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Stephen Forward blog: Gross profits aids sustainability

Published:  14 February, 2011

Every now and then I stumble across independent wine retailers selling exclusive product lines on
tiny gross profit margins. I used to ask myself how on earth can they could sell at those prices and stay in business. A year or two later I would discover that these very same retailers had gone bust: the answer to my question was, of course, "they can't".

 

On a recent overseas buying trip, organised by a generic wine body for independent retailers, I discussed gross profit margins with my fellow travellers and competitors. I was surprised to learn how low their expectations were. "If we can achieve 20% we're really happy," remarked one buyer. With business naivety like this, it's no surprise indies come and go like third-division football managers.

 

Twenty per cent is just not enough to make a retail business sustainable in the long term. It's fine if you're in the volume business, but as indies we're not. An independent retailer that isn't planning to file accounts with gross profits over 30% is planning to fail, as this is the minimum figure most retailers need just to break even. Selling a product below that averages down the gross margin, potentially towards a loss.

 

Retailers unable to sell exclusive independent product lines at decent margins show poor sales skills. Indies should focus on selling value, not price. If every consumer bought solely on price we'd all be driving the least expensive car, eating in the cheapest fast food restaurants and living in the cheapest accommodation. A quick look at the UK's roads, restaurants and housing shows how many consumers will pay more if they see the value inherent in their purchase.

 

The independent retailer's job is to understand their customers' requirements and to explain the quality and value for money in the exclusive lines they are selling. If they do this successfully, gross profit margins of 40% to 50% or more are attainable, securing profitability and, therefore, the long-term viability of their business.

 

Stephen Forward is owner of independent wine merchant Essentially Wine

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Richard Siddle, comment December 17

Published:  17 December, 2010


And so this is Christmas, another year over and a new one about to be begin. With all due respects to Mr Lennon it has been another eventful year in the world of wine and spirits.

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Australia's First Families of Wine launches second year of UK activity

Published:  09 December, 2010

Australia's First Families of Wine (AFFW) has launched its second year of UK activity.

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Inverarity Vaults opens Edinburgh wine bar

Published:  07 December, 2010

Inverarity Vaults has opened its first wine bar in Edinburgh at the city's Festival Theatre under its One to One retail brand.

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Barwell & Jones takes on premium Aussie wines

Published:  03 December, 2010

Barwell & Jones has added premium Western Australian winery Willow Bridge Estate to its portfolio.

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Alcohol sales to plummet over Christmas

Published:  03 December, 2010
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Oddbins launches new off-licence and convenience store concept

Published:  02 December, 2010

Oddbins has launched a new off-licence and convenience store concept called Oddies.

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Ex chief constable calls for minimum pricing in Brighton

Published:  01 December, 2010

The former assistant chief constable with Sussex Police has called for a ban on cheap alcohol in Brighton to call a halt to excessive drinking.

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Independents urged to enter Top Merchants awards programme

Published:  01 December, 2010

Independent merchants have the chance to prove how good they are by entering the inaugural Top Merchant Awards programme organised by Harpers Wine & Spirit, in association with Gruppo Italiano Vini and Wines of Chile.

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Independents urged to enter Top Merchants awards programme

Published:  01 December, 2010

Independent merchants have the chance to prove how good they are by entering the inaugural Top Merchant Awards programme organised by Harpers Wine & Spirit, in association with Gruppo Italiano Vini and Wines of Chile.

Read more...

Investors pull out of euro into sterling

Published:  01 December, 2010


Sterling climbed against the euro yesterday as concerns over sovereign debt in the euro zone continued to hamper the single currency.

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Independents urged to enter Top Merchants awards programme

Published:  01 December, 2010

Independent merchants have the chance to prove how good they are by entering the inaugural Top Merchant Awards programme organised by Harpers Wine & Spirit, in association with Gruppo Italiano Vini and Wines of Chile.

Read more...

Naked Wines invest £10 million to find new winemakers

Published:  30 November, 2010

UK online wine retailer, Naked Wines, has announced a £10 million, 2011 investment pot to unearth new winemaking talent.

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Supermarket wine comparison website launches

Published:  29 November, 2010

A supermarket comparison site has launched the UK's first online wine comparison site ? it allows shoppers to compare prices between Virgin Wines, Majestic, Tesco, Asda, Sainsbury's and Ocado.

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Balls Brothers in administration

Published:  29 November, 2010

Balls Brothers, the 19-strong London wine bar and restaurant group, has gone into adminstration.

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Supermarket wine comparison website launches

Published:  29 November, 2010

A supermarket comparison site has launched the UK's first online wine comparison site ? it allows shoppers to compare prices between Virgin Wines, Majestic, Tesco, Asda, Sainsbury's and Ocado.

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8 out of 10 drinkers choose wine with strong reputation in home market

Published:  29 November, 2010

Eight out of ten British wine drinkers prefer to buy wine which is well-thought of in its home country than wine endorsed by celebrities.

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Tough conditions for alcohol sales in Greater Manchester

Published:  23 November, 2010
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Independents and on-trade look to benefit from #winedealfriday

Published:  19 November, 2010

Anyone looking to service the independent or on-trade sectors is today encouraged to join the growing the number of suppliers that are using Harpers Wine & Spirit's #winedealfriday to offer special deals directly through Twitter, the social media service.

 

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Call for higher VAT on supermarket alcohol

Published:  19 November, 2010

VAT should be increased on drinks sold in supermarkets and off-licences - but not the on-trade, a leading doctor has suggested.

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