The success of GroupOn has sprouted more than 20 group buying sites in Australia, all hoping to have the same kind of impact.
Liquid Deals is one of these, but operates in a niche within a niche, offering nothing but quality wine discounted by up to 50%.
Geoff Drucker, one of the five co-founders of Liquid Deals, spoke to StartupSmart about the journey of the business.
What inspired the idea for Liquid Deals?
I’ve been working with a colleague by the name of Pete Burley for quite some time. He’s got skills in database building and database management. My skills are in marketing.
In developing [another site], Pete and I watched the very rapid growth of group buying. We’d also been quite conscious of how popular purchasing wine was on the internet, with auction sites and a variety of other online sites where people can buy wine.
We thought, there’s got to be an opportunity to do something in group buying but to do it in a niche way. Then we thought, why not create a group buying site for wine and wine only?
What was the process from there?
To be able to sell alcohol, you’ve got to be able to have an alcohol license, which we didn’t have. But for many years, I’ve been friends with a guy by the name of Peter Marr and he has a business called Winestyle, which is about servicing private clients with their wine needs.
Peter Marr’s Winestyle has got a very big warehouse – we can manage trucks, we can manage the distribution through Australia Post.
I asked Peter if he would be interested in partnering with us – he has the license and we’ve got the idea – and he said yes.
He then had colleagues who are web developers so it sort of put together a nice package of skills in terms of marketing, database building and management, buying and acquiring wine, and people to build the website.
We had a very structured arrangement in terms of who was to do what, and everybody was to operate on a sweat-for-equity basis. This was about October last year.
We didn’t initially have to put any money into it although we have done that now. We all just worked and worked to do what we had to.
We had the site built, finished, done and dusted and our first offer out on December 17. We all worked like crazy to get the whole thing built and to secure the first deal of wine.
What sets Liquid Deals apart from its competitors?
It’s got to be quality wine so we put it through a tasting panel. We either get them together or we send the wine out to them. It’s a lot better for us to send the wine to them individually so that their comments aren’t influenced by other people.
So the wine is sent to them, they make an assessment of it, they send back a couple of paragraphs about what they think of it and give it a rating, we collate that and it becomes the text that goes with the website copy for the wine that’s on offer.
The other thing that we’re doing now is we’re actually going to sell our wine in half dozen lots rather than making people commit to a dozen bottles.
Was the tasting panel planned from the beginning?
It really was. What we didn’t want to do was to compete with the auction sites that are out there because it’s a bit hit-and-miss.
To be able to justify the fact that we are saying that we’re offering quality wine, it’s not good enough for us to assess it. It’s better for us to have independent people assessing the wine to say yes, this wine is something that I’d be happy to put my name behind.
How was that panel selected and how many people are currently on it?
The tasting panel at the moment has got six on it. We want to try and build that up to 12 so that we’ve got different people regularly.
Some of the people are people who Peter Marr has worked with for years who have either had media wine tasting roles or wine writing roles, or people in the hospitality industry who are highly regarded.
How did you pitch the idea to the panel, and to winemakers and distributors?
We said to them, here’s an opportunity that hasn’t been done anywhere in the world – to have a niche group buying site.
We also pitched it on the basis that Liquid Deals doesn’t have to buy any wine. The wine is only purchased from the winemaker or the distributor once we’ve sold our specified volume of wine.
So from the winemaker’s perspective, they think, if I can unload a pallet of this stock, I get instant money.
What’s the experience like for customers?
We have a minimum quantity of wine to go live. The moment that goes live, whoever has registered for it, their order will be processed.
So you place your order, it’s processed immediately. We notify the winemaker or the distributor that the deal’s on, they ship the wine to us and then it goes straight to you via Australia Post.
Once it leaves our warehouse, you can then track where it’s up to. It gets delivered to your home or if you’re not home, to the nearest post office.
The group buying concept has experienced phenomenal growth. How do you think niche group buying sites will fare in the future?
The reason we entered the niche area with wine is purely because so much wine is already transacted online, so people don’t have a problem buying wine online.
The good thing with wine is that we can get the wine in and we can send it anywhere in Australia whereas if you’ve got a beauty salon in Bentley or Essendon, it’s going to be hard to aggregate deals that will appeal to people.
I think the group-buying concept itself has got oodles of growth still there. The more people who are aware of it, the more it’s going to grow.
Where do you see Liquid Deals heading?
I see us being able to get more deals coming to us rather than us chasing deals. The last couple of weeks, we’ve found more calls coming to us from winemakers saying, ‘I need to unload some wine’ so I think we’ll get more coming to us [in the future], which means we’ll probably be able to get better deals for our customers because it’ll become more competitive.
We’ll also go from two or three deals a week to a deal a day, and I’d say that will probably happen in about two to three months’ time.
Maybe there might be an opportunity for us to extend the business to offshore deliveries because there are a lot of expats who want to buy Australian wine and find it difficult because it’s so expensive overseas, particularly in Asia.
Any tips for other start-ups, particularly within the group buying domain?
When you’re buying property – you always go for location, location, location. With start-ups, it’s people, people, people.
The most important element is the people you’re working with. If you can trust them, they can trust you and you can work together, you’re a long way forward. It doesn’t matter how good an idea you’ve got, if you’ve got the wrong people it will never, ever survive.