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The specialty wine retailer, Naked Wines, has experienced a downward trend in its sales, with full-year sales rising by only 3% after peak pandemic trading, and shares in the company down 4.2% at 158.10p each. The company’s chief financial officer even departed the company by “mutual agreement” amid a recent sales warning, leaving things looking unresolved and tenuous.
In spite of Naked Wines’ gloomy prospects, its competitors in the field of subscription wines are attempting to stay afloat by diversifying their offering to its market of consumers. For example, Laithwaites has recently leaned into selling wines delivered in recycled glass, as well as paper bottles, while Virgin Wines has inadvertently found a niche in vegan wines after the company’s sales of those particular wines increased by 51% this year.
Despite attempts to diversify, some wine retailers are still slipping in certain aspects when it comes to business; Naked Wines’ shares dropped 44% this month and Virgin Wines’ annual sales are reportedly down to £69m from £73.6m despite reporting that their customer retention was not a worry.
This is most likely due to the cost of living squeeze as new research from Grant Thornton and Retail Economics revealed that 90% of consumers are looking to minimise non-essential spending, which is in turn expected to wipe out £24.9bn of discretionary spending across the economy during this financial year.
Even though these wine companies all offer a reduced price on first joining, the cost afterwards could potentially be unattractive and unsustainable for most households in this economic climate. Fiona Beckett in The Guardian noted that the average Naked Wines customer spends £10.26 on just one bottle of wine. To put it in perspective, the average price for a bottle of wine in Waitrose, one of the pricier UK supermarkets, retails for £8.19, so you can imagine how much cheaper the average bottle of wine could be if sold from a budget supermarket.
As the cost of living continues to rise, consumers could become harder to entice as low prices are looking more attractive. Rather than the status of a wine subscription with a premium price tag, consumers could be opting for cost-effective luxuries, as the Food Spend Report revealed that only 2% of consumers prioritise brand names, while 40% find the price of what they are purchasing to take precedence.
In the coming months, we will have to see if they choose to put their prices down in a bid to cultivate customer loyalty in the wake of a recession, or if they will continue to struggle to win buyers over.
