Popping the Cork on An Untapped Market: How Naked Wines Takes It Off

Business.com / Starting a Business / Last Modified: February 22, 2017

Naked Wine is a name that gets noticed, but the company’s focus on transparency and cutting out the middle man is what makes them stand out.

Naked Wines is an online retailer, started in 2008, that combines an unusual business model with a product name that promises complete transparency (and absolutely no prurient content).

Between their headquarters in Norwich, England, and operations in the winemaking hotbeds of Napa Valley and Australia, Naked Wines targets a market niche of about a quarter of all wine drinkers: those who like and appreciate good wine, but aren’t high-end connoisseurs.

Naked Wines found a hole in the market, and used it to their advantage. Here's how you can apply similar tactics to your business in order to uncover an untapped target market.

Related Article: 9 Words of Wisdom from the Faces of Global Entrepreneurship Week

Naked WinesImage via Naked Wines

Cutting Out the Middleman 

In addition to selling exclusive handcrafted wines from relatively unknown winemakers, Naked Wines offers a crowdsourcing option—in return for a monthly payment, “wine angels” receive a 40 to 60 percent discount on every wine order, as well as a free bottle every month. It’s been such a success, attracting over 90,000 investors, that Naked Wines is currently fully subscribed, though it is maintaining a waiting list of over 14,000 people (it probably helps that you get three free wines just for signing up).

Cutting out the middleman is a chief advantage of Internet retailing. Winemaking is a traditional business that tends to be resistant to anything that isn’t, well, traditional. As Jancis Robinson notes, the conventional wine trade is less than accepting of this model. Naked Wines overcomes this resistance, however, by using social media to promote product. This includes a chat room where suppliers and customers interact as well as customer reviews and ratings of wine purchases. No middleman necessary to markup, distribute or market the product. Naked Wines emphasizes it investment in winemakers—not sales, marketing, fancy packaging or other things you can’t taste.

Related Article: To Borrow or Beg: Small Business Funding in 2015

Staying Social

Another aspect of Naked Wines that makes them unique, is combining their retail site with a social site. Customers are able to rate and comment on wines they have tasted, interacting with one another and even the winemakers. Naked Wine capitalized on people's natural tendency to rate and discuss wines that they have tried. With the added ease of discussing their preferences directly online, customers can get the most out of their experience. 

How to Get Naked in Business

According to company founder Rowan Gormley, as reported in The Huffington Post, lessons learned from running Naked Wines that apply to entrepreneurs looking to take off in similar ways include:

Related Article: The Top 10 Qualities That Define An Entrepreneur

Keep the Faith

Staring a business comes with inherent risks. You're asking for a lot of trust—trust from your customers, from your investors and trust from your employees that come on board. If, like Gormley, you’re disrupting a widely accepted business model, you’re going to get a lot of people telling you that what you’re doing is bound to fail. Until it doesn’t.

Know When to Change Course

There comes a point when, if something really isn’t working, it’s not going to work. Most of the time this comes with experience. Knowing the signs and symptoms of a failing business is crucial to success. Successful entrepreneurs know the difference between sticking with a vision and fixing something that’s broken. They realize the difference between when you need to change direction, and when you need to cut the cord. This is an important lesson that often relies on a gut feeling.

Employ a Small Number of Talented People

Big organizations tend to get bogged down in politics, with conflicting interests among teams and individuals that get in the way of getting anything done. Smaller is better, more efficient and easier to manage.

Use Your Customers to Fund Your Business

Investors can conflict not only with the interests of the entrepreneurs they fund, but also with the needs and wants of customers. If customers are willing to help you fund your business, they are so much more likely to purchase your products or services. Customers who help fund your business will have a vested interest that you can’t get from a bank or a venture capital fund.

Your Business is Going Cost More Than You Think

So plan for putting more money into escrow than you think is necessary. Because at some point you’ll need it.

Know When To Leave

People who create start-ups have special strengths. They are not necessarily the best strengths to run an established company. When your start-up becomes a “real” company, it’s time to start thinking about your next start-up and let someone take over running your company.

And here’s Gormley’s final work of advice to all would-be entrepreneurs: get used to working like a dog. That’s the biggest naked truth of all.

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