Australian online retailer of the year, Vinomofo, is preparing to go global. Co-founder Justin Dry talks to Power Retail about the expansion plans.
Melbourne-based pureplay wine retailer and 2015 Online Retailer of the Year Vinomofo is set to go global in 2016. The company will use a broad, low-risk strategy to seed multiple markets — including the UK, US, China and Singapore — before committing to a deeper market penetration.
Joint CEO and co-founder Justin Dry sat down with Power Retail to discuss the expansion plans.
“Our original plan was to dive really deep into the US, UK and China to establish which was the best market to go for,” said Dry.
After investigating the markets and opportunities, Dry and joint CEO and co-founder Andre Eikmeier decided that China looked most promising.
“The Chinese market is still very young and our offer is well suited as far as curation and authenticity go,” said Dry, “with many consumers looking for advice on wine, education, content — all those things that we go quite deep in.”
However, entering foreign markets one by one is both expensive and time consuming. “We could cashflow ourselves going into China, but we couldn’t do China, the UK and US all in one.
“We wanted to scale globally over a period of time, but it was taking a long time to do one market. If we went all in on China, then into the US next, it would take us 20 years to get a global footprint.”
Instead of going all in on a single market, Dry et al. hit upon the idea of offering a light version of Vinomofo to test multiple markets at once to see which responded best.
“We realised that we could go really deep into the Chinese market, or for the same money we could test a variety of markets, see what traction we get and follow that traction.”
The market seeding strategy involves launching a single event in each market. Landing pages are set up for each region announcing a Vinomofo event. The sales events are limited to one container load of wine. Markets are built up through social media, corporate partnerships and Vinomofo’s strong word-of-mouth network. Sales events are then scheduled for each region and staggered a week or two apart.
“This provides us with a low-risk way to test each market once, in a big way, and the ones that we get the most traction in are the ones we follow.”
The landing pages for each region went live in mid-December, with the first sales event scheduled for February.
“I expect the first event to be China, Hong Kong or Singapore,” said Dry.
There is no clear time line for events after that, with dates in subsequent markets to be confirmed.
Funding the growth
At this stage, Vinomofo’s market seeding strategy will be entirely self-funded. Once the most promising market has been identified, the company will look to further establish itself in that region.
“We can definitely handle going hard on one market ourselves,” said Dry.
While initial growth will be self-funded, Dry has floated a potential capital raising to fund future expansion.
“If we do start seeing traction in multiple markets, which we assume we will, then we may need to do a raise or something to fund that.
“We already have a lot of interest in that space. There’s always conversations happening, so it wouldn’t be a long turnaround for us, but nothing yet is signed, sealed and delivered.”
Tailoring the approach to different markets
Approaching several foreign markets at once provides some interesting challenges, especially for a business that prides itself on quality product and customer experience. Dry explained that the business model won’t change by region.
“The model is all about curation, going through all the good wines and finding the five percent that we love and focusing our buying on that, which creates really great value because we go deeper than anyone else.
“And when we say ‘good wines’, we mean real wine, wine with passion, stories, and real people behind it, not the commercial big production stuff that you get on the floors of the chain retailers. And that retail model can work anywhere.”
The one thing that will change by region is the mix of wines. By examining the breakdown of wines (i.e. by variety and region) sold in each market, Vinomofo has determined the appropriate mix of wines to offer to each market.
“We will mimic the percentages of wines currently sold in each market,” said Dry. “There will be a slight skew to Australian wines, however, because we’re Australian and we like getting Aussie wines out to a global audience.”
Vinomofo has a well-deserved reputation for creating entertaining, informative, and straight-up cool wine-related content. (Check out the Vinofiles blog.) One of the major challenges when approaching foreign markets, especially for content-heavy retailers, is tailoring your content to ensure it’s appropriate to the target market. What works with an Aussie audience may not work in China or the States.
Vinomofo’s original plan of going all in on one market meant that the company was planning to hire entire local content development teams.
“It’s really hard to get that market translation right,” said Dry. “There was a lot of thought put into how we would do that well and there were specific people we were looking at for those roles.
“We considered going all agency, but on further examination it didn’t feel very much like us. It’s what a big company would do.”
The multi-market seeding approach means that around content, the first play will be very light. It is, however, at the back of the collective Vinomofo mind, with the company conscious of successfully translating its culture and values into new markets.
“When you start as a business in a garage with two people, you are the culture. But when you grow to around 100 people, which is where we’re at now, we’re like two percent of the company. To maintain our culture we’ve had to focus on getting our message, mission, vision and values really strong, written down, and up on all the walls.”
Inspired by business writer Simon Sinek’s Start With Why, Dry et al. answered the question “Why do we do what we do?” with three points:
- We want everyone to experience good wine
- We want to be proud of what we do and our impact on the world
- We want to have fun
“If you get you mission really well defined, if you live and breathe it and you invite people into it, it becomes an integral part of the business,” said Dry.
“It took a while to understand how important this was. When you start with just two people in a garage, you don’t know these things until you have to face those challenges.”
“For our global teams, the plan was always that they come to work with the Australian team for enough time for them to really understand it. And then constant trips, constant communication to ensure that everyone is part of the same team.”
Attacking the markets
To gain visibility in these new markets, Vinomofo have a three-pronged approached. First, leverage the already significant traffic it has in some of the foreign markets. Second, establish those first thousand customers and create a network of word-of-mouth brand ambassadors. And third, market through events, social and already established corporate partnerships with international companies like Deloitte.
For Vinomofo, a marketing budget has always been nice to have, but not essential if you’re doing the right thing.
“We had very little marketing budget for the first couple of years — pretty much nothing. We did everything socially and through referral. We had no marketing, but people told people. They told their friends because the product was amazing, the experience was amazing, and the customer service was amazing. So it’s only later that you learn that marketing starts with product. Get your product right and it takes care of itself.
“It’s only more recently that we’ve actually increased our marketing spend to consider amounts. But even having increased that spend considerably, our biggest source of new customers is still referrals.
Dry is understandably excited about the Vinomofo expansion plans.
“It’s going to be challenging. We don’t know what we don’t know until we get there, but I think we’ve got a really strong core proposition. We‘re coming from the right place and we’ve got the money to back it up.”