In this episode of Scaling with Samir, Steve Finlan, CEO of The Wine Society, discusses the unique mutual business model where members are shareholders, emphasizing member satisfaction over profit. Finlan shares insights on modernizing a 150-year-old institution, maintaining the lowest margins in the industry, and offering unparalleled services such as free next-day delivery. He highlights the importance of understanding consumer behaviour, building high-performance teams through curiosity and collaboration, and leveraging strong supplier relationships for sustainability. Finlan also touches on the significance of allowing teams to make and learn from mistakes, fostering a culture of continuous improvement and innovation, and the strategic focus on long-term goals over short-term gains.
Understanding your customer’s needs and behaviour is key to standing out in a competitive market.
Key Takeaway
- Member Satisfaction Over Profit: Prioritize customer satisfaction to build long-term loyalty and sustainable growth.
- Offer Exceptional Services: Providing exceptional services, such as free next-day delivery, can significantly enhance customer experience.
- Continuous Modernization: Regularly update and modernize your business practices to stay relevant and competitive.
- Invest in Employee Training: Invest in training and developing your team to foster curiosity, innovation, and high performance.
- Learn from Mistakes: Encourage a culture where mistakes are seen as learning opportunities to drive continuous improvement.
- Focus on Long-Term Goals: Maintain a long-term vision for your business, prioritizing sustainable growth over short-term gains.
- Encourage Curiosity: Foster a culture of curiosity within your team to drive innovation and improve problem-solving.
- Data-Driven Insights: Utilize data and insights to understand customer behavior and improve decision-making.
- Member Engagement: Engage with your customers through events and personalized services to build a strong community.
View Written Interview
Hey everybody, welcome to Scaling with Samir. I am so excited to feature my next guest who not only is running Wine Empire and has one of the largest wine stores in the UK, I just found out, but it also has a very seasoned career of doing really interesting things both in retail and digital. Leading amazing teams. And so I am super pumped to feature Steve Finlan, the CEO of the Wine Society. Steve, welcome to the podcast.
Thanks for having me, Samir.
I'd love to have you kick things off a little and tell us what the wine society is.
Yeah, so interesting actually, because the wine site is something called a mutual, which I don't think you have mutuals in the US, but think of a cooperative business that is owned by the people that are part of it. So we have members who are shareholders, one member, one share. And we can only sell to them. Fortunately, there's about 240,000 of them. It was founded in 1874, so this year is our 150th year. I've been there about five years with the brief to modernize and make sure the business is fit for another 150 years if that's possible. We sell wine from £6 .95 a bottle to Six and a half thousand pounds a bottle and everything in between so we're considered Very expert our members are the people who sign up for us to pay a one-off subscription to join you join for life so there are no further payments required then you get access to all of our wines and services and because we can only sell to our members it's a business that I was saying to Samir earlier is I was slightly nervous about the word scaling because that's not our goal. Our goal is to Do this only to my committee, we have a committee of members that I report to, they're only, the only thing they want is a member hat. So members hat are my only KPI, they expect me to run a decent business, and they expect me to sell a lot of wine, but the thing Judged, and measured is customer member satisfaction. So it's quite refreshing to be able to take a long-term view of things. So we're working on a five to 10-year horizon rather than anything shorter than that.
The thing about being a mutual is that you never have a huge amount of money in the bank. The challenge is to have enough. But as soon as you go into surplus, any surpluses are reinvested back into either wine service or price and because we're heavily investing in price, we've got the lowest margins in the industry. And actually, we're selling both regular wine and fine wine at the cheapest in the market. So it's an unusual business. And as a CEO, having spent 40 years in proper commercial businesses, the commerciality here is very different. We have to differentiate ourselves and actually, a lot of the things that we do are very counterintuitive.
So, for example, 80 % of our deliveries arrive the next day and are for free. You can order a bottle of wine for free, and get it the next day. So we're a bit of a virtual wine rack as well to save people having to nip out to the supermarket grocery store to get wine. So we're a very unusual business. I'll pause there, Samir.
No, I love that. And I'm curious, you know, what you just touched upon, how do you make those decisions or how do you decide, right? Because you've got like you said, nearly 40 years in retail. Now, some of these decisions you said are counterintuitive. You know, I'm really curious, maybe, you know, are you making these decisions around consumer behavior on certain metrics you're trying to improve, like customer satisfaction?
