- Majestic Wine boss Gormley shrugs off impact of Aldi selling wine online
- Says discounter has caused a “bloodbath” in value market but poses no “new threat” to Majestic
- Believes the retailer can build customer loyalty through customer service proposition
Majestic Wine boss Rowan Gormley has shrugged off the impact of Aldi launching wine online and claimed it doesn’t represent a “new threat.”
Gormley admitted that Aldi was a “credible competitor” that had created “a bloodbath” at the value end of the wine market, but insisted the discounter’s plan to launch a transactional website to sell wine next year was not keeping him “awake at night.”
Gormley, who took the reins in April after Majestic acquired Naked Wines – the online business he founded in 2008 – was in a bullish mood as the retailer unveiled its first interim results update under his leadership.
Pre-tax profits fell 50% to £4.3m following a series of one-off costs incurred when purchasing Naked Wines, but Gormley hailed the first growth in the core Majestic Wine business since 2011 as he unveiled a three-year plan to transform the retailer and grow annual sales to £500m by 2019.
Asked about the threat Aldi could pose to that turnaround plan, Gormley told Retail Week: “Is it keeping me awake at night? No it’s not.
“They are credible competitors who you take seriously, but it’s not the same thing as opening a new store. The sales don’t just come to you and customer engagement doesn’t just happen”
Rowan Gormley, Majestic Wine
“They are credible competitors who you have to respect and take seriously, but there are a lot of value retailers who have opened an online wine shop and have found that it’s not the same thing as opening a new store. The sales don’t just come to you and customer engagement doesn’t just happen.
“At Naked Wines, we’ve got a 15-year-long learning curve of understanding online wine retail and I think it will take someone else some time to catch up with that.”
Gormley added: “There is a bloodbath at the sub-£5 end of the market, with Aldi and Lidl setting the pace and the supermarkets struggling to keep up.
“In our end of the market, where people value customer service, obviously it’s important for us to be competitive and we have sharpened pricing and offers, but we see that as a market that has still got legs in it.
“We are not competing for the £2.99 Portuguese rose end of the market. We are competing for the sweet spot which is people spending around £8, who care about personal service, who want to try new and different wines, who like to make a considered purchase decision.
“They either value the service they get in a store, or value the relationship with wine makers they get through Naked Wines. So I don’t think what Aldi is talking about creates any new threat to that.”
Majestic Wine’s sales in the 26 weeks to September 28 grew 6% year on year and 36% including the impact of Naked Wines. Gormley admitted there is “work to do to make that growth sustainable” and achieve his £500m annual sales target. But he said the plan he has put in place to achieve that was “not rocket science.”
At the heart of that strategy is making stores “easier and more fun to shop” as Gormley bids to improve availability, build engagement between staff and shoppers and drive customer loyalty.
He said “less than 10%” of Majestic Wine’s 211-store estate had been identified as “a mistake” and had been closed or earmarked for closure, but is now focusing on restoring good stores to growth to garner repeat consumer visits.
“The difference between wine and toilet paper is that it’s not a commodity. There are commodity wines, but we are not in that business”
Rowan Gormley, Majestic Wine
Gormley said: “The big difference when you go to a Majestic is that you can taste wines before you buy and speak to someone who knows what they are talking about and can make recommendations to you.
“The difference between wine and toilet paper is that it’s not a commodity. There are commodity wines, but we are not in that business. If you go to a supermarket, you’ve saved a bit of money but in value terms, you haven’t actually got what you went out to get.
“In that commodity end of the business, loyalty is probably non-existent. But because we are in the slightly more exciting end of the business, we can build that.”
Despite what he called an “encouraging” start, Gormley warned: “There’s a lot of work to do, it is a three-year plan and profits will go down before they go up. But the fact we have seen growth restored in the first half just by going back to basics tells you there is plenty more steam in this business.”