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Shift from shop to showroom is vital for the future of retail, says Majestic CEO

Published:  27 March, 2019

The chief executive of the newly rebranded Naked Wines has defended the decision to trim down its 200-store estate while shifting investment focus to the online side of the business.

Majestic Wines announced on Monday that it would be ploughing all of its £26 million annual budget for new customer acquisition in FY2020 into the Naked Wines subscription service while also closing stores, after yet more underwhelming retail sales.

“We’re looking at a big change in retail over next few years,” chief executive Rowan Gormley told Harpers. “The role of stores won’t be to shift lots of wine but to introduce consumers to the brands and act as a showroom.”

Gormley drew comparisons to US clothing store Bonobo, where customers are measured in store, then directed online to place orders for ease and convenience.

This “joined-up” approach between in-store and online is the “future” of retail, he believes, and said the round of closures to be finalised in June are a one-time measure to stabilise the business for future growth.

Gormley became Majestic Wine's chief executive in 2015 when the company bought his online subscription service, Naked Wines.

Speaking to Harpers yesterday, he said “It became obvious the big driver of growth was Naked Wines”, which helped to drive profits up £10 million in FY2018.

The restructure, alongside the news that the business is dropping the Majestic name, is however thrown into relief by last year’s annual results in which Gormley said he wasn’t concerned about retail sales, despite having a “tough time” in the UK.

“What we’re doing is doubling down on engaging our people to get them to engage customers to offer a customer experience in store that you can’t get in a supermarket. My belief is if we’re successful and make that differentiation, physical retail becomes an asset, not liability,” he said at the time.

Following Monday's announcement, many have lamented the loss of stores, as well as the Majestic name from the high street – one of the last remaining names with strong brand recognition among consumers.

“Majestic is a great brand in my opinion and hopefully the name won’t disappear altogether,” said Robin Copestick, managing director, Freixenet Copestick. “However if Rowan and the board of directors feel that greater success will come by putting more emphasis into the Naked side of the business then we have to respect that decision. The UK BWS industry needs one or both of Naked/Majestic to be successful.”

Others have suggested the move foreshadows further polarisation in the trade between supermarkets and specialist independents.

Emily Silva, head of marketing and retail, Oxford Wine Company said: “I can understand how attractive it must be to run a business with a largely online presence in terms of overheads, but there will always be a group of customers who enjoy the experience of going to a physical wine merchant, tasting, and getting advice. We as independents now need to focus on differentiating ourselves from the supermarkets and making sure that coming to shop with us is an ‘experience’ – so clever merchandising, well-trained staff, and creative events.”

Revenue from Naked Wines for FY2018 was £156.1 million, a rise of 11.3% on the previous year, while growth of the larger Majestic retail proposition saw revenue rise just 1.9% to £263.8 million.

The number of stores due to close will be announced alongside the annual results for FY2019, which ends next week, in June.