Launched in 2012, the business was acquired by UK-based Majestic Wine in 2015, and has since expanded to the US market. It is based on an online crowd-funding model, which sees customers giving independent winemakers cash upfront to produce wine.
Naked Wines Australia managing director, Greg Banbury, said this approach gives winemakers the confidence to make “really incredibly tasting wine for a lower price”.
The strategy seems to be working. Over the last three years, Naked Wines has almost tripled sales in Australia and is now a profitable business, according to Banbury.
More than 70,000 customers are currently funding 46 winemakers in Australia so far, but Naked Wines is looking to significantly grow both these figures as it doubles its current $21 million investment in customer acquisition over the next three years.
Banbury said the board gave the go-ahead to increase spending on customer acquisition by $16-21 million after noticing that the return on its current investment was much greater than they thought, with around $86 million a year generated in future value.
Naked Wines currently acquires customers through partnerships with complementary businesses such as HelloFresh and Everten cookware, but has recently ramped up its activity on Facebook, Instagram and Twitter.
“The old way of recruiting customers with $100 vouchers [through partnerships] is a bit hit-or-miss. With digital, you can focus on people that you think are going to be loyal and tell them a lot more about your business through the platform,” he told Inside Retail.
Banbury said Naked Wines Australia will use the additional investment to accelerate known channels.
“You won’t see an above-the-line ad from us,” he said.
Indeed, Banbury believes there is plenty of potential for growth without needing to put a billboard up.
“We’re finding that we’re converting offline shoppers to online. Where we’re seeing the biggest growth is the people who were shopping at Dan Murphy’s for a few years and now want something different,” he said.
As Naked Wines looks to increase its customer base, it will need to ensure its winemakers can keep up with the increased demand. Banbury said he knows this will be the retailer’s biggest challenge, but is confident the businss can handle it.
“It’s something we talked about before deciding to put our foot down. We have a pretty good idea of the response rate [to advertising]…so it’s not just about growing as quickly as we can. It’s growth in a controlled way,” he said.
“We believe we can double the level of investment while maintaining the returns, driving sustained growth in our business.”
So far, Naked Wines has invested over $80 million dollars in independent winemakers and expects to invest an additional $100 million dollars over the next two to three years.