Media reports

Vats Liquor Store is committed to “crack down fake wines”, squeezing the existence space of fake w

  Determining to arouse the revolution of marketing channels of wines, chairman of the board of Vats Liquor Store has two urgent problems to deal with right now: prices of high-end white spirit rise rapidly, so how can consumers find the main channels to buy real wines; the second problem is that opening chain stores need more and more capital, so how can he gather enough capital to meet related demands.  

  Till now, Vats Liquor Store has got 250,000,000 RMB Yuan from New Horizon. “Receiving this investment, we will accelerate the speed in opening shops to reduce the existence space of fake wines.” Wu told the journalist from China Business, Vats Liquor Store has about 300 shops now, but it will have about 1000 shops in about 3 years. Listing in China will also be considered.

  Vats Liquor Store Cracks Down Fake Wines

  Wu said, six or seven years ago, a friend who had collected many wines was planning to move, and asked him to verify his wines. Wu found his friend had collected several hundred of wines, but 70% of them were fake wines. Realizing that the market of fake wines was very “big”, Wu thought that he could succeed in establishing a chain store to sell real and high-quality wines.  

  In September of 2005, Wu Xiangdong opened the first shop in his hometown, Liling, Hunan Province. It was the first shop of Vats Liquor Store. Genuine goods at a fair prices, western decoration style, professional shopping guide and star-level service, make recommendation for VIP customers, and differential brand positioning, make its annual sales exceed several million RMB Yuan. The concept of chain stores was not new, but Wu thought that he could sell wines through chain stores. “Nowadays, people would like to shop home appliances at Gome or Suning, but they have no idea where to buy wines, because they are always afraid the wines they buy are fake wines.” Wu thinks that there is a great business opportunity in such consumption habits.   

  Just several days before Vats Liquor Store got the investment from New Horizon, Wu went on a business trip to Shanxi. He had his thumb burnt carelessly. When the doctor bound up the wound for him, he was told to “buy wines at the local soldiers service center”, because “the wines there are usually real”. The doctor’s words strengthened Wu’s confidence in accelerating opening shops through the “real wines mode”.

  Attempt on quasi regular store mode

  After determining to establish the first chain store of wines in China, Wu had to think about how to duplicate the successful experience of the first shop to other shops efficiently. As the first one in this industry, Wu has to verify his idea through practice.

  There are two modes of development for chain operation in China: one is regular chain, and the other franchising. The advantage of regular chain is that the company can control the end shops completely, form a unified brand image and management mechanism, and benefit from shops when shops are operates well, but its disadvantage is that the company develops slowly because of the limited resources and capital. Advantage of franchised store mode is that the company can make the most of social resources and assets to expand quickly, but it will influence the brand image if franchisees are not under good control.

   After the analysis of two modes, Vats Liquor Store did not follow any mode. In response to the features of high-end wines, it creates a new mode, “standard regular store mode”, which is a new mode between regular store mode and franchised store mode.

   Wu Xiangdong said, the so-called “standard regular store mode” means that each shop under Vats Liquor Store should be opened and operated by a businessman who has local social resources as well as business awareness. After being investigated and confirmed as qualified to meet related requirements, “cooperation partner” will investigate together with Vats Liquor Store management groups to rend suitable shop, and then Vats Liquor Store will invest money to decorate the specific shop, and help the cooperation partner to manage the shop, train its personnel, and assist in sale.

  Under such mode, Vats Liquor Store assumes the obligations of cooperation partners, but does not share their benefits, so that the benefits of the cooperation partners are guaranteed.” The famous wines marketing specialist said (refer to the blogs of marketing specialists).

  Actually it is the brilliance of Wu Xiangdong. All wines sold at Vats Liquor Store are supplied directly by wineries or Vats Liquor Store, do Vats Liquor Store already can make profits when such products enter end shops.

  Channels flattening

   The costs of fake wines are relative low, so fake wines can penetrate some selling channels easily. As for famous wines, the proportion of fake wines is surprisingly high. According to relevant data, the proportion of some high-end wines, for example famous white spirit is over 50%. Therefore consumers can easily buy fake wines at some regional or private shops.

  As for Vats Liquor Store General Manager Tan Zhiqiang, the success of wine chain stores depends on many key factors, but the most basic and difficult one is to impede fake wines. However, how can a competitive wine chain brand be established?  

  “The selling channels of wines are rather open, after various dealers, wines that enter the selling channels can easily be adulterated. When a consumer buys fake wines, it will destroy the fame and reputation of the whole chain store.” Wu Xiangdong said, Vats Liquor Store has already solved the problem, “our products are supplied directly by wineries, and our selling network has just two levels. Company can also supply directly products to all shops, so we can prevent fake wines entering the selling system of Vats Liquor Store.”  

   In the existing operating mode of Vats Liquor Store, Vats Liquor Store purchases wines from wineries, but all shops get wines from Vats Liquor Store. Traditional selling channels of wines fall into 5 to 8 levels, but ours just fall into two levels, so we can guarantee the real “wine quality” to a great extent. 

  According to the plan of Wu Xiangdong, each shop should have a detailed profile in the computer, so that details of the implementation of standards of each standard can be got easily.

  “In the future, the identification of each bottle of wine will be verified through a bar code. In case of fake wines, the computer terminals of Vats Liquor Store will alarm automatically.” Wu Xiangdong said.

  However, there is essential difference between Home Appliances Chains and Wines Chains. In the Home Appliances industry, it is permitted to purchase merchandise prior to payment, but you have to pay first when you buy wines. As the number of shops and wines in stock increase, more and more capital will be occupied in Vats Liquor Store. 

   Wu Xiangdong Planned that “there will be more than 1000 shops under Vats Liquor Store in 5 years, and famous wines from China as well as the whole world will be incorporated into our selling system.” After getting the investment of 250,000,000 RMB Yuan, Wu started to accelerate the expansion of Vats Liquor Store. At present, there are about 300 shops under Vats Liquor Store in China.

  “Vats Liquor Store will enrich its product line and enhance its competition and struggle for market against fake wines”, Wu said. Vats Liquor Store will take on the development of high-end gifts and health care products based on the powerful selling network

  Investment Story

  Zhang Jie, managing director of capital of New Horizon said, New Prospect Growth Fund under New Horizon Capital RMB Funds invested in Shanxi Xifeng Liquor, a famous liquor enterprise in China half a year ago. Now New Horizon Capital invested again in wine industry and its downstream chain store, and it was the first time for New Horizon to invest in a company which specializes in wines selling channels. Vats Liquor Store takes the lead in national wines sales chain market. New Horizon thinks highly of the unique business mode “real wines guarantee” mode and the potential growth of Vats Liquor Store.    

  Opinions of others

   Tie Li, a visiting professor of Southeast University and wines specialist, thinks that Chinese wine industry faces the challenge of fake wines, so wineries and chain operation institutions should work together to resolve the challenge. The investment will push forward the development of wine chain ends, and bring in driving force for the development of wine industry.


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