D2C05 Reaching Consumer In Free Market - Retail Flashcards Preview

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Flashcards in D2C05 Reaching Consumer In Free Market - Retail Deck (31)
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List major retail outlets to end consumers

Deep discounters
Convenience retailers
Specialist wine retailers
Online retailing
Global travel retail
Wine investment companies


Give a few examples of major supermarkets

Wal-mart - USA
Woolworths - South Africa
Carrefour - France
Tesco - UK


Which outlet has the largest share of wine sale?

Supermarkets, in USA, UK and France


What kind of wines can be found at supermarkets?

> Large producers
> Well-known and popular regions and varieties
> Style that appeal to a range of customers, who may have little knowledge
> Local wines in producing countries
> Small amount of wine from artisan producers under the producer’s label - on the understanding that when they sell out, there is no more available; attractive to consumers with a strong interest in wine


Compare the use of well-known brands and private label wines in supermarkets

> Well-known brands: attract customers; do not promote customer loyalty
> Private labels: promote customer loyalty; need to be available in large volumes and need to be from large producers


What is private label wine?

In order that customers cannot easily compare prices, supermarkets stock wines bottled under labels exclusive to them (even if they are available elsewhere under different labels)

> Promote customer loyalty
> Need to be available in large volumes, from large producers


Advantages of private label wine for producers

> Attractive opportunity to sell large volume
> High level of market exposure, sometimes in more than one country
> No intermediary costs
> Supermarket-employed winemaker may work closely to supervise production and ensure quality control
>> this could help improve quality of other wines


Disadvantages of private label wines to producers

> Competition to stock in supermarkets means that supermarket wine buyers have enormous negotiating power, esp. when it comes to price --> low profit

> Substantial fees to have wine stocked, and desirable placement.

> Producer usually covers cost of price promotions.

> Contracts have strict requirements regarding quality control, time and manner of delivery, packaging and labelling - or may be refused or penalised

> Producer/wine may be delisted if not selling sufficient quantities


What are deep discounters? Examples?

> Share many features of supermarket but sell at lower price
> Offer permanently lower prices, rarely offer price promotions
> E.g. Trader Joe’s; Aldi and Lidi (Germany) ; Netto (Danish)


How do deep discounters achieve lower price points?

> Lower profit margin, rely on volume
> May have subscription model (e.g. Costco) to finance lower margin.
> Shops are basic: goods stacked on pallets rather than shelves
> Away from prime retail location - lower rent
> Limited product range - more streamlined, easier to maintain
> Many private label - opportunity for producers
> Rarely stock major brands, work with less well-known producer with lower overheads, buying up whatever stocks may be available.


What kind of wine can be found at deep discounters?

> Private label
> Small-producer wine with low overheads
> Small amount of expensive wine in more affluent areas or before holidays e.g. Christmas; this attracts customers with stronger interest in wine, who may discover other product they like


Benefits to producer of working with deep discounters

> Private label wines can represent a large volume order for producer, in turn developing brand (e.g. success of Charles Shaw's 'Two Buck Chuck' at Trader Joe's).
> Deep discounters often work with less well-known producer with smaller overheads, with no expectation of future supply of the same product; can be attractive if producer has a surplus of a given wine to sell.
> Deep discounters buy directly from producers, cutting intermediary costs
> Though strike hard bargain, do not charge suppliers for stocking their products
> No promotion costs


Features of convenience stores

> Closer to where people live
> Open longer
> May be independently owned or a part of franchise
> Store popular brands, similar to supermarkets but smaller
> Tend to be more expensive


Why do convenience stores tend to be more expensive than supermarkets?

> Smaller premises - rents proportionately higher
> Premises designed for other purposes, so less efficient
> Higher proportion of staff relative to their size
> Where there is a franchise arrangement, fees to franchise owner must be paid


What kind of producers are attracted to specialist wine retailers? Why?

> Largely do not have the purchasing power of larger retailers, thereby creating better economic outcome for producer
> Average price sold is higher due to high involvement consumers
> Can have hand sell of wine due to staff expertise


What are high involvement consumers?

Those who are more interested in wine, willing to spend more per bottle than the general population


Major features of specialist wine retailers

>Specialise in wine, sometimes premium spirits and beers, some sell cheese and delicatessen foods
>Most independently owned
>Some specialise in particular styles of wine; some deal with premium wine, en primeur
>Small producers, high involvement customers, higher price
>Personal service: hand sell, build up relationship with regular customers, learn about likes and dislikes, suggesting new wines and let them know when their favourite wine is on offer; customers trust staff
>Special events such as tasting and educational class


What is hand sell?

> Tell story of wine
> Provide information about wine, variety, food pairing


Disadvantages to producer working with specialist wine retailer

> Smaller quantities sold with each retailer
> Need to employ distributor (given the number of potential outlets)
> Highly dependent on retail staff in a given retailer, which is not in producer's control


What are hybrids?

> Specialist wine retailers with a bar area where customers can drink the wine they buy in the shop
> Usually sell food too


Benefits and downsides to retailer of hybrids

> Adv: consumer can try wine before buying; wine by glass - showcase new wine and wine from less well-known regions or varieties
> Dis: stay open later; additional staff; additional bureaucracy cf. a simple shop due to serving of food and drink


Advantages of an online retailer (to retailer)

> No need for expensive retail stores
> Warehouse with lower rent, therefore lower overheads; can stock a larger and more varied range of wines
> Chance for small niche producers
> Larger and more varied customer base than a single physical store as can reach anyone


Major issues of online retailers (to retailer)

> Delivery is expensive; can mitigate using click and collect if have physical premises
> Need to ensure easy to use, reliable website: distinctive and convey retailer’s band image; content should be well presented and helpful to customers; kept up to date (e.g. should not show items that are out of stock as in stock)
> App management in some countries (e.g. China)


Advantage of global travel retail (to retailer)

> Passenger has leisure time
> After arrival: do not have to carry and stow extra hand luggage


Why has the concept of duty free become less important?

> Introductions of free-trade zones such as EU
> Customers look for high-quality and high-priced goods not available in their home market; therefore best suited for (super-)premium wines


Disadvantages of global travel retail (to retailer)

> Expensive, due to the high cost of retail space, thereby leaving lower profit margin to suppliers.
> This could weaken the global travel sector if suppliers choose to leave it.


What kind of companies are involved in wine investment?

> Specialist wine retailers (Farr Vintners, Fine & Rare, Berry Bro’s & Rudd) who are allowed a small allocation

> Companies which only deal with investment-grade wine (Amphora Portfolio Management, Cult Wines)

> Other companies that essentially act as brokers between buyers and sellers


What are investment-grade wines?

> Most sought-after and expensive wines in the world
E.g., Bordeaux Premier Cru Classés, Burgundy Grand Crus, top Napa Valley wines
> Possess rarity value


What are “fine wines”?

No agreed definition but usually would be:
> From prestigious regions
> Made in small quantities by leading producers
> Able to command super-premium prices
> Have a secondary market


What are the main routes to buying investment grade wines?

> Purchase en primeur
> From specialist retailers
> Trading exchanges that work like stock exchanges: for retailers and brokers who want to find buyer or seller of particular wine
> Companies that manage wine portfolios of clients, sourcing and selling
> Auction houses: not possible to know storage condition; also particularly liable to wine fraud in recent years