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Naked Wines wins £6.4m investment to finance ongoing international expansion

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Online wineseller Naked Wines has won investment of £6.4m ($10m) to invest in new wine as it expands its international presence.

The investment comes from German wine producer WIV Wein International, which has now put £15.4m in total into the social media-powered marketplace. The money will allow Naked Wines to invest in more producers ahead of anticipated future demand in new markets including the US, where it launched last June, and Australia, where it opened for business last July.

Naked Wines turned over £40m last year, and currently invests regular payments from its 150,000 network of ‘angels’ into more than 130 wine makers. But as its customer base increases – currently by 40% a year – founder Rowan Gormley anticipates that the company will need more wine.

“The thing about wine it isn’t like Coke, you can’t just turn on a tap and make more,” said Gormley. “It’s got at least a year’s lead time and often longer, so we are having to hunt wine makers now so we have wines to sell in a year or two year’s time when, if the base keeps growing as it is, we’ll have a lot more sales than today.”

He says the US, the world’s largest wine market and the one with the biggest profit margins, represents the best opportunity for Naked Wines to demonstrate what it can do, while Australia is another key market. “There are other geographic opportunities but I think it really makes sense to focus on the big ones first and really nail those before doing anything else,” he said. While other retailers have found the US a more difficult market, Gormley finds it an easier, “more open” market to do business in.

Naked Wines launched in 2008 and sells wines sourced from around the world into the three markets, via a warehouse in Norwich, two in the US and one in Australia. “We try to deliver faster than our competitors and that means you have to have a warehouse closer to the action,” said Gormley. As volumes grow, more warehouses are likely to follow.

Its angel investors and other customers rate and review the wines they buy, contributing to crowdsourced scores that act as arecommendations for other buyers. Angels are also asked for their input into which winemakers to invest in.

Gormley says the internet has allowed companies like his to reduce the cost of selling. “If you have a group of people who want to buy something, they don’t have to pay to be sold it. Zopa is doing the same thing for money and Unbound is doing the same thing for books. Before the internet came along this wouldn’t have been possible. To make it possible you have to have a whole bunch of strangers all over the world who are prepared to chip in relatively small amounts of money to make something happen that individually they couldn’t make happen on their own. The internet is great at doing that.”

He says the model also gives it a cost advantage. “You can afford to be permanently better-priced than all the competitors and that gives you a long-term sustainable cost advantage. I’d be very surprised if in 20 years time if the crowdfunded business model hadn’t built up some momentum and a big place in the market because it delivers a better product for a lower price. You can do all the fancy marketing you like but if in the end you achieve that you really are in a much better situation than taking mediocre products and trying to compensate with glossy marketing.”

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