Subscription Clubs Get Naked

Columbia House? Book-of-the-Month Club? Yesterday’s news. In a world where connected consumers have increasing control over exactly what they want, when they want it, and how soon, the subscription club model is going the way of the dodo. Online wine retailer Naked Wines might have the flight plan for a whole new direction.

Naked Wines is not a club.

Subscription clubs push their products upon their members, who — once they’ve signed up — don’t get a say in the particulars of their soap, or beauty product, or cupcake, or what-have-you of the month.

The traditional subscription model in the wine industry is no different. A company will send its members three or four bottles of wine of its choice every quarter; the recipient can drink it, throw it away, give it to the dog for Flag Day — the club doesn’t care at that point. The club has the member’s money, and that’s that.

That’s not the case for, which — as Zack Crafton, the company’s Director of Operations, will remind you — is not a club. Naked Wines officially refers to its customers as “Angels,” and Crafton prefers that term.

“‘Angel community,’” he says, “would be the phrase that I would use instead of ‘club.’”

(What’s the collective noun form of angels, though? A murder? No — that’s crows.)

Founded six years ago by Rowan Gormley, formerly of the Virgin Group in the U.K., Naked Wines — which two-and-a-half years later expanded to Australia and the U.S. (where Crafton is based, in Napa Valley, California) — operates as both a crowdfunding site and an eCommerce site. As Crafton explains, the two business models are not necessarily mutually exclusive.

When a customer signs up to become an Angel of Naked Wines, he or she deposits $40 into a wine savings account. That’s the crowdfunding element. The collected capital goes toward supporting independent winemakers, paying for the fruit, the yeast, the bottling, et al — while the winemaker, says Crafton, “gets focused on making wine.”

The crowdfunding aspect begets the eCommerce element, as Angels — in exchange for their funding participation — are given the opportunity to purchase wine at wholesale prices, saving between 40 and 60 percent on every bottle. Notably, Naked Wine customers get to choose what wine they purchase.

“We never send wine to customers without them asking, essentially,” remarks Crafton. Presented with the winemakers and brands that they (and other Angels) supported through their crowdfunding efforts, “they get to pick…whatever it is that they like.”

Naked Wine customers aren’t left entirely to their own devices if they don’t want to be, though. The site encourages Angels to rate wines, and has in place a recommendation system based on customers’ preferences. That’s the community aspect that Crafton talked about, in action — another differentiator between the established model of subscription-based consumer clubs and the new one taking shape online.

(Is it clowder? A clowder of angels? … No. Cats are in clowders.)

In the case of Naked Wines, that community covers a broad age range (21-to-50-year-olds, in Crafton’s estimate) and a variety of backgrounds — both on the consumer and the winemaker side.

The consumer/financiers of Naked Wines include wine novices, wine aficionados, and just about everything in between; what they’re all seeking, in Crafton’s observation, is something that most consumers of any product or service look to find: value.

That value naturally refers to price — getting a $100 bottle of Napa Cabernet for $60, for example — but, for Naked Wines, the term extends to the interaction its customers get to have with the winemakers.

It’s very rare,” Crafton points out, “to be able to have a dialogue directly with the winemaker, saying, ‘Hey, I actually like this; and this is what I like about this wine,’ or, ‘I dont like your wine; and here’s why.’” It’s a level of access that he has observed to be quite valuable to the Angels.

On the winemaker side, while Naked Wines does attract the talents of some established names in the industry experimenting with their craft outside the confines of corporate brands (Crafton shares the examples of Daryl Groom and Wayne Donaldson), the community arrangement is greatly beneficial to artisans who otherwise would not have the means to operate.

In the traditional winery model, explains Crafton, “[winemakers] spend some percentage of their time in the cellar, and they spend some percentage of their time signing bottles in grocery stores, kind of hitting the trail, out and about at restaurants and pitching their product.” Winemakers with Naked Wines, by contrast, get to focus entirely on what they do best, and allow the company — itself circumventing the hassles and added costs of marketing and distribution — to bring the resultant product directly to its Angels.

(Covey? Covey sounds right. Unless… Nope. Covey refers to a flock of quail.)

Crafton acknowledges that the way in which Naked Wines operates could be classified as “disruptive,” both to the existing subscription-based business model and especially to the wine industry. He credits it all to his company’s “very innovative approach.”

“We focus on a number of things,” he continues, “that maybe wineries don’t have the resources to focus on.” And a big one in that regard is data.

Recently, by aggregating feedback from consumers on the data level, Naked Wines was able to determine that UPS deliveries of its product were only being completed on first attempt at a rate of 80 percent (in the U.S., the delivery of alcohol requires the signature of an adult who provides proof of being 21 or older — and the package cannot be left unattended). Finding that number unacceptable, Naked Wines turned to Doorman, itself a startup that came out of “Shark Tank”…

“And now we see a 94 percent delivery rate,” Crafton reports.

He goes on to say that “by being innovative, we like to think that we’re opening a door to more and more people getting involved with wine.”

That result, as much as anything, might be what’s keeping Naked Wines — despite its disruptive nature — in the good graces of the larger wine industry.

By engaging with millennials, in particular, through technology, Naked Wines is actually starting to draw consumers who otherwise might have been beer drinkers or, if they bought wine at all, tended to purchase the two-buck chuck from grocery stores.

“Now we’re introducing [millennials] to…amazing wines from Napa, and from Sonoma, and from regions all over the world,” says Crafton. As the pockets of this consumer base deepen over time, it could stand to benefit the entirety of the wine business.

If there is a blueprint for consumer-facing industries to advance and expand the subscription model in the digital age, Naked Wines just might be sketching one out.

Sticking to one of what Crafton calls the company’s “core principles” — delivering a high quality product — has contributed to Naked Wines’ “tremendous growth [in the U.S.] over the last three-and-a- half years.”

To keep it going, the company, according to Crafton, must also continue to work at solving one of its biggest challenges: how to get that product to the customer in a way that is as or more convenient than any other option.

The winged spiritual beings that Naked Wines refers to its customers as can only keep an innovative, consumer-facing online company aloft for so long; if that company isn’t doing enough to keep its consumers out of liquor stores, then… flights of angels may sing it to its rest.

(Or it still possibly could be a clowder. It’s 50/50.)



On Tuesday, March 31, 2020 at 9:00 AM (ET) join PYMNTS CEO Karen Webster and panelists Vincent Kilcoyne and Roland Brandli of SmartStream for an in-depth discussion on the need to use transformative digital strategies to remain relevant in today’s challenging financial landscape. The discussion will cover strategies that will allow clients to improve operational control, reduce costs, build new revenue streams, mitigate risk and comply accurately with regulation.

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