Blog: Retailers may need more customer-collaboration business models

It’s no secret the internet has transformed the way retailers must run their businesses.

Naked Wines, the four-year-old online wine business founded by Rowan Gormley, is a perfect example of how the internet has made certain business models possible.

Naked Wines works on the basis of customer buy-in. Naked Wine members, or Angels as they’re known, pay £20 a month into their customer accounts which is used to fund winemakers. The benefit for members is that they get top quality wine at wholesale prices, which can be up to 50% cheaper than if they bought it in the shop.

According to Gormley, through this model Naked Wines owns the wine but the winemaker owns the brand, earns a decent wage (enough to afford to pay his mortgage and look after his family, says Gormley) and is given the creative flexibility to make the wine they want.

Gormley explains that the major price of wine producing resides in the cost of the packaging and not the wine itself.

It is an innovative model that has so far proven successful, as Naked Wines now generates a revenue of £50m.

“I think we will see more of this type of customer collaboration model,” says Gormley. “I think it is such a powerful force and will change how other retailers work. Twenty years ago this would never have happened. It is the internet that has made it possible.”

Other retailers have also cottoned on to this model with online furniture retailer Made.com, which claims customers can save up to 70% because it cuts out the need for warehouses, stores and suppliers by connecting customers directly with designers.

Gormley criticises the supermarkets for their tough, inflexible stance on suppliers such as winemakers.

But he recognises that customers, as well as retailers, need to come round to the new way of business.

“Why would the customer put up the money?” he asks the key question. “We’ve got to be naked. We’ve got to show them everything.”

To achieve this Naked Wines, provides detailed profiles of the winemakers, which include videos, and members review the wines, giving the wines specific ratings.

Comet, Jessops, HMV and Blockbuster all went bust because they were too slow to react to changing consumer habits and didn’t listen to what the customer wanted.

The new customer buy-in model truly puts the customer in charge. And if more innovative business models like this means more exciting retailers in the future and a richer UK retail sector, I’ll drink to that!