Naked's new wheeze


This is a longer version of an article also published in the Financial Times.

London's most wine-friendly restaurants may be particularly difficult to get into next week, thanks to the influx of hundreds of winemakers and wine traders to the thirty-first London wine trade fair, now encompassing spirits and now at the Excel exhibition centre in the eastern wastes of the city. The themes being debated at the fair reflect the current preoccupations of the mass market: How do you make money from online retailing? Who is the consumer? How does wine feature in the digital conversation?

Something entirely new this year will be a group of 50 keen wine consumers roaming the fair under the aegis of online retailer Naked Wines actively trying to undermine conventional supply chains. If Naked's founder Rowan Gormley has his way, they will be laying the foundations of an entirely new departure for his company and an ingenious way of benefiting from the current worldwide glut of wine.

'Our goal', he explained to me recently, looking less than dynamic with a leg in plaster after having tried unsuccessfully to scale a wall on his way into his Norwich offices, 'is to create a meritocracy for winemakers, where the sales go to people with huge talent, not a huge marketing budget – and UK wine drinkers pay what they feel a wine is worth, rather than the result of some deal. We want to change Naked Wines from being a retailer to being a farmer's market.'

Gormley used to run Virgin Wines for Sir Richard Branson and then fell out with the online retailer's new owners and old rivals, Tony Laithwaite's Direct Wines. He set up Naked Wines in opposition to this behemoth in December 2008 and has been running it as a reasonably conventional direct mail retailer since then, although making waves by financing some of the smaller of their 85 suppliers in advance of delivery, allowing some talented winemakers without access to backers and working capital to set up their own labels. See, for example, this thread in our Members' forum. 

Gormley has always had a particularly keen eye on the sort of social-media innovations employed in other fields. Look on the Naked Wines website and you will see consumers ('our real asset') are at least as important as the wines. There are reviews by the hundred, with ratings by value from the company's 50,000 'angels', customers who pay £20 a month against a discount of a third on what they buy 'instead of the normal 35% that is paid for marketing in the direct mail business'.

Naked's customers have been recruited via partnerships with the likes of Jamie Oliver and BBC Good Food, and the company seems to have tapped into a seam of enthusiastic but distinctly non-nerdy wine drinkers who are typically, I was told, between 30 and 60, have an average annual income of £65,000 and regard wine as a minor not a major interest. Naked's customers certainly seem to be hugely enthusiastic about the company's way of business, efficiency and the wines themselves, to judge from feedback to this recent survey of wine clubs by the UK consumer organisation Which?

'Value's important but they tend to like extrovert wines. They want to know with the first sip that this isn't average. I imagine if you tasted them you might be a bit...' Gormley glanced at me. 'Snooty about them?' I suggested. He grinned.

But now Gormley ('I don't have a palate but I do have a business degree') wants to change the way Naked's wines are chosen and priced by letting his customers decide. As a first step, small groups of these 50 'archangels', the Naked angels who are most active on the site and the keenest reviewers and buyers, will spend a day at the fair, visiting particularly promising exhibitors, smallish and not yet represented in the UK, in the morning. At lunchtime they will all gather and exchange views on specific finds. In the afternoon, the plan is that they will descend en masse on the most likely new suppliers and come up with a wish list.

The selected wine producers will then be given the chance to pitch for Naked Wines business by having the archangels' notes and scores posted on the Naked Wines website. But it will be the customers who decide on the price, as it will be for all future transactions if Gormley gets his way. Working in competition with the giant retailers, his chief problem is finding suitable new products rather than new consumers. 'I want us to become a fetcher rather than a seller', he says.

The idea is that possible new wines are either suggested by customers or by Naked's past route of scouring wine colleges, trade magazines and asking current suppliers for suggestions. Then the price is decided mutually by producer and consumer. 'Say you have a New Zealand Pinot Noir that retails for $25 in Auckland. If our customers take 1,000 cases, say, the producer will accept $15. We translate that into a UK retail price and if 1,000 of our customers agree to buy, then the deal is done. Or, they can say no, and we'll ask whether there's a price at which they would take it. So the winemaker gets a demand curve and it gives them a chance to say whether they'd rather take the margin or the volume. So for the customer, the price may go down from what they have bid since all customers get the same price. We think this is the best way to encourage people to be sensible.

'The winemaker then has to deliver the wine to our New Zealand agent. We test and check it and if everything's fine, the winemaker gets our money. So for the winemaker there are no costs before sales. We want the winemaker to have no incentive to inflate prices, but a powerful incentive to make better wine.'

Naked takes 10% of all transactions, and has consumers' cash between when they commit to the purchase and when the deal is agreed with the supplier. Each wine producer is profiled with photographs and cosy copy on the site. Typically they are individuals without huge working capital who have already used Naked's funding to reach a new market. Gormley was inspired to instigate his new scheme by attending a mobile phone technology conference in Munich. 'I was the oldest by 28 years. There were lots of programmers there who had left big companies and are now working in their bedrooms. The App Store has given them a way of selling their goods directly. I want to build an App Store for wine where winemakers can pitch their wines direct to customers.'

Apple of course take a lot more than 10% on their transactions, but then the mass market end of the wine trade was never very good at maximising margins. 

Naked Wines is 60% owned by the German wine retailer WIV which supplies just one out of the 220 wines currently offered by Naked in the UK. 


In a trial case, reds seemed much more impressive than whites, and none was cheap:

Mauricio Lorca, Angel's Reserve Torrontés 2010 La Rioja, Argentina £8.99

Benjamin Darnault 2010 Minervois, Languedoc £9.49

Mauricio Lorca, Lirico Malbec 2010 Mendoza, Argentina £9.99

Benjamin Darnault Organic 2009 St-Chinian, Languedoc £12.99

Domaine O'Vineyards, Trah Lah Lah 2008 Cité de Carcassonne, Languedoc £12.99