Chapter 5 - Retail Sector Flashcards
(27 cards)
Retail/retailer vs retail sector difference in textbook
- Retail/retailer: selling wine to end user for consumption - whether retail or hospitality sector (as opposed to selling wine to another wine trade like importer, distributor, wholesaler
- Retail sector: selling wine in shops or on internet to end user, typically sold for end user consumption (except wine sold to investors)
Which is larger is many market - wine sales in retail or hospitaility sector?
retail sector; in uk retail is 80% of sales
What are the 6 different types of operators within the retail sector
- Supermarkets
- Deep discounters
- Specialist wine retailer
- Online retailing
- Global travel retail
- Wine investment companies
Describe supermarkets as an operator wine retail sector. Discuss their selection & customers.
- supermarkets are places where consumer buy everything they need under 1 roof (ex: Walmart, Carrefour, Tesco)
- supermarket often have largest market share when it comes to wine sales (US, UK), attractive for producer who want to sell large vol
- WELL KNOWN: generally stock wines from well known/popular regions or grapes; also carry well known brands (Barefoot, Oyster Bay) to attract consumer to buy wine at supermarket
- BROAD APPEAL: style appeals to large range of customers, many w/ little wine knowledge; in wine-producing countries, range often domianted by local wines
- PRIVATE LABELS: allow supermarket to create brand loyalty to their stores
- PREMIUM SUPERMARKET CHAINS (eg whole foods) - buy artisan producers under producer’s labels - bought in small qty and when wine sells out no more avil; appeals to consumers w strong interest in wines; can be useful route into new market for artisan producers
What’s the challenge with supermarkets carrying well known brands?
- big brand are widely available in many retailers, so consumer can price compare and buy at cheapest retailer.
- these brands don’t promote customer loyalty to particular supermarkets
How are supermarkets dealing w/ challenges associated with carrying well known brands?
- stock bottles of wines under labels exclusive to them: ‘private label wines’
How do private label wines work? What are examples? What are the advantages to supermarket?
- wine brands can be exclusive to a supermarket (can be avail elsewhere under diff label).
- some may have created name & brand but their supermarket name doesnt appear prominently (eg Costco, Walmart, M&S)
- others have own-brand range that clearly display supername & branding (Sainsbury Taste the Difference)
- if brands are popular they can promote customer loyalty to that supermarket
- need to be avail in large vol, so usually come from large producer
What are the advantage for producer who supply private labels for supermarkets?
- opportunity to sell large vol
- enjoy high level of market exposure, sometime in more than 1 country
- supermarkets mostly buy direct fr producer, no intermediary cots
- supermarkets may employ winemakers who work closely w/ producers to supervise production/ensure quality control; expertise may help improve quality of other wines they sell elsewhere
What are the disadvantage for producer who supply private labels for supermarkets?
- supermarkets need varied product range, so there’s more producers who want to sell to supermarket than supermarket needs (excess supply over demand), buyers have enomorous negotiating power, esp on price
- producer dont receive as much as if they were to sell through other channels
- producer expected to pay substantial fees to have their wines stock by uspermarket and for additional promos, like desirable product placements in shops or coverage in supermarket magazine
- when supermarket offer price promo, they expect producers to pay for any reduction in profits due to reduced retail price
- strict contract requirements: regarding quality control, time manner of delivery, packaging, labelling; if not met, they can refuse the wine
- placement in store is competitive, so if wine doesn’t acheieve expected sales vol & profit margins, it may be delisted
- all these things have serious financial repercussions; worst case they are left with large vol of wine they can’t sell
Describe deep discounter as an operator in the retail sector
- many features like supermarket but sell at lower price (eg Aldi, Lidl, Trader Joe’s), very important part of retail sector in DE
- business model is to offer permanently low prices; rarely run limited time price promo
- sometimes buy small amt of more expensive wine for more affluent area or ahead of increase spending seaosn (xmas) - this attracts customers w/ stronger interest in wine who may try their less expensive range and gone back for more
How do deep discounters keep prices low?
They achieve low price by keep cost down by:
* take lower profit margin, rely on sales vol
* basic shops, goods on pallets isntead of shelves, away from prime retail location (less rent)
* more limited product range - more streamline range cheaper to maintain; mostly private label products
* rarely stock major brands (which are more epxensive bc of marketing budget); work w less well known producers w/ lower overhead, buying up whatever stock avail - understand that if sell out, no more avail
* buy direct fr producer, no intermediary cost; dont charge supplier for stocking their products, means greater profits for producer
Describe convenience retailers as an operator in retail sector. Describe their model, stock, prices.
- found closer to where ppl live and open for longer, sometimes 24hr (while supermarket/deep discounter located out of town)
- may be independently owned or part of franchise group (eg Spar)
- some supermarkets are moving into convenience sector too in some countries
- stock brands popular w/ local customers - can be similar but smaller than those of supermarkets; mostly major brands but some have own brands (eg 7-Eleven, Spar)
- tend to be more expensive than supermarkets, smaller premise, rent proportionately higher; consumer willing to pay more for convenience
- employ higher staff relative to their size (compared to supermarkets)
- in franchise, operator has to pay fee to franchise owner
Describe specialist wine retailers as an operator in the retail sector. Describe their model and stock range.
