Wednesday, April 03, 2013

Why online wine trading platforms are sure to fail. Or are they?

Over the last few weeks, two trading platforms have been launched that will allow UK wine drinkers to sell each other wine without recourse to auction houses or merchants. As reports,

"One wine merchant, who wished to remain anonymous, dismissed the chances of survival [of CAVEX and Wine Owners], let alone prosperity.
‘Firstly, if [these trading platforms] expect support from the trade, they’re deluded. Secondly, Liv-ex makes most of its money from data rather than trading, which suggests the model is fundamentally flawed. And thirdly, people may try it for a while, but they just won’t stick with it. I’m afraid the pair of them are doomed.'"

That unnamed wine merchant may be right. After all, new business models do fail. On the other hand prophets of doom don't always get it right.

An embarrassing 2006 prediction

And one from 2007
"IPhone...nothing more than a luxury bauble
that will appeal to a few gadget freaks"

And the reality...

And the same applies to books...

Another 2007 goodie...

Still doubting in 2009

And the 2012 reality...

Time will tell, but if I were a betting man, I wouldn't want to wager any cash on the certainty of wine merchants winning a war against online platforms...


  1. hmm, except (not having read the Decanter story and knowing nothing about the business models except for what you mention above), trading platforms are VERY different to either iPhones (a thoroughly researched hardware 'extension' from an already well known computer hardware manufacturer) and ebooks (relatively low cost products DELIVERED over the internet and still being 'retailed' by knowledgable businesses to the mass public).

    It seems that this is still all about creating further market opportunities for the tiny fraction of the wine consuming public that buy wines for 'trading' and are therefore either complete wine geeks awash with tools, magazines and books aimed at them, OR traders who want to make money and couldn't give a shit about what was actually in the bottle.

    Even if these platforms succeed (which I personally doubt), they will not have an effect on the real wine market.

    If they actually addressed getting real wine from growers/makers into the hands of consumers, OR improved the distribution issues in most markets, THEN I'd take more interest.

    If they are merely supposed to smooth the transition of over-priced bottles from one wine w*nker to another, I don't really care :)

    (sent while on holiday and therefore probably not as politic as I would normally be)

  2. Robert, I agree with some of what you are saying. Yes trading platforms are different to products, but I might as well have chosen eBay and Amazon - both of which are retail platforms that also came from left field and disrupted traditional markets.
    I wasn't talking about the "real wine market" which has - in many countries - already been largely wrested out of the hands of the merchants who are being threatened by the new trading platforms. I was simply addressing the "things have always been this way and they aren't ging to change" mantra.
    In the US, direct shipping - from wineries to consumers - is quietly growing apace in a way that was never predicted, as barriers begin to fall. Again, these shipments may not hurt the bigger retailers, but they will change the shape of wine distribution.

  3. Stephen Bonner wrote on Google+ Peer-to-peer wine trading sounds interesting. No chance of that happening in Canada with our regulations. I cannot imagine support from the trade

    1. Not yet awhile anyway Stephen...

  4. Anonymous12:03 p.m.

    Dear Robert,

    I can speak from first hand experience that even with trade support (Vinetrade was well received by the UK trade), this is far harder to make successful than people think. There are many, many problems with a peer-to-peer trading platform:

    Warehouse inefficiency and costs
    Banking Support/Payment Speed/Card Integration
    Distance Selling Regulations
    Customer Apathy
    Marketing Issues
    Provenance of Stock
    Website Infrastructure/Efficiency
    The Buying Cycle for Fine Wine

    Some would say these are insurmountable; whether that is true or not remains to be seen. Nevertheless this has been tried before and not been successful (U-Vine


  5. Thank you for your insight. Your points are well made but I would have to say that U-Vine failed long before the era of eBay... Whether we like it or not, we are living in an increasingly peer-to-peer world, and I don't see why wine should be exempt.

    1. Anonymous2:36 p.m.

      I must correct you, Uvine failed in 2006, eBay was up and running for several years before that.

      I agree wine shouldn't be exempt from the peer-to-peer world, and had previously enjoyed some success on eBay itself. There are however, far more problems with peer-to-peer wine trading than there are with peer-to-peer clothes selling for instance.


    2. I stand corrected, in the sense that eBay did indeed exist before Uvine's collapse in September '06. However, my use of the words "era of eBay" referred to the far more widespread use of the model that we have seen over the last decade.

      I also agree that it would be foolish to underestimate the challenges facing peer-to-peer wine trading. However, the current trading system is far from ideal and is not one that would be invented today if one were starting from scratch.

      The Berry Bros peer-to-peer model seems to be working well. A collapse of the Place de Bordeaux (unimaginable to many, it is true) would allow chateaux to sell wine directly to consumers - or to do so through their negociants who could also operate peer-to-peer businesses.

      The success of the Naked Wines model which purports to put consumers in - almost - direct contact with producers may be one that is worth looking at.

      Similarly, it is possible to imagine a bonded warehouse becoming involved in peer-to-peer trading.

      Maybe the idea will die in the water and the old Bordeaux ways will survive. We'll see

  6. Dear Robert

    A fascinating analysis and equally interesting replies.

    It might also be worth mentioning that uvine probably folded for a number of reasons, not least weak management controls that failed to separate client accounts and the business trading account. When the basics fall that short and those failings undermine market trust, it's tough to recover.

    Peer to peer exchanges in 'collectible' markets need effective price discovery mechanisms, as well as greater transparency that assured processes available to seller and buyer can provide. In the secondary market Provenance (demonstrable prima facie history and condition of a wine) is an important part of that. These aspects,it seems to me, (together with properly mapped out and implemented business processes) underpin a reliable and trustworthy environment.

    Successful peer to peer markets don't have to necessarily disrupt markets, indeed they often grow them, especially in long tail segments such as fine wine, where all participants within a highly fragmented industry can benefit from engaging new and efficient channels.

  7. Thanks Nick. I appreciate your input. My point is that on this, and on subjects like en primeur and the Place de Bordeaux, the default is to say that nothing can/will ever change.
    There is no question that peer-to-peer trading comes with baggage that will need to be dealt with, but so does consumer reviewing (Tripadvisor, Amazon etc). eBay and Amazon are having to address these kinds of issues, just as Facebook has to deal with cyber bullying and identity theft. But as they do so, they'll open the door for all kinds of online activities that the flat-earthians cannot conceive.

  8. Anonymous1:58 p.m.

    Agreed and i must say that online selling is increasing day by day

  9. Penfold wine has the best reputation among wine lovers throughout the world. The main reason for why people feel affection for Penfold grange is ingredients. Vintage wines