Cheers to today’s interview with Naked Wines founder and CEO Rowan Gormley. A native of South Africa, Gormely settled in the UK and helped launch Richard Branson’s Virgin Money, and later Virgin Wines. In 2008, Rowan left to work on his 4th start-up, Naked Wines, and saw it grow to UK’s fastest growing wine retailer by 2011. Here’s how Naked Wines work:
Eric: Hello everyone. Welcome to this week’s edition of “Growth Everywhere” where we interview entrepreneurs and bring you business and personal growth tips. Today we have Rowan Gormley from Naked Wines. Rowan, how are you doing today?
Rowan: Great. Very well thanks. How about yourselves?
Eric: Doing great. Thanks for joining us. Why don’t you tell us…Give us a little bit about your background and then how Naked Wines came about.
Rowan: Sure. My background is, I came from private equity and I met a guy called Richard Branson, and through him landed up becoming an entrepreneur. We set up Virgin Money together, then we set up the Virgin One account, which is a bank and then Virgin Wines, and then Naked Wines. So, this is my fourth start-up.
Eric: I see. Okay. So, you kind of just stumbled into this whole entrepreneurship game, right?
Rowan: Yeah. I think I probably always had it in me so when I met Richard he wanted me to join him to do corporate development, to do deals for Virgin, and literally, the first day I was there we had lunch and we were talking about; so where should the Virgin brand go. And everyone was talking about spaceships and boutique hotels and nightclubs and I said, “What about financial services?” And everyone went, “What? Virgin financial services? Crazy!” But my logic was, and Richard said, “Why do you think that?” And I said, “Because no one trusts banks.” And this was twenty years ago, and “They’re going to trust them even less in the future.” And everyone trusts Virgin. So the Virgin brand’s going to be most valuable where people, when people don’t trust the incumbents, so why don’t we do financial services.” And he went, “Great!” So I said, “Shall I do some research or what?” “No, let’s just do it.”
Eric: Okay, Great. So, how did you…I guess we’ll backtrack a little bit, I mean, how do you go from private equity to meeting someone like Richard Branson and then end up working with him? What’s that story?
Rowan: Well, we worked on a deal with the Virgin guys and the deal itself never actually happened. But Richard was involved and I just got a phone call one day and he’s got quite a sort of quiet shy voice, so there’s this quiet shy person on the other end of the phone going, “Oh, hello. It’s Richard here.” So, I said, “Richard who?” “Branson.” So, you know, “Fuck off. Whatever.” [Laughter] And he says, “No, no, true, it really is. Do you wanna come and work here?” So I said, “Okay.” So I went around to go and see him and we kind of stared each other. I expected to get all these heavy interview questions and he just stared at me and I said, “What do you want me to do?” And he said, “What can you do?” I said, “I can do deals, I can fix broken companies.” He went, “Great! Come and do that. That’s great! Perfect!” And that’s how I landed there, working there.
Eric: Wow! Okay. So, he just knew you were the right guy. I think it’s one of those gut feeling calls huh?
Rowan: He does that a lot. You know. So, just lucky to be one of the guys that he, “So, let’s give this guy a shot. See what he can do.”
Eric: Great. So, I know, reading your Wikipedia, it might be a little inaccurate, but I know the first wine company was called Orgasmic Wines, right? So, Orgasmic Wines, Naked Wines, how does this naming come about?
Rowan: Well, working at Virgin I learned the benefit of having an impactful name and so originally I went to the Virgin group and said, “Look I think the internet’s about to happen and I think classic wine’s going to be one of the areas. Why don’t we do it?” And originally they declined so we called it Orgasmic and then once they saw it working they bought back in and we changed the name to Virgin and I’ve stuck with the theme.
Eric: Got it. Cool. So let’s talk about Naked Wines. I know you took fifteen Virgin Wine employees from there, I mean, how did you…How many customers do you guys have right now? How are revenues looking? Things like that.
