This is a write up that was shared with me. It is from RGA Investment Advisors. I thought I would share it.

The origin story of Naked Wines is in and of itself another reason not to anchor on the stock chart’s path. Naked Wines first launched in 2008 and was bought by Majestic Wine in 2015. Majestic Wine was a publicly-listed, UK wine retailer that bought Naked Wines in order to deploy their lush but stagnant brick and mortar cash flows into a growth asset. [3] In early August of 2019, Majestic Wines arranged to sell itself, but leave behind the growth subsidiary and reorganize its entire corporate imperative around the Naked Wines growth opportunity. This is similar to the setup that brought us into Acxiom/LiveRamp a few years back, though this time the opportunity is even more compelling.[4] The crucial step in realizing the extent of the opportunity for us was setting aside this thought that perhaps “we missed it” and instead recognizing that the company today is not the company whose story the lines on charts actually tells.

An Advantaged Business Model

Naked Wines described itself as “a customer-funded wine business” whereby the customers, affectionately called “angels” “fund talented winemakers and give them the freedom to make wines the way they want to.” “Angels” commit in subscription-like fashion to fund an “angel” account at Naked Wines with a minimum “investment” of $40 per month. This commitment opens up discounted pricing on Naked Wines’ entirely unique inventory. The $40 per month is a powerful force for three reasons:

  • The Cialdini Commitment Concept—”When someone agrees to something small, they are likely to be consistent and go along with a bigger idea later” (an idea we were first introduced to in the book Influence by Robert Cialdini and summed up nicely in the linked article below).[5] Customers who become angels are thus committing in advance to purchase at least a portion of the wine they consume from Naked Wines.
  • The $40 pre-commitment gives Naked Wines very good visibility into what their forward demand will look like and helps efficiently manage the business along the way.
  • The $40 per month comes in before actual expenditures on the platform, thus funding inventory investment for the business enabling Naked Wines to operate with minimal working capital.

These advantages also materialize for winemakers who sell their wine through Naked Wines.…

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