Yeah, so it's all about having this point of difference. You know, our competition, particularly in fine wine, are superb at what they do. They're really good. You know, the other sellers, online wine sellers, are fabulous at what they do. So, therefore, actually, we've got to stand out. So our members are consumers elsewhere. They expect us to be able to do at least the same as everybody else, but actually, they know we're mutual. So for many years of our history, they've forgiven us for being a bit useless at, you know, taking a week to get wines or, you know, having contact center that operates by post not by phone, know, all of that sort of stuff. So we've had to help ourselves to get just about the best proposition in the market. And what I mean by that is the lowest prices, the fastest delivery, all the things that people expect full flexibility, you know, we do a lot of services around the side. We do a lot of, you know, this year we'll do about 200 tastings, tastings and events, everything from dinners to walk-around tastings and we offer them the lowest price that we can. Our goal is not to maximize money, but to maximize profit. Our margins are low. Our strategy is to reduce margins, not to increase them. And you know, I spent a career out of increasing margin, making the business more efficient, making the things that will make shareholders drive shareholder value. But when your shareholders are the people that are buying from you. My god, it makes it so much easier as long as you do the right things. So, therefore, things like I think we can afford to take delivery charges off, we did two years ago, had a profound effect on the business. Then we said we'll not just take delivery charges off but we won't have a threshold.
Previously if you bought 12 bottles you get delivery for free, now you can buy one, two, or three bottles in the same way and get delivery for free. Our reserves operation where we look after members' wines, we age it because we've got specialist warehousing that will enable you to do that. Again we're the cheapest in the market but we're also the most flexible in the market as well. There's no restriction in terms of what you put in, what you take out.
So it's those sorts of things that drive us, but of course actually in driving those, because we're driven by member satisfaction, then ultimately actually the scores come along with that. So we've got a net promoter score of 80. We've got on our own where we measure.
What members think about our touch points. We're in nine out of 10. Trust Pilot with four points, I think we just dropped to four point eight actually, but we were four point nine. You know, so across all of those, but that we have to, because if we don't, our members have got other choices and other places to go. We've got to continue developing and being fast. And that involves our website's got to be great. Was saying to Samir earlier, that our members, the members that we've got are either wine buffs, wine enthusiasts, or wine curious. People can't just get wine. There's something in it for them. So, therefore, actually, our journey to checkout needs to be outstanding. But equally, our site needs to be incredibly content-immersive.
A good example is for issue issues like utility and social impact. We've got a plan where three years into the plan is going incredibly well. But actually, we're carbon neutral not because we're offsetting but because we're insetting because we've got great relationships with our suppliers that go back in some cases well over 100 years. And actually, we're giving money to them rather than to an offsetting scheme somewhere else in the world.
To improve their approaches to regenerative agriculture, because course wine is a threat to climate change, and weather events for those that aren't particularly keen on climate change. You know, whenever people ask me about it, I always say, actually, just go to a vineyard and talk to the farmers. You know, they'll tell you about weather impact. So it doesn't matter whether it's going to get hot in 50 years. They're seeing it now. You know, the harvest this year in France is being decimated by mildew because it's been so wet the harvest in Germany has been devastated because of hail You know all things that they weren't having to put up with even ten years ago So we have to play to that and therefore when members come onto the site They can buy quickly but actually, our dwell time on our content pages is about an hour.
So these guys are very invested in wine. I'm showing off now, but actually, we've been online retailer of the year with the two big awards producers in the UK for the last five years and retailer of the year for the last four, buying team of the year for the last four. Because actually what it means is why are we buying Team of the Year? Because we've got the biggest team of buyers. This will surprise you if anybody is from a purely commercial background, as I don't get involved in what we buy. Put some frameworks around it so the buyers have got some guardrails, but it's not like the buyer comes in, chooses a wine, and the merchandiser then goes out and says you can't have that one, you have to have that one.
And you've got to fill slots and you've got to, the buyers have got a lot of freedom, and because of that they're in the vineyards a lot and they're making connections.
They're making connections with the vineyards and actually, you if you think it's a heaven-sent content development opportunity, you know, so you can go onto our website and really sort of explore France or explore Portugal or explore Bordeaux if that's your thing. You know, we've only just started. Mean, you know, we plan to get even better than that.
I mean, you touched on a lot of little golden nuggets there, right? Think, right? One of them that I appreciated is the free shipping. We promoted a lot on this podcast, but I can't tell you, I can't tell you the listener how important free shipping is and how impactful it can be on your business. If you feel like your price point is too low and you don't know what to do, go back and listen to the episode we had with Cosmos Q. We handled that with them very inexpensive product. And we talked about ways around that, which it sounds like you've also had to potentially overcome because you have very inexpensive lines. You talk about NPS scores. Everyone here should know what their NPS scores are. If you don't know what they are and you're not running NPS surveys, please start now. And then I think that also kind of lends itself to some of those ideal profiles, right? You touched upon knowing some of your ideal customer profiles, which helps you inform better decisions and your content strategy.
