Naked Wines, aka, NakedWines.com, the online retailer, founded in the U.K. in 2008, employs a club with a unique spin on crowdsourcing where customers, called Angels, fund independent winemakers in return for wines at wholesale prices. The company employs roughly 300, about half of them in the U.S. In a recent interview, CEO Rodrigo Maza discussed the company’s focus on customer retention.

WBM: Naked Wines is publicly traded. Are you about to release more earnings soon? 

We recently shared the results from our peak season, October, November, December. We met our expectations. We continue to meet the guidance we shared with the market for the year. We're happy that's the case and that we saw a very strong response from our customers across the US, the UK and Australia, with activation being higher than last year across all markets, with a lot of people ordering a Christmas cases, magnum bottles, and tasting packs. 

WBM: OND is always the big season for wine at retail. Is it the same with direct to consumer?

It starts accelerating in mid-October, then and goes all the way until Christmas. It's a very intense period for Naked. It's also a very fun period for the company that brings out the best in us with teams working closely, making sure people can enjoy wine with friends and family, which is what the season is all about. During the season, we were delivering close to 500 cases per hour worldwide. Sparkling wine was a big winner. We were selling close to 10,000 bottles every single day, with the most popular styles being Prosecco, crémant.

WBM: There's been an oversupply of wine across the industry. There was COVID, and everybody ramped up and made supply commitments and then things got out of whack. Where are you in terms of working through that?

We have made a lot of progress. In the UK and Australia, our stock levels are back to normal. The situation in the US is different. We remain highly overstocked there still, but we have made a lot of progress. We continue to sell our surplus inventory, and we expect those sales to accelerate this year. The market has been challenging, so this is not going to be solved in a matter of months. 

WBM: How much time on average do people spend in the club? 

We have what we call immature and mature retention. Once people become mature customers, it's 4.5 or 5 years and we've seen the retention of that group improve this year. That's something we're very happy about because retention is what drives Naked. Customer acquisition is very important, but having a very strong core set of members is fundamental to sustainable growth. That's the main pillar for Naked

WBM: What’s an immature customer?

Out of the customers that join Naked, we experience an attrition level within the first months because Naked isn’t for everyone. We’ve been working to make it clear to potential customers what the Naked value proposition is. Hopefully we attract the right customers instead of everyone that gets a voucher. We want the people that are truly interested in our proposition to come into our store. Once they convert into customers, we have redesigned what we call the onboarding flow. We want to make it very clear what this company is all about, how it's different than its competitors, how we think it's better than its competitors. Some people are going to realize, ‘actually, this isn't what I'm into,’ and they’re going to leave. That's what we call immature customers. Once customers mature, that's where we see very, very high retention materializing. That’s where people stay with naked for years. We have a very significant percentage of users that have been with the company for 10 years or more.

WBM That's interesting because we know from surveys that average wine club retention is usually closer to 18 months. Do you focus more on acquisition or retention? How do you how do you go about acquiring customers?

Growth always starts with retention and that is sometimes misunderstood. If you have a very strong, loyal, engaged customer base, acquisition gets easier because you have word of mouth working for you, you have referrals working for you. You see an increase in organic demand. If you let Net Promoter Score scores, go down, then the opposite thing starts to happen, and acquisition gets harder. 

In the last few years, the acquisition cost across many channels has significantly increased. A lot of companies want to start with acquisition as the main lever for growth, but then struggle when channel performance declines, so we're trying to shift that focus to start with retention.

Obviously, acquisition is very important. We have a been running a lot of tests this year around our acquisition channels. We're moving, basically redefining how naked goes to market from an acquisition perspective. Naked was over invested in what we call the voucher channel, sending vouchers to people's homes. We've seen the performance of that channel deteriorate over time this year. That doesn't mean like we're going to abandon it completely, but we're putting resources in SEO and influencer content. We're trying to leverage our community more. Naked has a very strong core set of customers that are truly invested in the company success. 

WBM: One of the cool things about naked is the focus on winemakers. Why is that effective?

What makes the model so strong is customers tell us that connection and engagement with a winemaker is very powerful. Wine quality is non-negotiable. The story behind the wine matters. 

WBM: What have you learned from your customers this year?

First, a lot of our customers, particularly the newer ones, are successful people. They go into work and have huge responsibilities. They're buying houses for their families.  They're buying cars. They're taking the family on vacation. They’re making big decisions every day. They're comfortable making them. Then they step into a wine aisle and feel completely lost. They get handed the menu at a restaurant to pick the wine, and they feel very anxious about it. Our mission as a company is to try to make the wine category, more approachable, simpler to understand, and hopefully more fun. The word anxiety keeps coming up. That stands out and that reaffirms our commitment to build this new approach to the category. 

Second, related to the question about connection with wine makers - is that in the UK, a tax increase meant we had to reassess our pricing architecture. We decided to keep some prices locked. We decided we needed to push some prices higher. We sent emails explaining why this was happening and that we needed to reassess our pricing but also explaining that we needed to make it fair to the wine makers. Our competitors tend to squeeze the suppliers. The response from most of our customers was super supportive. 

WBM: What’s next for Naked Wines?

In the past few months, we've revamped parts of our customer experience. For example, we redesigned the ratings flow where people rate our wines. That's important because we want to know if people are enjoying the wines. When you say that a wine wasn't for you, we're going to reimburse you for that wine. We're going to give credit. This is very important, because we want people to feel confident; have fun; explore a category; and taste wines from different regions, winemakers and styles. We're excited to see that more customers are engaging with our rating system. I look forward to finding the right places to invest in a way that brings out what Naked Wines is all about