Majestic Wine considers scrapping minimum purchase to attract customers

Wine Bottles

Majestic Wine is considering scrapping its minimum six-bottle purchase as the new chief executive, Rowan Gormley, seeks to revamp stores and revive the ailing business.

Gormley, who took over in April, said Majestic’s warehouse-style stores and minimum-order requirement put off customers. He said the company would experiment over the next six months before settling on a new format.

For the year ended 30 March, pre-tax profit excluding exceptional items fell 12% to £20.9m. Profit will fall again this year as Gormley spends £3m on improving service and stores.

Majestic appointed Gormley when it bought his Naked Wines online business two months ago. He replaced Steve Lewis, who left after poor Christmas trading capped a period of disappointing results.

Majestic was founded in 1980, selling wines by the case to retail customers from a warehouse in Wood Green, north London. The company grew to become Britain’s biggest wine retailer but it has faced stiff competition from supermarkets and online wine retailers.

Lewis halved the minimum purchase to six bottles in 2009 but Gormley said the restriction helped deter people from shopping at Majestic.

“What customers are saying is they find the warehouse format, the six-bottle minimum and the discount pricing structure difficult and intimidating. The six-bottle minimum comes up again and again so it’s something we will have to test,” Gormley said.

The warehouse setup, with cases piled high around the store, may also have had its day, he said. “The reason a number of new customers who walk into the store walk out again is that they thought it was a wholesale store.”

High turnover of store managers and understaffed branches have also taken their toll, he said. When shop managers left, usually to work elsewhere in the wine trade, store sales fell and the company’s response was to cut staff, causing a vicious circle.

“Customers tell us: ‘Every time I go in a store there’s a different person there. Nobody knows the wines I like and nobody treats me as an individual.’”

Majestic’s main computer systems are 10 years out of date and need overhauling to support a business selling online and in shops. They would also give branch managers data on individual customers so they can suggest new wines.

Gormley said it would take three years to revive Majestic. Improving the computer systems will take two years and another year will be needed to implement changes across the branch network.

Majestic’s shares had risen 40% since the purchase of Naked Wines and Gormley’s appointment were announced but they fell as much as 5% to 418p after the results announcement.

Retail analyst Nick Bubb said: “After the excitement about the future for the merger of Majestic Wine and Naked Wines after the deal was announced, today has brought the City back down to earth with the warning that that things will get worse before they get better.”

Powered by Guardian.co.ukThis article was written by Sean Farrell, for theguardian.com on Monday 15th June 2015 10.52 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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