It costs quite a bit to acquire customers (the CAC: customer acquisition cost), and then it costs more to retain those customers (after all, you are interested in the LTV of that customer]. If a retailer aims to connect customers directly to wineries, then there’s a significant expense they have to bear: customer acquisition and retention. Once sales cross international borders and shipping and taxes are involved, using an importer is often the only way to go. Where a hybrid model of direct sale and selling through retailers and restaurants in the local market is taken, they usually have to be careful not to undercut their customers, so this means you won’t get the wines cheaper by buying direct. Of course, a few wineries are well known enough to be able to sell their entire allocation to a mailing list, but this is just a few. For a winery to sell direct locally, they’ll probably need a tasting room or cellar door facility, or the staff availability to receive visitors to get these direct sales. This ignores the fact that it costs a lot of money to find customers. When you see the details of how much a producer gets for a bottle of wine, and then how much of the sticker price it is sold for is taken up by two sets of margins (importer/agent and then restaurant/shop), it’s tempting to think that there must be a way to make wine cheaper by going direct.
There are literally tens of thousands of different wineries or wine producers in the world, and the job of connecting them to customers in export markets is time-consuming and requires a skill set – if a UK retailer were to start to facilitate this direct relationship, they’d need staff to do this, and the overheads would be similar to that of the margin of the ‘middle man’. A retailer is going to find it hard to pick up the right wineries to import. The second is that ‘middle men’ play an important role in scouting new wineries, and have expert local knowledge. Not many wineries have this capacity and ability to act as their own importer in the export markets they want to sell to. But connecting wineries with customers in export markets is skilled work that requires an understanding of the market the wines are being introduced to. Of course, there’s nothing to stop wineries doing this job themselves if they have the skills and resources. This exclusivity allows the importer to invest in building the market for these wines, selling them into retailers and restaurants. They have been picked up already and there is an agency agreement in place that, in most cases, is exclusive. The first is that almost all good wineries are already imported into the UK. But there are two reasons why it is unlikely to be the former. Now this could be the company that aims to cut out the middleman and offers you a very good deal on the wine, just as it could be an importer who then sells the wine on. If, as a private customer, you want to buy wine in the UK that is made elsewhere, then someone will have to import it through official channels, and pay duty and VAT, before selling it to you. This is because wine is heavy and breakable (and expensive to ship), and alcohol is regulated. If you introduce an international border then this all tends to fall down (the exception might be within the European Union). Of course, direct sales from wineries to customers does work very well, and in many countries this is the primary revenue stream for some wineries. I say: if you see anyone claiming to be cutting out the ‘middleman’, then run a mile. These wineries (they say) are usually small, family-owned businesses, and when you spend £10 on a bottle, you’ll be getting a lot more for your money. It sounds plausible: here’s a business model that involves retailers connecting customers directly to the wineries that they have scouted, thus cutting out a margin. Their claim is that they will ‘cut out the middleman’ and offer you wines from leading wine producers at ‘farm gate’ prices.
Every now and then a new wine retailer emerges.
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