Rowan: So, we’re five years old. The customers we really care about are what we call angels who are customers who support growth and wine…crowd fund our winemakers, and we’ve got two-hundred thousand of those across the U.S, the U.K, and Australia. Last year they gave us revenue around 85 million dollars, and this year we should be somewhere northbound of 100 million.
Eric: Okay. And all in the span of five years, huh?
Eric: Cool. Great! How did you…I always have to ask the people that I interview, how did you go about acquiring your first…to see your first thousand customers?
Rowan: What we did was we literally put an ad on Google Adwords and said, “We’re looking for people to be wine-tasters and paid wine-tasters and we’ll send you six bottles of wine for free. All we ask is that you review them and tell us what you think. And we had about five-hundred people put their names down. So, it cost us five hundred cases of wine, but about three hundred of those people are still customers today.
Rowan: That just got the ball rolling.
Eric: Wow! Okay. Crazy. I’m assuming your customer retention rate, I mean, it must be like through the roof. I mean, are you doing anything else to retain these customers? I heard customer focus, you come from a Virgin background, there’s got to be some secret sauce, right?
Rowan: Yeah, that’s right. The whole business model is based on doing is actually the opposite of what the rest of the wine industry does. So, work now, especially in the U.S., the wine industry’s pretty broken. The two important people are the wine-maker and the wine-drinker. They’re both getting screwed. The guys in the middle are making money. So, when we set up Naked-Wine, we can’t just be another online winery retailer competing with the same brands, the same prices, we have to do something that’s completely radical. And to do that we had to do exactly the opposite of what the industries do. So, instead of screwing our suppliers by beefing them up in price the whole time, and never paying them when you’re supposed to, we actually financed them. Instead of trying to screw our suppliers by telling them this bottle of Macabeo is worth a hundred dollars because the Robert Parker gave them the magic five points, we let them get the wholesale prices in exchange for funding our wine-makers. So, what we try to do is build this virtual circle where our customers crowd fund our wine makers.
That means the wine-makers don’t need waste their time and money selling to the customers, which means they can give the customers stunning wines at wholesale prices, which are anywhere forty to sixty percent below the more retail prices. And the reason the wine industry’s made this easy for us to do is, you can buy a hundred dollar bottle of Macabeo, there’s only about $10 bucks of Macabeo in that bottle, you’ve got to pay for the bottle and the cork, Shaun, but there’s an awful lot of sales and marketing, and distribution, and all sorts of context. Whereas for us, if we spend ten bucks to make a bottle of wine, we’ll sell it for $20. Customer’s getting a hundred dollar bottles at twenty bucks. That’s what makes them loyal and why they stick around. You simply can’t get these wines at these prices anywhere else.
Eric:Got it. Okay. Would it be fair to call this a kick-starter for wine?
Rowan: Yeah. People keep going like KickStarter for wine, and there’s [Mix Mix] for wine, it looks a bit like Etsy. It’s much like all of those things, but, yeah it’s got the crowd funding of KickStarter. It’s got the artisanal aspect I suppose of Etsy, and then in a sense we’re, I don’t know who this’d be like, we don’t just connect the wine maker and the wine drinker. We are almost like a polisher for wine makers in the sense, if we fund them and design the labels, we do the sales marketing and distribution, we provide a facility here in Sonoma for them to actually come and make their wines. We do all the regulation, we handle the funding, the collections, everything. So all the winemaker needs to do is make great wine. And if you think of the book industry, publishers don’t expect authors to know how to bind books or print books or anything. All you’ve got to do is write. That’s what we try to do for winemakers.
Eric: Got it. Okay. Cool. It seems like making wine’s not that common. You’ve got a superstring community. I mean, is there anything special you guys did to kickstart…Did you use the kickstart community?
