finweek

From cellar to cyber: SA’s fine wine is moving online

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With online retail in South Africa still very much in its infancy, some of the most compelling success stories have come from ‘e-tailers’ that have chosen to specialise in and serve niche markets.

From organic and natural food products (Faithful to Nature) to limited edition luxury men’s socks (Nic Harry), specialisation has thus far proven to be a smart strategy in a young but fast-evolving local e-commerce sector.

Given SA’s legions of wine lovers and world famous wine-ries, it is unsurprising that wine is having its own cyber moment – with a plethora of both new and established retailers launching online platforms to peddle wine both locally and internationally.

According to Nicolò Stortiglione Pudel and Vincent Bührer, co-founders of start-up Port2Port, a specialist fine wine e-tailer, online wine represents a unique opportunity to combine advances in technology, commerce and marketing – and ultimately transform the local sector.

“In South Africa, the wine industry is far behind other categories such as fashion and electronics [with regard to e-commerce],” explains Pudel. “Added to this, SA e-commerce is between five to 10 years behind the US and Europe – so as newcomers, we have a double advantage.”

Equipped with formidable backgrounds in digital marketing, technology and commerce, the founders of Port2Port essentially built a technology company first – and then added the fine wine component with a laser beam focus on customer service. The Cape Town-based start-up officially launched in January 2015, with the backing of former FNB CEO Michael Jordaan. Jordaan, whose love for fine wine is well known, invested in Port2Port through his venture capital firm Montegray Capital.

Despite the fact that local e-commerce is still tiny, and has yet to surpass 1% of SA’s total retail, Pudel and Bührer insist that there is massive growth potential. This potential, they say, can already be seen in the quick and enthusiastic take-up of the Port2Port platform, having enjoyed a 46% customer return rate since inception.

In addition, the founders note that the business is growing at a rate of 30% to 35% per quarter, along with a rapidly expanding portfolio and the beginnings of an intricate international network of distributors. 

“We are tapping into a market that is small but hungry for new innovations,” adds Bührer, also highlighting that Port2Port has global ambitions and will ultimately be a showcase for fine wines on an international scale.

Bottle shock

With an eye on the remarkable success of digitally driven platforms such as Uber and Airbnb, Port2Port is looking to replicate their disruptive approach by leveraging technology – and an
“open source” attitude – to cut out the middle players and bring prices down.

“Wine has a very complex and sporadic distribution process attached to it, and there are multiple players involved,” says Pudel. “In our view, there are two stakeholders who lose out as a result: the consumer (who pays a high price) and the producer, who comes out with the lowest margins.”

By collaborating with the major retailers and suppliers, Port2Port aims to pair the established legacies of local wineries with tech expertise to provide a highly curated online showcase. According to Pudel, Port2Port has formed close partnerships with eight wine farms and four established wine retailers. One of these retailers is Wine Cellar, which was established in 2000 and made its own move online two years ago.

Roland Peens, director at Wine Cellar, echoes the positive sentiment at Port2Port regarding the potential of e-commerce for wine merchants, noting that about 20% of Wine Cellar’s sales now originate online.

“This is far more than I had expected, and I think we will hit the 30%-mark next year,” he says. “We think there is a tenfold growth opportunity online, and the tipping point is coming soon.”

Peens states that it’s the millennials and younger consumers who are driving the shift to buying online, although he adds Wine Cellar’s online platform is attracting the older generation as well.

“People enjoy having access to a wider variety online, and they can easily do their research and read reviews before purchasing,” he explains.

“Also, the fact that it can be delivered to your doorstep within hours is huge.”

As with Port2Port’s tech-orientated team, Peens emphasises the importance of customer service and timely trouble-shooting – with smart logistics underpinning the online offering.

“If you’re not willing to invest in customer service then you will fail – you will not get repeat orders,” cautions Peens. “Being online requires a firm commitment and dedicated resources.”

This is surely good news for even the most casual of wine drinkers, as both new and established retailers scramble to bring the best of SA’s bubbly straight to their doors.

This article originally appeared in the 8 September edition of finweek. Buy and download the magazine here

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