Naked Wines founder Rowan Gormley on his “wine venture capital” business, which funds independent winemakers and cuts out the middleman for consumers.
Fresh from his win at the Fast Growth Business Awards, Naked Wines founder Rowan Gormley certainly has cause to pop open the bubbly. As well as scooping the New Business of the Year gong, he’s also predicting 2010 revenues of £9m for the wine e-tailer he launched less than two years ago.
What distinguishes Naked Wines from the raft of other e-commerce outlets in the sector is its focus on directly funding independent winemakers, Gormley says. “There are a whole bunch of companies out there that buy wine which other people have made and sell it on,” he explains. “What’s different about Naked Wines is we’re really a wine venture capital business. We find talented winemakers who want to set up on their own but need a helping hand financially, and instead of taking shares, we get their wine at cost price.”
Essentially, Naked Wines cuts out the middlemen – the agents and distributors that contribute to an £8 bottle of wine getting a £16 price tag by the time it hits the shelves. “Many of the winemakers you come across are actually sales people. It’s hard to find the great ones. We look for the quiet ones who are sitting down in the cellar nurturing their grapes.”
The company’s cashback model, where customers pay a set amount each month in return for discounts later on, also does wonders for cashflow and means Naked Wines can guarantee large orders for its independent suppliers. Gormley concedes that his model means his margins are slender, but they are compensated for with high order volumes and a very loyal customer base.
For all Naked Wines’ rapid success you’d expect Gormley to be somewhat of a grape expert. However, he insists he no sommelier – he just likes the product, which is a far cry from his private equity background. His seven year stint in the City was followed with a pivotal role at Virgin. Gormley led the team that launched Virgin Money and it was during this time he first developed a taste for the wine market.
“I originally proposed the wine idea to Virgin but they weren’t interested, so I started working on it with my brother and a friend at weekends,” Gormley says. His first wine venture launched as Orgasmic Wines, but it didn’t take long for Virgin to recognise its potential, and it soon brought the business under its famous brand umbrella. When the company was eventually sold to Laithwaites, Gormley and 17 members of his Virgin team left to work on the Naked proposition.
Naked Wines is the result of extensive concept honing before and after launch. The process of selling cases by the quarter was soon abandoned in favour of more flexible buying options and within a year the company had smashed business plan targets for customer acquisitions by more than 15,000. Affiliate marketing schemes have also provided a cost effective way of getting new people trying the service. By offering customers who sign up to credit card and broadband deals a free Naked trial, the business has quickly gained traction and word of mouth momentum.
Gormley’s focus is now on profitability, and the possibility of shipping within Europe. But while revenue and profit is providing strong motivation, he’s still on the hunt for those elusive winemaking aficionados. “We’re putting as much energy as possible into building the depth of quality of our wine because at the end of the day if you open the cork and pour out something you think is delicious, you won’t want to buy something dull from Tesco.”