Adapt and survive

Like hundreds of independent merchants, Tivoli Wines in Cheltenham experienced a tidal wave of orders in the early weeks of lockdown.

But where were these orders coming from? Who were these new customers, and were they different from the regulars that the team was used to meeting and greeting? Could they be persuaded the stick around once Covid-19 was in retreat?

Owner David Dodd describes how the business changed its own buying behaviour as a response to the pandemic – and assesses whether his strategy has paid off

david dodd

As I sat in the shop an hour after Boris Johnson’s lockdown announcement, boxing up stock for what I believed would be a lengthy period of inactivity, I could hear my phone beeping away in my pocket.

I ignored it, putting it down to the over-excitement of a group of friends exchanging messages on Whatsapp or my wife informing me that our 12-month-old had woken up for the fifth time in an hour.

At around midnight, as I was locking up, I glanced at my phone. What I saw surprised, excited and terrified me in equal measure. It wasn’t text messages coming in. It was the notification of online orders – more than we’d ever had in a single day.

Like many small independents, the majority of our sales, around 95%, are derived from our bricks-and-mortar channel and, even though we developed an e-commerce website back in 2018, we viewed it primarily as a window to promote our hybrid business model.

I was quite happy with our website, but it had suffered from months of neglect as we focused our investment on growing the more profitable aspects of our business, particularly the wine experience side.

As rumours of a forced closure of retail circulated, it hadn’t crossed my mind that the website would become our life support. We felt re-energised; we had a form of income flowing into the business.

But as the orders stacked up over the next 36 hours, I became less excited and more terrified at the opportunity presented to us.

The first week of lockdown was intense – akin to trying to build the aeroplane when you’re already hurtling down the runway. We were not ready for the demand: our website was not updated with our latest range, nor was it aligned with the EPOS used for stock control.

Winelibrary_seating

We had no processes in place to update stock records and pick, pack and deliver at short notice. We don’t own a business van to make deliveries or even have business insurance on our cars. We didn’t even have enough shipping boxes. But we were taking money, from faceless customers we knew very little about.

Unfortunately, though, we just couldn’t keep up with the pace. We needed to take a breather and get ourselves organised, restock the empty shelves, reflect on what had just happened and adjust our processes accordingly. Most of our stock of sub-£10 wine disappeared within the first few days as the nation was in full panic-buying mode. Frantic calls were made to try and get new lines delivered within 24 hours (no chance!) so 72 hours would have to do.

But the backlog of orders kept building up and, fearful that our levels of customer service would drop, we made a conscious decision to close the website to non-local customers. Although we lost sales in the short term, it gave us time to plan and to strategise on how to maximise the opportunity presented to us.

Understanding the new customer

With little experience of dealing with online customers, we felt that we needed to try to understand more about their purchasing behaviour and started to cluster the transactions in similar missions or behavioural segments.

Just from eyeballing the transactions made over the first few days, three groups stood out.


One-hit wonder
© Krakenimages.com / stockadobe.com

The One-hit Wonders

The first group we termed One-hit Wonders and they ended up representing around 40% of the orders coming in during the first week or two of lockdown.

These were clearly the supermarket overspill customers on a panic-buying mission. We expected them to only make a single order in the month: they purchased items in cases, or in multiples of six bottles, and were price-sensitive – rarely purchasing lines above £10 after discount.

They focused on recognisable grapes over regions or countries – Pinot Grigio, Pinot Noir, Malbec, Sauvignon Blanc – and ordered 12/18/24+ bottles for each transaction.

One customer, clearly stalking our website for the moment we restocked, purchased all our cheapest Pinot Grigio within minutes of it going live. I envisaged him gleefully carrying it into to the nuclear bunker he was clearly building in his back garden, waiting for the end of the world to happen. Going out in style.


On-boarders
© Goran / stockadobe.com

The Onboarders

The second cluster group I named The Onboarders – a phrase from my corporate days which reflects an employer’s desire to upskill and retain employees.