How you have the website laid out, and how you're interacting with your customers, which I think is amazing. But then you also touched upon having direct communication with, let's call it supply chain, if you will, right? Of your supplier. And I think that's important too. Sometimes maybe you're the manufacturer, I understand, but a lot of brands out there and businesses are not, or they're still getting materials or ingredients or whatever it is and you wanna know those things. And I think you're in an amazing position where your business is looking at a very long-term view, which allows you to think that way. Can be a long-term thing and can sit and become better with age and everything else. But it's still an interesting thing that I think a lot of people sometimes ignore or don't pay enough attention to.
You know, so I appreciate that you touched upon that. I'm, I am curious though on like, we see a lot of brands now having a lot of success with building communities, right? And curating communities, creating content around education, creating content to, to, you know, educate the customer and things like that. Right and you have to become a member to join. And I'm curious sort of how do you feel like that's impacted things or maybe more specifically, should other businesses think about kind of running a business model like that, especially as you're sort of coming from the retail world and kind of entering into this, a lot of digital, right?
As far as the business goes, but also like, you have to become a member to get in. And I'm so curious kind of how you think of that almost like a gated, you know, become a club member. And we, you know, I think there's a lot of businesses that have a lot of success from that. I'm just curious. Yeah. How has that impacted things in your eyes?
I think there are two sides to this. The first one is that as a members organization, even though it's only 40 pounds, 50 dollars to join and that's it for life and then you're in, actually that's quite a significant barrier. The other element that makes life difficult is the fact that we don't discount at all.
So we'll get rid of bid ends, you know, 10% off and we'll clear them at 10% off. But having said that, we have what we call an everyday fair price. So we have none of the psychological advantages of discounting even if it's, you know, fake discounting, which most of it is. So, you know, that makes it difficult for us to grow. But having said
We don't need to grow very much. We've got 180,000 active members, people who have bought in the last year, and my target in five years is 192. That brings on another challenge though, is actually if we're to have a net 12k increase, they've got to be the right people. So curation is incredibly important. We built our insight function unbelievably over the last five years to get to the stage where we understand our members, we know what they're doing, we know what's in their basket, know what, you know, almost to the point at which we know what their next best action is. And actually, you need a tech suite which can do that, that's not complex but one that is very agile and very flexible. For us, even though we've got channels outside the website, the website delivers 87% of our business, but we've got everything from monitoring at one end to making sure that we get alerts when something's happened that we don't like the look of. But having said that, we've also got a suite of tools that run through every journey on the website.
Quite common stuff to a degree, but having said that, actually we've simplified it so that ultimately we're not overloaded with so much data. And again, it's a curated journey to make sure that you're generating the right data. And the right data for us is not the right data for somebody like Clark, where I was before here, that you'll know from the US.
You know, that's important, but then you need the data science that sits alongside that to be able to make sense of it and then convert that into practical solutions. So we've, you know, mean, we've, we've caught up big time along the way. But having said that, we, you know, the mistakes that we've made have been mistakes around plug and play.
Quite a big business to have that level of agility around plug and play. Should have said we're about 150 million pounds this year, we'll be about what's that, 175 million dollars. So that's a sort of element of the scale of it. So we're a big small business or we're a small big business depending on which way you look at it and actually, that can be difficult from a tech perspective sometimes. So actually choosing the right elements I was saying to Samir earlier so you know our new member journey is an obvious one but it's important you know if we get a member to a third purchase they're going to stay for 10 years on average and five years ago it took 450 days to get three purchases now it's taking 117 and the average member will make eight purchases during the year which is insane for a wine retailer.
However, because we're so flexible and because actually what we've done is to encourage smaller orders, that doesn't necessarily equate to growth. So if I sort of take this year as an example, our bottles per order are down, it's about nine bottles per order. Our average order value is down, but our frequency is up. So in this ecosystem of 180,000 active members, actually if we're getting, so year to date we're five months in, six months into our financial year, we've had 50,000 more member transactions. So actually for me, that's an indication of member satisfaction.
We're probably at the same place as we would be if we were selling at a higher margin and having less interaction and frequency. But actually, the joy for our business is that if we can get that sense of community if we can get that frequency of purchase, get that participation, we can get that dwell time on the website. Nobody else can do that because that's not how they're wired.
