Comparing Amazon and Naked Wine

It is interesting to look at the parallels between Amazon and Naked. Naked is much more of an emotional connection with the customer but could also offer a cheaper and better product. Amazon is all about scale but also, to a degree, offers a cheaper, all-in solution, potentially. How do you look at the parallels between Amazon and Naked?

Firstly, with Naked, I wouldn’t say it was a cheaper product. It really comes down to this leverage of how much wine is in the bottle. We used to have this great graphic on site, which took a bottle of wine and said, where is your money going? What you find is, in a cheaper bottle wine, something less than £6, once you’ve accounted for the bottle, the VAT, the glass, the duty, the shipping, you get to the point where, within that £6 bottle of wine, there is probably about 20p to 30p of wine. In order to do that, you have to take a bit of a Lidl approach which is that we are just making loads of it. We are just going out for absolute volume; that’s the only way you are going to compete at that level. By its very nature, you are getting something that is a bit more of a commodity product.

But the advantage of that is if you are going to go from a £6 bottle of wine to a £7 bottle of wine, of that 20p to 30p of wine, you’re getting an extra 50p or 60p. That continues as you go to £8, £9, £10. Where Naked is very good value is in that £8 to £12 range. They actually call them sweet spot wines on the website. There is plenty of juice in the bottle. Because you have cut out some of the marketing costs and things for the wine maker, there is a bit more money going into advanced wine-making techniques, like how long it sits in oak. That gives it a good quality product.

As you get into the higher prices, say £12 plus for a bottle of wine, you’re starting to get to the point where people expect appellations and you are also starting to pay for those appellations. You can go to Châteauneuf-du-Pape and you can have, literally, a vineyard that is two miles down the road but it is not officially in the appellation. The ones that are in the appellation just charge a premium for that. As you are getting more expensive, you are paying for the name much more.

In terms of product, that is mostly how Naked think about it. Obviously, they have got some cheaper stuff and it’s generally good quality cheaper stuff. But the real benefit is in those sweet spot wines, where you really are getting a lot of return for the extra money and you’re not really paying for the brand name of the appellation. I should add that they do do the appellation stuff, as well, for those who want to do it, and because they have talented wine makers who happen to be in those kind of locations.

That’s the main thing around the product and then you get onto the service side. It really becomes a case of, is the website functional? Does it allow me to discover those wines and when I get it delivered, is the delivery good? The delivery experience is all important, especially for a product like wine. It is a big purchase and when you try out a wine service, if you have a bad delivery first time round, you can write them off. Wine is one of those products that has to be delivered to your home. You can’t get it delivered to work because it’s a lot to carry home with you on the train. It’s a tricky experience, because it’s hard to leave it in a safe place if you are not in and things like that. That’s how you think about the experience, in terms of the quality of the product and then the quality of the website and the quality of the delivery.

For Amazon, and having worked at Amazon, it’s much more of a machine. Let’s get the products out there; let’s get the range of everything; let’s make sure the delivery is spot on. Let’s make sure the price is spot on. What you see there is that it is an absolutely great machine and it works really well, but there’s not a lot of character in it. There is not a lot of personal love and attention that goes into these computer algorithms that are generating category lists and everything else that you need, to make an e-commerce store work. They really are different beasts. I always think there are certain categories that Amazon will struggle with because it takes more care and attention to get them right and that is never going to get onto Amazon’s radar versus the benefit of going from two-day delivery to one-day delivery or from one-day delivery to evening delivery, which are the things that can really move the needle for them.

Do you think Amazon could get into wine, as a category, effectively?