These Onboarders were new customers, not recognised by our website or EPOS loyalty scheme database, who were prepared to purchase from lesser-known grape regions, or less familiar grapes and styles.

They were more experimental with their choice and less price-sensitive, and not fussed about triggering the case discount thresholds. These customers typically purchased between five to 12 bottles priced between £11 to £17, selecting from multiple lines.

Some of these customers possibly migrated from the multiple retailers or The Wine Society, which had temporarily closed. These were our target customers who, due to our existing price proposition and range, we felt we had a better chance of converting to a repeat purchase. This group represented around 25% of orders in the early days of lockdown and were our key focus for retention.


Dependable
© Afshar Tetyana / stockadobe.com

The Dependables

The final group we identified were our Dependables. These are the loyal customers who you already know and love.

The lockdown may keep them from the shop, but they won’t let a little-known virus stop them from buying your wine.

These are the customers who already know what they want to purchase before they hit the website – laser-focused on buying bottles already tried and tested, but sometimes calling the store asking you to remind them of the name of the wine they’ve been drinking every week for the last two years (“the one with the funny-sounding grape (Treixadura) and a flower on the label”).

These customers are the are the social media sharers, word-of-mouth spreaders and fully-fledged supporters of your business. They’re also willing to spend more per bottle than the other groups, an average of £16 to £22, and are happy to select your Mystery Box given the trust they have in your judgement (unfortunately for one poor customer, the biggest mystery was why we only put five bottles in his six-bottle case).

These customers purchased small but frequently, between three to nine bottles, and they represented around 35% of all orders in the first few weeks of lockdown.


Once we understood more about the customer missions, we started adapting our processes accordingly.

With no trading shop, stock replenishment had to be driven by the website analysis, which resulted in a significant shift in our approach. Usually just 15% of bottles sold in the shop are priced under £10 and there’s a similar percentage for bottles priced over £25. Like many other independents, our core range was the £12 to £25 range.

But in the first week of lockdown, more than 50% of bottles sold were below £10, and less than 5% of bottles sold priced over £25. Average spend per bottle had dropped from £16 to £11. With a limited budget, and with uncertainty over how long the lockdown would last, we felt that we should tread carefully and increase our investment in new, sub-£20 RRP lines, pulling back from the more premium lines.

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Embracing change

Once we knew a little more about the customer, we started making some changes to our business model.

To satisfy the One Hit Wonders we needed stock, and lots of it. Cases and cases of entry-level sub-£10 RRP lines, but we had the dilemma of satisfying the demand while managing cash flow.

The supermarkets, experiencing sales equivalent to their best 15 Christmas Eves in a row, were not likely to accept empty shelves for long.

Would our One Hit Wonders disappear as soon as the shelves were replenished? Would I be sat on hundreds of cases of entry-level wine without a trading shop to sell them in or, worse still, continue trading but with my existing customers rejecting the lower-priced options? Would it not be better to just sit it out and not risk destroying our cash flow? Paralysed with fear, resisting change … it’s an easy trap to fall into.

So I did the sensible thing and asked my wife for advice. She’s a rare breed: an accountant and a risk taker. She told me to go for it. She’s in charge of the company books, so who was I to argue? We opened the floodgates to Languedoc Pinot Noir and Sicilian Nero d’Avola. It didn’t matter how many we ordered. They flew out the door as soon as they came in.

Focusing on the Onboarders, the new customers experiencing the website and our customer service for the first time, we wanted to keep them interested. Ignoring all the talk about SEO, PPC, bounce rates and conversion, we felt that we’d have a better chance of retention and repeat purchase if we followed the old adage of “give them more of what they want, at a price they want to pay”.

So we set about expanding the range of wine styles from regions they frequently searched or purchased from. I was indebted to a member of my team here, who made extensive tasting notes from the winter trade fairs and transferred them to a spreadsheet (who does that?). This meant we could react faster, and our hit list of new wines was “oven-ready”, as a certain (untrustworthy) politician would say.

