Jago stresses online wine opportunity

Delegates at yesterday’s LIWF conference were told that online wine retailing in the UK is “on the brink of fundamental change” by Dan Jago, category director of beers, wines and spirits for Tesco.

Speaking at the event, called Getting Down to Business Online, he stated: “Wine is high spend, information rich and heavy; wine is suited to an online environment.”

He added that estimates put the UK online market at £250 million, which “is a relatively small part” of the £5 billion worth of wine sold through the off-trade (of which Tesco alone accounts for £2bn), allowing web-based retailing “a lot of room to grow”.

Indeed, he pointed out that total online grocery sales, which are currently worth £5.8bn, are expected to double in value over the next four years, and it is predicted that wine, as part of this, will grow faster than food.

Referring to Tesco’s 12 million “Clubcard” customers – the retailer’s most loyal shoppers – Jago stressed that the “most valuable customers are those who buy in-store and online: they spend two and a half times more on wine annually.”

Although he failed to put an exact figure on the size of Tesco’s online wine business, he said that wine sales through the web were 10% of its total, which would make them worth around £200m.

This part of the business, he pointed out, is growing at three times the rate of in-store wine sales, and split 50:50 between wine sales through tesco.com (for groceries and alcoholic drinks) and those via Wine by the Case its wine-only online offering.

Speaking of the latter service, he said it lists the full 850 wines from the Tesco in-store range as well as 400 further wines, as “exclusives”, and that these contribute 37% of sales, making them “disproportionately beneficial”.

He also stressed that online retailing of fine wine “was increasingly important”. “In September we launched a new range of fine wine online with 100-120 wines, but we’ve just upped that to 300,” he explained, adding: “We’ve just had four orders for over £30,000, so we know we’ve tapped into something interesting.”

Turning to Tesco’s overall online wine business he said that the supermarket’s average spend online is £135, with an average order of 26 bottles (making for an average bottle price of £5.20).

These customers, he said, are spending more on each shopping occasion online than they are in-store. “Our online customers are up 10% year on year but now account for 20% of annual sales," he said. "They are increasingly valuable to us as a business overall and increasingly important to us in terms of their propensity to buy more compared to the customers of one year ago.”

As for why customers buy online rather than in-store, he cited research which showed that 38% of respondents said it was “because it’s easier”.

“That doesn’t say much about how we have engaged with customers emotionally but it says an awful lot about convenience,” he stated.

“There is a lot of opportunity online… we have elastic walls, we can fit more in, but I’m not sure we have fully embraced why it’s going to be better, rather than just different,” he continued.

For Tesco in particular, he said that the retailer sees “a huge opportunity” in “click and collect”, where consumers can order wine online and pick it up at the back of stores from a “bespoke bay”.

And, speaking of Smartphone technology he reminded: “The mobile used at the point of purchases gives the shopper potentially more information than the retailer has, which is a fundamental change in the roles.

“They can do immediate price comparisons and can tell absolutely who has got what at the best price, so if you have no loyalty, no dialogue with those consumers, they will go elsewhere.”

Patrick Schmitt, 17.05.11