How Naked Wines kick-started its US growth

octomedia

19th May 2016

The US market has “exploded” for crowdfunded winemaker and online retailer, Naked Wines, but it took time and a change in strategy to attract repeat customers.

“In the US we had been offering a very cheap offer and bringing lots of customers into our business, but we weren’t seeing the stickiness of those customers like we were seeing in Australia and the UK,” Luke Jecks, CEO of Naked Wines International, told Internet Retailing.

Owned by the UK wine business Majestic Wine, Naked Wines relies on its customers, known as Angels, to crowdfund its independent winemakers in exchange for exclusive boutique wines at discounted prices.

Entering the much larger US market, the conventional online retail approach to acquire customers — offering a loss-making entry level proposition to establish a long-term and profitable relationship — wasn’t attracting the right kind of consumer.

Jecks explained Naked Wines was “attracting Walmart customers for a Wholefoods proposition.”

To find customers who would buy into the Naked Wines proposition, which is built around supporting independent winemakers over time, the business doubled the price of its introductory case of wine.

“We had to get the pricing right to ensure we were seen as a Wholefoods proposition,” Jecks said.

“It did two things: it changed the quality of customers coming to the business, changed the perception of the product and it released more funds into advertising because we weren’t losing money on that first product.”

Jecks said the change did cause a “slight response rate drop off” but they were able to offset the decline by investing the extra advertising funds into acquiring new customers.

“Most importantly we’ve seen a 20 per cent improvement in the stickability of our customers, which means the downstream profitability of every consumer has gone up and because of that we are able to invest even more in recruiting consumers,” Jecks said.

“We tried to think of all these cool things to improve customer quality and in the end a price filter was the best one.”

Australian focus
The Australian arm of Naked Wines is gearing up for another strong year of growth and has appointed a new local boss to oversee the business.

Jecks is stepping back from the day-to-day operations in Australia and Greg Banbury, Naked Wines’ former Australian marketing director, has been promoted to MD of Naked Wines Australia.

Banbury was part of the Naked Wines team in the UK and stepped into the role of marketing director when the business launched its Australian operations.

“I think Greg is a real leader of the future and somebody that can take the Australian business to new levels,” Jecks said.

Naked Wines, which recently passed 50,000 Angels, has big aspirations to grow the number of Angels and winemakers on its books.

“We had our biggest year last year for new customers and for growth,” Jecks said. “This year we are already on track to smash that number.”