BWC management & consulting

New Wine Stock Exchanges Are Here to Stay Says BWC Management & Consulting's James Aspinall


London, England -- (SBWIRE) -- 10/22/2014 -- Last year's launch of new wine stock exchange platform Cavex has encouraged much speculation amongst the fine wine community and has split opinions on the validity of this type of business model. Cavex was said to have been almost 2 years in the making and billed itself capable of competing with already existing exchanges, aiming to break new ground in the way fine wine is traded. Almost 2 years later and with little change, there are questions over not just the short-term but also the long-term potential of trading wine in such a manner.

The Cavex exchange platform is said to be unlike any other UK-based exchange model and for some is a welcomed competitor to the London International Vintners Exchange (Liv-ex), Bordeaux Index’s LiveTrade platform, and in particular Berry Bros & Rudd’s BBX. Liv-ex is the first and the most successful of its kind, is now arguably the world’s most important and widely used fine wine trading platform for merchants and traders. The new Cavex platform however, offers a distinctly different avenue of trading, one which is open to private individuals. It is also different to the BBX trading platform of Berry Bros & Rudd’s for two reasons: one is that the trade (merchants, brokers, etc) can use the site, and the other is its fee structure – Cavex takes 3% commission on both sides of the trade, in contrast, BBX’s one-sided transaction, with the seller paying the full 10% broking commission. LiveTrade was set up by Bordeaux Index in 2009, allowing the buying and selling of wines in real time with prices set by Bordeaux Index, and the opportunity to make bids and offers.

Speaking to the Drinks Business, Cavex founder, Stephen Maunder said: “We believe we are filling in a gap in the market. Are we competition to BBX and Liv-ex? Yes but their business models are very different, Liv-ex is for the trade, BBX is open for private consumers but you have to move your wine into the Berry system.”

The exchange is primarily aimed at private collectors, although it is also open to the trade. It will hold data on approximately 50,000 wines, is open to global buyers and sellers, but wines can only be traded through recognised UK bonded warehouses. Those involved in the trade must be members of Cavex and the wine must be stored in bond within the UK.

Wine Owners, founded by Nick Martin, is another recently launched online trading exchange that enables private buyers and sellers of fine wine to trade with one another. This Fine Wine Exchange is aiming to make sourcing and selling wine fast, simple and safe. Created by collectors for collectors, the new service enables enthusiasts and investors to buy and sell in four different ways, each one assured with the option of independent inspections. Trading fees are competitive with private sellers charged 6.5% and buyers just 2.5%.

Mide Sanni, Senior Trading Manager at BWC Management & Consulting says “I can speak from first hand experience and a decade in the industry, that even with trade support these models are far harder to make successful than most realise. There are many, many problems to overcome with a peer-to-peer trading platform, immediately I think of: website infrastructure and efficiency, refunds-and-returns, provenance of stock, warehouse inefficiency and costs, marketing issues, banking support/payment speed/card Integration, and of course customer apathy.”

So even at BWC we are somewhat divided as I say these are modern day business obstacles and therefore not insurmountable but whether that is true or not remains to be seen. Other industries have undergone similar transitions and gone on to be industry standard rather than an exception to the rule. BBX has recently exceeded £50m in turnover, generating approximately £1.2m every month. Cavex made just over £3m in its first year, since its launch in 2009 LiveTrade has sold £150m worth of wine. Nevertheless this has all been tried before and has not been particularly successful, if anything ending in disaster; U-Vine launched in 2000 only to collapse in 2006 with £2m worth of debt.

These new trading platforms have allowed UK wine drinkers to sell each other wine without recourse to auction houses or merchants. As Decanter reported last year on the unison of these modern but ambitious trading platforms and those involved in wine's more traditional mode of trade. One wine merchant, wishing to remain anonymous, dismissed the chances of survival of Cavex and Wine Owners, let alone prosperity. "Firstly, if these trading platforms expect support from the trade, they’re deluded. Secondly, Liv-ex makes most of its money from data rather than trading, which suggests the model is fundamentally flawed. And thirdly, people may try it for a while, but they just won’t stick with it. I’m afraid the pair of them are doomed." Conversely, in last month’s Financial Times, Maunder stated that “next year, we expect to make more than double our turnover to between £7m and £8m”, Martin also in the Financial Times said “we’re doing about 50 trades a week, with an average value of £1,100 - £1,400, which we’re pleased with”.

I along with many am of the belief that peer-to-peer exchanges in 'collectible' markets need effective price discovery mechanisms, as well as greater transparency that assured processes available to seller and buyer can provide. In the secondary market Provenance (demonstrable prima facie history and condition of a wine) is an important part of that. These aspects, it seems to me, together with properly mapped out and implemented business processes underpin a reliable and trustworthy environment.

Successful peer-to-peer markets don't have to necessarily disrupt markets, indeed they often grow them, especially in long tail segments such as Fine Wine, where all participants within a highly fragmented industry can benefit from engaging new and efficient channels. At BWC Management & Consulting opinions are clearly divided but our overall verdict is that these platforms are a welcome and positive disruption for an industry steeped in great history but stuck in time for far too long, we hope they open a wider commercial base therefore we hope they are here to stay.

Ultimately, the big winners in this brave new online wine world are private buyers.

About BWC Management & Consulting
Based in London, BWC Management & Consulting offers services to institutional clients, corporate and private individuals, throughout the UK and Europe.