Yeah, I mean, that's that's, first of all, very impressive metrics. And, I know you said you were a little nervous about kind of the scaling aspect of the name of the podcast because your guys' goals are not to scale. But those are key metrics and really important things that every brand should be looking at. Right? If they're looking to scale, because paying attention to those and knowing what those right. We talked actually on the previous episode, we were talking a lot about lead-in products, right? Like what is the product that someone needs to buy to then become that awesome lifetime customer, right? That is to increase that customer's lifetime value. Right. And I'm sure you have some of those metrics, right? Of course, like, Hey, if someone comes in for a $5 bottle versus a $500 bottle, those are two completely different types of customers. And so paying attention to those metrics and understanding.
What does this person turn into? And like you said, hey if we can get them to purchase three times, they're a customer for 10 years. Like, great, all our marketing efforts should go towards that and push and promote that. And then great, once they're in, they're in and we know it. And now it's just the satisfaction score and all those kinds of things, which I love. And I'm curious, before we hit record, we were kind of talking about some leadership things and style of CEO style and whatnot. I'm curious, what leadership practices have you found to be the most effective in building such high-performance teams?
I think many and varied and different over the years, to be honest. You know, I'm sort of this will be my last, this will be my last role other than sort of non-exec and maybe a bit of consultancy. But having said that, it took me. Quite deliberately many years before I got into a CEO role and, you know, therefore I was in senior positions right across the spectrum of retail business. So HR ran for HR in Europe for Gap and I was an MD at Thomas Cook, a travel company in the UK, was a travel company. And then with probably Britain's most famous retailer Marks & Spencer where I ran internationally.
I ran the retail and then actually that's where I started my career, donkey's years ago. But the thing that, you know, I mean, it's cheesy, but having said that, actually the thing that is most important of course is people, you know, and the role that I am now, it's about picking the right team, picking the right blend of skills and not just the right blend of skills, but also a difference.
I think sometimes, and I've worked for many CEOs who are threatened by people who might be better than them, threatened by people who's got a skill set that they haven't. And I think you've just got to be incredibly open-minded to make sure that you've got the right people slotted into the right roles. And you've got to be honest with yourself in terms of what you’re good at and what you’re not good at, but perhaps most importantly, you know, in that sort of old dog's new tricks style, the things that you really can't be bothered to improve once you get to a certain age. So therefore hire it and make sure that you appreciate it develop it and bring it on. So I was talking to Samir earlier, and he asked me about my day. And, you know, I try and make sure that 80 % of my day is free because of that level of accessibility and visibility, you know, we're a relatively small business. I mean, we've got warehousing, so we're about a kilometer end to end.
But having said that, I'll walk the site twice a day and talk to people, listen to people, and find out what's going on. They give me the best ideas. I rarely come up with the best ideas. And then you identify and diagnose issues. But having said that, that time in your office when you're not doing anything, again, I've worked for CEOs who are just too busy getting involved and actually, sometimes you've just got to let things play out. You know, we've got so much information about everything. You know, we launched our range of sake last week, which is the first for us part of that sort of range expansion to Japanese wine, Japanese rice wine for those that don't know. But I've got people running up saying, we sold the first bottle, we first sold the next 10 bottles, we've sold. And actually, I'm not bothered, probably for another three months, you know, let it run to see whether it's a success or not because we're not going to make any decisions off the back of knowing that any sooner. And so I think there's that sort of element of sort of calming things down and helping people think about, you know, the big thing for me is I want teams with curiosity.
Of course in any business you've got people that come in, they just want to do a great job and they want to go home. But having said that, curiosity is a great thing because then you've got cross-fertilization, you've got collaboration, you've got all of those things going on. And you know, for me, I'll know I've succeeded where that's just happening organically every day, irrespective of what I do. You know, I'll retire a happy man then when you've just got this, I don't know, a pulse.
A vibrant business with a pulse that's constantly curious about what else we could do, and how else we could satisfy members, but equally an organization that is just seamlessly working together. You know, and you probably know better than me in terms of the kinds of environments that achieve that, and you've got to match the environment to the people that you're leading. But having said that, you know, doesn't help getting people out of offices, doesn't hurt know common areas it doesn't hurt to have a bit of fun while we're doing it. Look we're selling wine so actually, wine is ever present in our business. You know we have a tasting room the buyers are tasting upwards of 100 wines a day. It was tucked away right in the corner of the building we put it by reception so that anybody coming in from the outside or anybody inside now looks through a massive glass window to see what our core activity is. Tasting wine.