Rowan: To be honest a lot of it just happened completely naturally and took us by surprise. But the first decision we made was that, and this was five years ago, so Facebook was one of the established by then, and the first decision we made was; how would our customers know the difference between us and every other wine supplier out there saying, “Oh, this is some tiny artisanal winemaker, you know, making three barrels in his garage.” The answer is, we had to connect them. We had to let the customer speak to the winemaker so they could see these are real people and they could understand how much of a difference by crowd funding them, they come into this person’s life, and we need to let the customers speak to each other. So, it was kind of…it was something we just didn’t think terribly hard about in the beginning. We said, “We want it to be naked. We want the company to be completely transparent. What you see is what you get.”
And the basic way to do that is just; no secrets. Let everyone talk to one another. And it was kind of an easy simple decision, but that’s what’s driven all the social engagement and this very strong sense of community. And I think, you know, the huge difference is, buying a bottle of wine from us and buying a bottle of wine from some hired wine merchant, aside from the price difference, the huge difference is you become friends with the winemaker. And it’s really cool drinking something made by a friend of yours and it’s really cool sharing that with other friends. So, it’s a different experience.
Eric: Totally. I’m going to go buy some wine after this from your site. I didn’t even know the savings were that big. But, I think when you start something out like this, you’re building out a community, we can call it a market place. You have, first of all, the users, or the customers coming in. You have to worry about the winemakers too. How did you go about getting all these great winemakers?
Rowan: We went out and raised some funding to start with, because we had to go to the winemakers before we had any customers and go, “Will somebody please make some wine.” Then you had to go to the customers and say, “Please give us some money. I promise you there’s going to be some wine soon?” And we basically had to try and get both sides to take it on faith that sooner or later the winemakers would make the wine and there’d be customers to drink it. Fortunately people did and the results were good and, you know, pretty soon you’ve got a viral effect, which happens after that.
Eric: Got it. It’s like…
Rowan: There are some nervous days in the beginning.
Eric: How long did those nervous days last until you first started really rolling?
Rowan: A good nine months. Literally the first day we sat there and turned on the switches and we had some…We had peanuts for appetizing so we spent our few peanuts on what little advertising we could do, and we kind of sat there and just watched this out and by about eleven o’clock it went “bing”. “Gosh. We’ve got an order.” And then we said, “Oh, it’s your Granny.”
Rowan: And by three o’clock that afternoon we put our first actual post and ordered some wine, and we just went crazy and we just sent it to them. We didn’t even take the money we were so excited.
Eric: It’s like when Amazon first started and the sold the first book or whatever and they rang the bell, right?
Rowan: That’s right, yeah.
Eric: Got it. Cool. So, let’s talk about…I know you come…you started with accounting and went to private equities, a finance background obviously. How has that helped you with all the businesses that you’ve run?
Rowan: I think the kind of key thing in each of the businesses that I’ve been involved with, kind of corporately is; there is so many things you buy today where very little of the money is actually for the thing you buy. If you go and buy a book, Amazon’s brought down the price of books, Alleluia. So a book costs’ ten bucks. What does the author get? The author’s still like getting forty, fifty cents, you know. I’ve always tried to come at things by saying, “Well what does the thing actually cost?” And then if you can find a way of getting it to the customer adding as little cost as possible along the way, then you don’t need to have a big fancy pants sales and marketing campaign. Whereas; what a lot of other people seem to do is they go, “Right, let’s cost-fix. I’m going to spend three at selling it. Now I need to charge five bucks and all of a sudden the product goes from being affordable to being expensive. And the money’s just been spent on stuff that doesn’t actually add to the experience.
So, you know, in financial services the whole idea was…most financial service companies are in trouble because they’ve got to pay their salesman so much to sell their product, which means the product’s expensive, which means nobody in their right mind would buy it. Which means the only way we sell is to employ a salesman, and so they’re stuck in this vicious circle. So, we try to come at from the other way around. And I think that comes from the financial background, just if you can get as much of the customer’s money as possible going into grapes…oh talent, time and as little as possible going into banner advertising campaigns, that’s the way to run a business and market.
Eric: Got it. Okay. And it’s worked out for you obviously. So, in terms of…I think a lot of entrepreneurs want to improve, in terms of getting their…let’s just say, their finance chops in order. How would you recommend someone go about that nowadays?
