An interview with Naked Wines’ Rowan Gormley

The former Virgin exec and founder of Naked Wines on why he's no grape expert

Rowan Gormley insists he’s no wine buff. He just thinks it’s an exciting product to sell. But although the man behind Naked Wines, the online retailer that only stocks the produce of small independent wine makers, is no sommelier, he certainly knows the numbers behind what goes into his bottles. The business, which launched in December 2008, achieved a turnover just shy of £4m and gained over 60,000 customers within a year. With revenues of £9m predicted for 2010 he certainly has cause to open a bottle of bubbly.

Virgin territory

Rowan spent seven years working in private equity in London before a chance meeting with Richard Branson led to him joining the Virgin empire in the mid nineties. Branson put him in charge of his new financial services offering Virgin Money which Rowan headed up from Norwich. “Within 10 weeks we’d recruited 100 people, got regulatory approval, built the system and launched the company,” says Rowan. However, the product itself wasn’t exciting enough for him and his attention soon shifted towards how he could make his mark in the wine retailing space. “I originally proposed the idea to Virgin but they weren’t interested, so I started working on an idea with my brother and a friend at weekends.”

The business initially launched as Orgasmic Wines, but not long after, Virgin saw the potential in online wine sales and brought the business under its wing, and the famous brand umbrella. The business was eventually sold on to Laithwaites at which point Rowan and 17 former Virgin Wines employees saw the opportunity to start up their own venture in the field, but with a few twists.

“There are a whole bunch of similar online retailers out there that buy wine which other people have made and sell it on,” explains Rowan. “What’s different about Naked Wines is we’re really a wine venture capital business. We find talented wine makers 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.”

According to Rowan, wines prices are inflated mainly because of the cost involved in selling a bottle. “A wine maker has to spend a lot on marketing – they need to fly over here, visit wine fairs, send samples, get an agent – more money is spent on selling the wine than the wine itself. So many of the winemakers you come across are actually sales people, but it’s hard to find the great ones. We look for the quiet ones who are sitting down in the cellar nurturing their grapes.”

Loyal fan base

Essentially, Naked Wines cuts out the middlemen – the agents and distributors that all contribute to an £8 bottle of wine getting slapped with a £16 price tag by the time it hits the shelves. “We only charge our customers for the actual wine in the bottle and that means we have very slender margins, but it also means our customers are very loyal. Our volumes are great and we end up making more money by charging customers the lowest possible price.” The company’s cashback model, where customers agree to pay a set amount each month in return for discounts later on, does wonders for cashflow and also means Naked Wines can guarantee big orders for its independent suppliers.

The innovative model behind Naked Wines was the result of extensive planning and honing of the concept 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 also provided a cost effective way of getting new people trying the service. By offering customers who signed up to credit cards and broadband offers a free Naked trial, the business quickly gained traction and word of mouth momentum.

Having recently celebrated the business’ second birthday, Rowan’s focus is now on profitability, and the possibility of shipping within Europe. But while revenue and profit is providing some 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.”

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