I do think sometimes that we're too quick to interfere. I do think that we don't see our primary role as being a coaching role. You know, everybody's got different styles, but that's the style that's worked for me. I'm not bothered in the slightest if people make mistakes, big or small, as long as we learn from them and move on. You know we're making mistakes every day. But, increasingly, we're doing some great things.
You know, if I sort of take our Insight function, you know, our Insight function does a lot of research, talks to members, actually in the early days they were getting a lot of things wrong, but actually because of their curiosity, because of where they're going, the quality of information, but more importantly the quality of the questions that they're asking to get the information back are unbelievable now.
And they've left me way behind. I can provide a bit of grey hair to say I think that means this but I have not a clue how they do what they do. I think that's not a bad thing either. I would always say to everybody in the league.
You're supporting them in making those decisions.
Yeah, but I think the other element is that you know, we give just a few of the silly things that we do, but I think they're quite profound in some ways. We give people reading time and we physically take them out of their work environment and put them somewhere where they can explore what they do, they can explore wine, they can explore, you know, we pay for all of our employees to go through some quite advanced starts, basically becomes more advanced wine training.
You know, we want them to love the product. The purpose of our business is to champion the joy of good wine. You can't champion the joy of good wine unless you know a bit about it or are curious about it. It's not a, not everybody has to do it. I'll take a blank week. We'll cancel trading for a week. And it's once.
Two weeks and just let things run so that we can evaluate them properly rather than evaluate them in real time. Drove my head of digital nuts but got a lot out of it in terms of redesigning some of the journeys that were working the way that we wanted them to. So I think having time to think about stuff, having time to start stuff, having time for things to play through, people It must be so hard if a CEO hasn't got an interest in people and I've worked for them, there are people around and it's really hard, you know, can't be an island because not one person isn't that good.
Yeah, no. I love the curiosity aspect. I'm going to think a lot about that. I think after this around, how do you measure that? Because it's a tricky one, right? think there's a little bit of gut aspect, right? There's culture. Was having a conversation with another entrepreneur, a friend of mine, who found out that one of their key directors was bottlenecking.
All those types of curiosity decisions. And it was toxic for the business because he would just put up these roadblocks for no reason. And when they got rid of him, there was this big sigh of relief in the whole business and the whole company culture even, right? And so I think that's a difficult thing to measure, but you feel it right away. To your point, it's allowing the team to have that curiosity. Well, let's test it. Who knows what's gonna like we're a big team of testers. It's in the ethos of what we do. But I think that should be true for every business. And yeah, I appreciate you bringing that up.
It's a good example.
There's something that we've done that illustrates a number of these things. One of our team, quite junior, had been on her own time researching wine samples. So, you know, little 15 milliliter aspects of wine and they're incredibly expensive. Operationally, they're incredibly difficult but she said, if I can get samples into boxes when people buy wine or something else they might like, I think this could be an incredible idea. I thought to myself, I think that is an incredible idea, but I can't see the route to being able to get samples at scale.
So just said to her, right that's your day job now for the next six months, come back in six months, talk to people. If you need any help or resource or you need a bit of budget to do stuff, come back and she's come back and we're now starting to do it. Don't know what the results are but you know that you can't bottle that, you just can't bottle that because people have better ideas than we do.
Yeah,no, I love that. And I also love what you're thinking. I think I encourage everybody to think about how they can instill also the business and educate their team members on the product and industry, sort of what you're doing with all your team members. I think that's amazing because I think it's true and you also can find out who's passionate or not. All right, one time I had a sales rep and he was a wine. Beforehand and then, you know, he was not that passionate about marketing. He wasn't doing the research. He wasn't doing the homework. He wasn't surrounding himself. And one time we went out for dinner and he's explaining to me these wines and I saw him light up and I'm like, dude, you should go back to being a wine salesman. I don't think this is, I don't think we're your thing, right? Because he was so passionate about it. And so, yeah, I think you can, you could kind of tell who's, gonna go the extra mile and learn those things because no matter what, it's gonna help whatever their role is, it's gonna benefit them, it's gonna benefit the business, it's gonna benefit everybody. So, Steve, I appreciate the time. I appreciate all of the advice. Yeah, any last tidbits or anything before we go here?
The only thing I would say to anybody doing whatever they're doing is for goodness sake make sure you enjoy it. Enjoyment is everything and that's why I've hung around retail for so long, that's why I've done so many different broad aspects, and that's why I was 58 when I became CEO for the first time because I just enjoyed what I did and sometimes that's more important than ambition. So anyway, it's been a real pleasure. Thank you for inviting me on from over here.
Thank you so much, Steve. Appreciate