- retailer specialise in wine
- other pfferings: sometimes combined w/ premium beer & spirits, cheese and delicatessen foods from artisan producers
- there’s some larger chains like Majestic or Total Wine, but mainly indie owned or part of small chain
- Range of spcialities: wine/food of particular region, particular style of wine - organic, bioD, natural (Les Cave); others in super premium / premium wines from prestigous producers (BBR, Hendonism) - often engage in en primeur offering - ‘fine wine retailer’
- provide personal service, enhanced by special events, tastings, etc
What are advantages of specialist wine retailers?
- no purchasing power like larger retailer, so tend to focus on small producers (may have few major brands for sparkling/fortified), incld from less well known regions/grapes - attractive option for such producers
- producers like higher avg price at specialist retailer than supermarkets b/c they cater to consumer more interested in wine, willing to spend more per bottle = better margin for producer, although usually have to pay distributor to sell/distributoe wine
- employ knowledgable, well train sell who can hand sell wines - tell the story, provide info and suggest food pairings and build relationship w/ regular customers
- consumer build trust in staff, willing to by unknown wine based on reccos
What are disadvantages of specialist wine retailers?
- distributor margin
- knowledgable staff more expensive
Describe hybrids. What are advantages & disadvantages?
- more specialist retailers now have bar area where customer can drink wine they buy in shop (at higher price than take away)
- usually sell food, mainly cheese/deli items, some offer tapas more substantial dishes
Advantage:
* consuemr can try wines b4 decide to buy, encouraging to purchase something they might have not
* offering rotating wines by glass - good way to showcase less known regions/grapes
Disadvantage:
* may need to stay open later in evening & require additional staff to serve
* additional bureaucracy in opening premise where ppl can eat/drink compared to simple shop
Describe online retailing and its models.
- signficance of this route to market varies by country - 20% in China vs 2% in US
- many retailers offer online retailing in parellel w. shop sales (brick-and-mortars), enable them to connect w/ customers who don’t live within easy reach of their shops
- others are online-only or predominantly online (eg Laithwaite, newpaper wine clubs NYTs)
- wine may be sold by reatiler who sell wide range of products (eg Amazon)
- some require customers to order certain amt of wine each year - either customer choice or cased put together by retailer (wine club model);
- now maby allow consumer to order what they want, some require min order
- mobile apps used for purchasing wines in markets like China
What are the advantages of online retailing?
- no expense of retail shops
- reduce overheads mean retails can stock wines that would not justify space in reatil shop, so can have larger, more varied range than brick and mortars
- provides opp for niche small producers;
- larger customer base as not limited to consumer living within reach of physical shop
What are the disadvantages of online retailing?
- MOST IMPORTANT: need easy to use, reliable website for browsing and placing orders; customer easily put off using slow, difficult to navigate websites
- SECOND IMPORTANT: expense of delivery - wine is heavy, bulk, fragile, so delivery cost more epxensive than clothes, books etc. and they retain risk of wine being lost/damaged
- need stock stored at warehouse, which addscost but can lease/buy building located outside town centers
- need some staff to deal w/ customer queries, take orders, dispatch orders
- website use to convey retailer brand image, so retailer spend money to have website designed plus ongoiong tech support
- content creation: content needs to be well presented and helpful (like detailed descriptions, food & wine pairings, scores from critics, suggestions based on browing history)
- content management: needs to be kept up to date w/ new wines being added as they become avail and OOS removed
what’s the benefit of click and collect
wine ordered online can be delivered to shop with that branch’s usual delivery, saving on costs
Describe global travel retail. Describe advantage & disadvantage
- shops located in place where customers are travelling from one country to another (eg airport, sea ports, intl rail station, onboard ships)
advantage:
* airport advantage - passenger has time after check in to view products or shops in arrivals areas (b4 border control), so they dont have to stow/carry extra hand luggage on flight
* change in consumer view: used to look for low prices in duty free sector (esp when travelling frmo countries w/ high tax rates); free-trade zone of EU, duty free less important - customer lookign for high quality/high priced goods they cant get at home, advantage for retailer to sell range of wines, inlcd super premium wines
disadvantage:
* cost of retail space is high, retailers pass some of that cost onto suppliers, resulting in lower profit margin compared to other routes to market
* if suppliers choose to leave, could weaken global travel sector
Describe wine investment companies Describe the diff models.
- specialize in sourcing & selling wine for investment
- most sought after, expensive wines in the world (Bordeaux Premier Cru Classe, Burgundy Grand Cru, top Napa)
- extremely high prices due to rarity value
Model 1:
* a no. of specialist wine retailers are allowed small allocation of these wines each year, bought directly from producer or via merchant. then offer the wines to customers who have brought before or expressed interest. Some only deal with investment grade wines
Model 2:
* other companies act as brokers - cusotmers tell them what wines they want and these comp try and put them in touch w/ seller; if done deal, brokens charge a commission.
how has wine investment grown in recent decades?
- started w growth of Bordeaux en primeur sales and driven by rapid growth of Chinese wine consumption
- wine is safe investment than stock and shares in financial uncertanity (but element of risk - Bordeaux price can fall)
- now interest beyond Bordeaux to Burgundy, Napa, Champagne, Piemonte, Tuscany
How can investors buy fine wines?
- buy these wines en primeur, either directly from the producer or through a retailer
- buy them on release
- In CA, members of exclusive wine clubs (e.g. Screaming Eagle or Harlan) buy these wines as investments.