Rowan: What certainly worked for us is, although I have a financial background, when I launched Virgin wines, which is actually a dot com boom, we raised an amount of money, you know, big ad campaign, fancy head offers, lots of staff, exponentially built all the RT, you know, no expense spared on anything. And in no time at all I realized, “My God, this has been a terrible mistake. We spent all this money, no one’s buying anything. This is a disaster.” We had to scale it quite back again. And the big learning experience for me was, despite the fact I had a financial background, I actually learned more about our business, when I couldn’t afford a finance team, when I couldn’t afford a data analyst, and I just had to do it myself. So, I think the advice to any entrepreneur whether it would be, you know, make yourself into a wiz on Excel. Teach yourself SQL. With those basic tools, get into your own data analysis, then give the job to somebody else. And that’s the best way to really understand your business.
And at the beginning, you know, we don’t need to do this anymore, but at the beginning what we would do is, I’d download every single data field on every single order, every single month, and I’d go through every single one of them and I’d say, “This customer hasn’t bought this month. Why? If this product didn’t make us the money we needed to make. Why? If this product isn’t selling at the speed at which it should be selling, why?” And it is kind of that arm-screw granular analysis that you have to do. Its hard grind, you know. I look around the Valley now and I keep meeting highly intelligent young guys who’ve raise twenty million from somebody to do something and they’re all…They’ve got very big ideas about, “We’re not really worried about monetizing this year. I think, “Sunshine, you’re gonna be [laugh], because at some point the music stops, there aren’t enough chairs to go around and if you don’t have one stuck to your butt already, you’re going to be standing a lot and looking awkward when everyone else has got a seat.”
Eric: Got it.
Rowan: I think I’ve learned that through painful experience.
Eric: Got it. Obviously you still look at the numbers yourself and your saying it’s a hard grind. What kind of help do you have with you on the finance end? Do you have a CFO…What types of critical hires do you have with you now?
Rowan: A CFO is actually absolutely critical. My IT guy, we’ve been together through four companies, so he’s fantastic. The guy who runs our U.K business, I hired him at the age, I think it was twenty-six. By twenty-eight he was running the company. He’s been fantastic. We’ve got this brilliant wine guy here. U.S and Australia, the guys running the U.S. and Australian businesses, I mean, they’re just both straight people. Not just that they’re very strong philosophy of: it’s so hard hiring the right people and you make mistakes all the time and the worst thing you can do is… You better give people a shot and if it hasn’t worked out just start again. Keep on going. Keep on doing this.
Eric: I guess building on that point, once one hiring tip that you can share with the audience?
Rowan: I’m very bad at hiring to be honest. So, I’m not sure I’d take my own advice. The biggest mistake I’ve tended to make in the past is hire people like me, because I like them. Very often, what’s actually needed in the company is people who are complimentary to me, people who are strong where I am weak, and visa versa. And so…I think it’s really important to say right out, “What is the culture of the company? Every person in the company needs to have those; and what is the character of the individual, and how do those two things fit together.
But for a long time I confused company culture with people I liked. I’m not saying I don’t like the staff we’ve got now. I don’t think I’ve become much better at getting over my first impression, and really trying to understand what this person is going to be like to work with. I suppose that there’s one technique of trying to come up with…that is, you can interview people if you look them in the face you really get number one answer. A better way to find out if they’re really going to be great is to work with them. So, I always come up with some kind of a real life problem, we work them in that area and say to them, “Look, I’ll pay you half-time to do this work, so I’m not trying to get your time for free, but I’d like you to pick up this problem, let’s work on it together and see what it’s actually like to work together. And that just separates the talkers from the doers like that.
Eric: Cool. And that’s grand, I mean it’s …I guess I’m getting a little too specific here, out of curiosity is that like a one week trial or a one month trial, typically.
