Majestic Wine grow by expanding their user base

In a period of retail doom and gloom, with more and more empty shops on every street, it's nice to read about a success story like Majestic Wine. The company runs wine "warehouses": pretty large stores open to the public, selling nice wine with good service and advice. And they just announced sales up 10.3% of £257.3million, and profit up 26% to £20.3million.

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But what was the key to this success? A sexy social media campaign perhaps, including Twitter feeds on new wines, an iPhone app and a fancy Facebook page with lots of followers?

Nope. Majestic's Facebook page has a grand total of 888 "likes". Indeed, it focuses on good old fashioned face-to-face service, with only 10 % of sales online.

The key to growth is much, much simpler. Two years ago Majestic decided to reduce the minimum order quantity from 12 bottles to 6 bottles in 2009, after testing it for one year.

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Quite a brave move, as this cut the average spend per customer by 2.5% to £126. However, this was off-set by increased penetration, with the number of customers increased by 8.2% to 511,000 in the year.

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CEO Steve Lewis said this move had driven 'quite a change' in its customer base: 'We still have the classic Majestic customer – the BMW or Mercedes driver – but we're also seeing a much younger customer because six bottles makes it much more accessible.'

Majestic has also profited from the trend for people to dine in at home, but buy nice food and wine. Sales of bottles of fine wine costing more than £20 rose faster than average sales, up 23.7%.

Looking forward I predict Majestic will continue to grow. They plan to aggressively drive "physical availability", by doubling their number of stores to 330, profiting from the collapse of most other UK wine retailers like Wine Rack. Unlike Majestic, the latter failed to create a differentiated offer versus the power of the supermarkets.

In conclusion, Majestic show that you can still grow in hard economic times with a premium offering. You need a good value proposition and a focus on the stuff that creates growth: expanding your user base and driving physical availability.