money on wine but make it up elsewhere in store. The problem is that the discounts that are given by these companies are often so significant that they are either majorly inflating their prices in the first place to discount them back to normal, or they are losing money on wine purchases thereby relying on the next tranche of subscriptions to pay for the previous discounts given. Unless more and more customers are added, often requiring ever increasing discounts to incentivise sign ups then it does not take long for the company to run out of money. Plus in order to retain the customers,who are paying money every month to use the website, they have to provide them with major discounts too, again eating up all of the relatively small margins that exist in the wine world. In short it is not a sustainable model and at some point it will come unstuck.
From a wider point of view there are serious implications to the wider wine world, mainly being that it is very difficult to get someone to pay full price for something once they have received massive discount elsewhere.
It is a Chateauneuf du Pape problem. It maybe because it has the word Chateau in the name but many people consider CNDP to be a single wine and therefore when they see one for £10.99 somewhere they would never want to spend £25 elsewhere for what they consider must be pretty much the same product.
For most wine is simply a drink and that is absolutely fine, a recent article that caused a stir in the wine trade demonstrated that most consumers could not differentiate between a £5 wine and a £30 wine, I don’t think that makes any difference. If people prefer £5 wine then sell them that, there is no problem there, in fact this website is entirely geared to finding good value everyday drinking wines. What is a problem is people not buying wine because it does not appear to have a discount attached.
In time this system of selling wine will devalue the wine trade into playing this game because it will become so hard to sell wine without also providing a discount. As a small online retailer we look for wines that we believe represent good value and our customers trust that our selection and buy wine without having to be constantly pushed by a discount.