I credit those suppliers who agreed to split cases and lower minimum spend so we could stretch our budget and de-risk our approach. With their help, and with a marginal increase in budget, we moved from a “invest in depth” model to a “invest in breadth” model, providing more choice for this customer group.

As mentioned above, I love our Dependables – those customers who’ll be with you through thick and thin. But Calum, our diligent, hard-working, “I transfer my tasting notes into spreadsheets” colleague, didn’t love them as much as me when I told him we needed to upload 100% of our current range onto the website.

With our loyal customers wanting to order their favourite tipple online, we needed to ensure that they could. It’s a time-consuming and mind-numbingly boring process which would take a long time. But we were willing to put Calum through hell to ease our loyal customers’ pain. Sorry Calum.

Encompassing all of the above was a focus on providing excellent customer service. By only accepting orders within 30 miles of Cheltenham, we put ourselves under pressure to fulfil our own deliveries, but we could be flexible, deliver at a convenient time to the customer, ensure a contactless approach and offer to remove packaging. All the things that larger companies struggle to achieve would become our USP.

We try to personalise their experience as much as possible – using our first names on newsletters, hand-writing delivery notes, introducing ourselves when making deliveries, thanking them for supporting a local family-run business. We focused on committing to a delivery timeframe of within two to three days versus the Majestic Wines turnaround of 10 days.

We threw in a packet of Haribo here, some artisan chocolates there. Anything to set us apart; anything to force the customers to remember us, to nudge the retention rate up a few points higher. And crossed our fingers.


Mask on the bottle as a symbol of protection with copy space
© zakiroff / stockadobe.com

But did it work?

In summary, I have no idea. Of the customers ordering in the first five weeks of lockdown, 55% of them have re-ordered, including some of the One-hit Wonders which, in my mind anyway, justifies our investment in the entry-level wines purchased in the early days of lockdown.

Not being too familiar with what would constitute a successful retention rate, I’m not sure if 55% is good or bad, worthy of all our efforts or not at all.

What I do know is that we’ve got a large group of new customers, local to our shop, who know we exist, what we can offer and are hopefully pleased with the wines we provided.

As I write this, six weeks after lockdown, new orders are still coming in daily, but at a much reduced rate with around 20% from new customers and the rest repeat purchases.

Online sales have reduced by circa 60% from the first two weeks of lockdown, but they’re still up considerably from where we were.

The reduction was expected, as the shop re-opened for a few hours a day, so our Dependables have reduced their online presence as they switch back to our bricks-and-mortar channel. Some of our faceless customers now have defined features as they’ve popped in to top up, thanking us for our service. We’re starting to build relationships with new customers.

The majority of the One-hit Wonders, having shone brightly for the first few weeks, started to fade soon afterwards.But from my calculations, we generated enough profit from this group in those few weeks to cover our rent for a month or two. That’s what it’s about now: covering costs, getting by.

With the shop now re-opened, we’ve had to change our working practices again, restocking more expensive lines, but the last six weeks has provided us with the confidence to make some of the temporary changes to our working practices permanent, and question our previous strategy on what we want to be and who we want to work with.

Ship in stormy weather
© Stolenpencil / stockadobe.com

I’ll remember those suppliers who support us, even though their cash flow was tight, and those who didn’t. But the largest benefit, without doubt, has been the learning experience for my small team and myself.

We’ve learnt so much about a side of the business we had yet to stress test and have come away with some ideas, and a steady pool of customers, to test these ideas upon.

I shudder at the thought of social distancing measures being imposed during the Christmas peak, with two customers in the store at any one time. I fear this will force a lot of customers online rather than queuing in the wind and rain, making or breaking independents instantly based upon whether they have a operational website or not.

For us, the experience of the last six weeks will place us in good stead. We’ve got a lot of work ahead of us, but we’ve been given the warning sign, and intend to prepare for the whatever’s heading our way. We may not thrive, but I’m now confident we’ll survive.

I’ll leave you with a nautical metaphor from William Arthur Ward which I found inspiring in those first few weeks of madness. I felt it was particularly appropriate for the times we find ourselves in:

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

May 2020