Buying direct: Pros & cons

By Lisa Riley

Published: 13 July, 2017

It can be a positive move, but there are issues to be weighed up before buying direct. Lisa Riley reports

Benefits and drawbacks of buying direct for independent wine merchants was the hot topic at the Buying Direct workshop at Harpers’ Think Indie, Drink Indie event last week, with an array of subjects discussed, from logistics and paperwork to creating own-label wines and bonding.

Among the many issues raised, to bond or not to bond proved a key subject.

Bonding

“Prior to going down the route of bonding, the business needs to decide if it actually needs a bond – if what it’s buying is going to be such a fast mover that you can just get a pallet delivered to your storeroom,” said Nik Darlington, managing director at Red Squirrel Wine.

Once this has been decided, while getting an account at a bonded warehouse isn’t exactly tricky, the business needs to be aware that bonding ends up creating another layer of work, he added, even if “the majority of the difficult stuff” is outsourced.

Still, Darlington said it made sense from the outset to “let the experts get on and do it”, adding that while a good bonded warehouse might seem expensive at face value, it takes a weight off your shoulders by taking care of HMRC and associated paperwork.

But it was vital to consider if the company’s cash flow could “stomach it”, and to plan for the possibility you might “sit on this stuff for a while”, he added.

To ensure a profitable exercise when bonding, volume and fast-moving lines made the most sense and were easiest to get right, said Andrew Lundy, managing director of Vino.

“Know when you have to get the wine out to stay ahead in GP versus having the wine cost weekly to keep and don’t ship a container-load first off,” he said.

General hurdles

Overall, buying direct had been a positive experience for Vino, which started the business with supply from a large Netherlands-based wholesaler, shipping five to six pallets from it at a time. But in order for it to work, “being organised” was essential, with paperwork, time lag on orders and cash-flow potential hurdles that should be considered by anyone looking to buy direct, said Lundy.

“You are the one responsible for dealing with all aspects of duty, shipping and logistic. Speak with others who are already shipping – we got some great help from within the industry.”

Benefits

In terms of the benefits of buying direct, in addition to enabling you to add “a bit more margin”, Darlington pointed to “the buzz you get from sleuthing, sourcing and selling your own wine – something you found and no one else did.”

He said: “That, after all, is what being a wine merchant traditionally is all about. Never is the passion you can impart for your product more authentic, and people notice that a mile off.”

Another exciting prospect that comes with buying direct, according to the Oxford Wine Company’s managing director Ted Sandbach, is the opportunity to create your own wine label at a “certain point and level” that is exclusive to you. Or, in some cases to work with one or two people to create own-label between a few wine merchants.

“Regional exclusivity is a big advantage when you wholesale – having a unique label that is not shared in your geographical area is important,” he said.

And, with many producers willing to do it for relatively small amounts of wine these days – maybe just a few thousand bottles – there was “definitely mileage in own-label with the right vision”, said Darlington.

“We love doing this, because it means we can indulge our creative side. Our bestselling white wine, for instance, is an Abruzzese Pecorino, the label for which I drew myself a few years ago, and we go beyond labels too and get stuck into blending decisions.”

Conclusion

Dip your toe in, take it slowly, work out what’s going to suit your business – paperwork can be a nightmare, but it gets easier. And, different things work for different companies.

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