Rowan: Yup, somewhere between the two. And kind of the weird thing about it is it’s a drop in the ocean compared to the cost of manpower. And if the person is absolutely the right hire and you know that for sure then it helps you be absolutely confident when you’re recruiting them, that you don’t miss out on a good person
Eric: Got it. Okay. Cool. For Naked Wines, you know, what are some struggles you face growing the business, I mean it’s been five years?
Rowan: I think reliability’s our biggest thing. I think when we first arrived in the U.S. for example, I discovered that I had no network in America and I came over from the U.K. two years ago, I’m used to, in the U.K. Parliament speech of potential marketing partner. I will either know someone there, or within one or two degrees I will know someone there. So, I really underestimated just how much the absence of a network is difficult to approach, and then when you phone people up they go “Naked Wives? No never heard of you.” [laughter].
It was very difficult just to get those first few partners. So, we recruit most of our customers by working with partners, and those partners might be a magazine that wants to incentivize people subscribe to the magazine and they will use our wine as an incentive for those people. We give them a great deal on the wine, they get an uplift in subscriptions, and then some of those people then become customers for us. So that’s how we recruit [inaudible 0:21:21.8]. And the whole thing is getting through to people to take your call and take you seriously.
Eric: Got it. Okay I know you mentioned trying to avoid sales teams and marketing teams. Do you guys have a sales and marketing team right now to help you grow?
Rowan: Curiously we have a sales team that are paid not to sell. So, we don’t have a sales team paid to get on the phone and call our customers and get an order for some wine off of them. What they’re paid to do is to look after a group of customers and if you see someone’s got a problem, call ‘em up and deal with the problem before it becomes a real problem. So, say for example, you know, the customer had a delivery and it went wrong, it got delayed by a couple of days and they came back on the sight and reviewed five of the wines very badly. Bad delivery, bad service, bad wine experience. One of our guys will call them up and say, “Eric, I’m sorry to see the delivery went wrong. I’ve refunded you for that. I see you didn’t like these five wines. I’ve refunded you for those. Now, let’s get you set up so you never get another bottle of wine from us you don’t love. And on our side we’ve got the ability to set your preferences so any wines that you won’t love will have a big red cross next to them that says, ‘don’t buy this wine you won’t like it.’” And so, I think they are a sales team noted by their ability to get on the phone and make the calls to make things happen, but they’re not measured by their ability to sale. They’re measured by their ability to improve the customer’s experience.
Eric: Got it. So this is exactly like a customer success team where they almost help with the retention at the end of the day, right? That’s cool. Perfect. One of the interviews I did with EchoSign founder Jason Lemkin is exactly what you guys are doing right now. So, I think it is funny how everything aligns like that. So, I agree. Super important rule. Cool. Question for you though. I mean, I talked about retention there, but what metrics do you use to measure these guys?
Rowan: We obviously track every caller from launch and to see how many of them stick with us, how often they’re buying. The single most important thing is are they interacting. Are they raising wines, are they chatting to the winemakers, this kind of thing, because it’s seems like customers get into their routine way, you get twelve wines, you come back, you say “I didn’t like these three. I really love these three.” “We’ve got a really high degree of certainty the next case you buy you’re going to get twelve wines to blow your socks off.” Now, once you’ve done that we know…and we know this happens, a customer will say to us, “I went into my local supermarket the other day and they had a special offer on something so I took a few bottles of it home. Oh what a waste of money. Even at half price it wasn’t [worth] the money” As long as we know our customers are interacting it’s the best sign of health in the base.
Eric: Got it. Okay. So, it’s about creating that “Wow” experience. Now, if you could go back and change one thing what would it be?
Rowan: I think probably I would have been more careful with hiring, especially the team in the U. S. and I would have just sort of taken things slower. I think, when I came to the U.S., you know…although America lacked the form, it just kind of blows your mind how enormous this market is. And so, “Hold on, we need to build this team really fast.” And actually I should have just done it a bit slower, be more careful with the hiring. I read somewhere someone said, “You are the people you hire in the first ninety days” And I think probably I should have taken that a little bit slower and just go with the people…It’s actually taken me a good twelve months to do it, but we’ve got the right team in place now.
