Naked Wines accelerates growth in Australia
Naked Wines will double its spending on customer acquisition in Australia over the next three years, as it looks to accelerate growth Down Under.
The business currently spends $21 million on customer acquisition, but is looking to increase that figure by $16-21 million over the next three years, according to Naked Wines Australia managing director, Greg Banbury.
Banbury said the decision to increase the budget came after the board realised the return on investment was much greater than previously thought, with around $86 million in future value being generated from current spending.
Banbury said the business will increase investment in known channels, which are primarily partnerships and digital advertising.
“You won’t see an above-the-line ad from us,” he said, drawing a comparison to Vinomofo, which rolled out a TVC last year.
Naked Wines currently partners with HelloFresh, Everten and other complementary businesses that charge the wine retailer a fee in exchange for access to their customers. Naked Wines typically offers customers a discount on their first order.
Branbury said that while these partnerships are effective, digital channels, such as Facebook, Instagram and Twitter, are even more promising.
“The old way of recruiting customers with $100 vouchers [through partnerships] is a bit hit-or-miss. With digital, you can focus on people that you think are going to be loyal and tell them a lot more about your business through the platform,” he told Internet Retailing.
He said he has no interest in spending a lot of money on campaigns that can’t be measured, such as outdoor advertising.
A crowd-funded business model
Started by South African entrepreneur Rowan Gormley in the UK in 2008, Naked Wines Australia was founded by Luke Jecks in 2012, before the whole operation was acquired by UK-based Majestic Wine in 2015. Naked Wines now operates in Australia, the UK and the US.
The business is based on an online crowd-funding model, which sees customers becoming members for $40 a month. This allows Naked Wines to give independent winemakers cash upfront to produce wine and offer members exclusive access to that wine at low prices.
According to Banbury, Naked Wines Australia is a profitable business, having nearly tripled its sales over the last three years, and is approaching $50 million in revenue this financial year.
More than 70,000 customers currently fund 46 winemakers in Australia, but the business is looking to significantly grow both these figures as it increases its customer acquisition spending Down Under.
Ensuring winemakers are able to keep up with the increased will be a challenge, but Banbury said Naked Wines is prepared for it.
“It’s something we talked about before deciding to put our foot down. We have a pretty good idea of the response rate [to advertising]…so it’s not just about growing as quickly as we can. It’s growth in a controlled way,” he said.
“We believe we can double the level of investment while maintaining the returns, driving sustained growth in our business.”
Banbury is also undeterred by the growth of online competitors like Vinomofo, which is set to enter the US market by mid-2018. He said there is more than enough room for everyone, especially as bricks-and-mortar retailers lose customers to online.
“We’re finding that we’re converting offline shoppers to online. Where we’re seeing the biggest growth is the people who were shopping at Dan Murphy’s for a few years and now want something different,” he said.
So far, Naked Wines has invested over $80 million dollars in independent winemakers and expects to invest an additional $100 million dollars over the next two to three years.