Eric: Cool. Got it. In terms one productivity hack that you can share with the audience, what’s one thing that’s at the top of your list?
Rowan: I mean, for me, this is kind of a personal quirky thing, but learning to do…learning SQL and just learning to do modern data analysis instead of trying to think of a question, explain it to a data analyst, wait forty-eight hours for a report to come up full of beautiful colors, look at it and go, “Now, here’s my next question.” you know, put that back in. So we’ve got a bunch of tools for use, but having everybody in the company having those tools in the base. We do have a data analyst and their job is to help people learn to use the tool, not to do the analysis for them. And I think the basic productivity happens is doing some of your own [shit].
Eric: Okay. Cool. Learning SQL on a scale of one to ten how impactful do you think that’s been overall on business for you?
Rowan: I’d say it’s a good six or seven and the reason is that it’s given me the ability to get insight into the business. It sounds like a small thing, but it’s given me the ability to get insight into the sort of business detail level that a lot of other CO’s I come across just don’t have. They’re used to looking at the consolidated report that’s passed through three or four people’s hands and it’s been sanitized and it kind of shows what they want to see. I think that, not just for me personally, but if you’re running a business, to have the ability to really draw it out into exactly the base, the rule of numbers, to find out what’s going on in your area. It’s incredibly powerful. I have business built on testimony, who taste everything. They have a really strong philosophy, you know…Six guys sitting around in a meeting room debating isn’t going to solve the problem. Put up six different points of views, build six, put them large; see what happens. That’s served us really well. But you have to have, if you’re going to have a shoot from the hip mentality, that’s got to be combined with really strong data discipline.
Eric: Yeah. And I think it’s super powerful…empowering when you can, like you said, you don’t have to wait to collect or wait for your next question, and you can just get it on your own. I think it’s something I might action on after this. Final question from our end. I mean, you know, what’s one must read book for entrepreneurs?
Rowan: I think “Built to Last” by Jim Collins and Jerry Porras is a fantastic book. It tracks, I think, thirty companies and their competitors, and really tries to understand why some companies make it and some companies don’t. And I think there’s some really valuable listings that come out of that which are incremental in the top. It’s an old book now. It’s probably twenty years old, but fantastic read and will be instructive forever.
Eric: Cool. And that’s the follow up to “Good to Great”.
Rowan: I think it’s the other way around. “Built to Last” then “Good to Great”
Eric: Got it. Okay. Cool. So, Rowan, thanks so much for joining us. You’ve given very helpful, very insightful stuff. I think it’s always great to talk to someone that’s started in finance and became an entrepreneur. So, thanks.
Rowan: Thanks very much for great questions. See you Eric.
Eric: Alright. Cool. Question for you. Are you…Well, I’m going to email you after the, get your address, send you a free t-shirt and then would be open to some kind of coupon on free wine for the audience?
Rowan: Absolutely. Yeah, yeah.
Eric: Okay. I’ll do that as well. By the way if any of you guys are doing marketing stuff we’ve been…just a tip for you, we’ve been killing it on YouTube ads for our clients, so you can just pass that to your marketing team, super cheap and super scalable. I think this will kill it on YouTube.
Rowan: That’s ideal.
Eric: So, perfect. Great. Let me know if I can help with anything else. You know, we’d love to have you on the show another time.
Rowan: Fantastic, and you if you ever come up Napa or Sonoma way, come and see us.
Eric: Yeah, no, for sure. I’m actually in [inaudible 0:30:07.6] every month so I will let you know.
Rowan: Come to wine country.
Eric: Take care.
Rowan: Thanks. See you Eric
Eric Siu (@ericosiu) is the CEO at Single Grain, a digital marketing agency that focuses on paid advertising and content marketing. He contributes regularly to Entrepreneur Magazine, Fast Company, Forbes and more.