Our Head of Decision Intelligence, Tom Burchfield, discusses how data-driven decision-making can help businesses make better decisions and build a more transparent, efficient fine wine…
The future of the fine wine trade will be shaped not just by relationships and expertise, but by the ability to turn information into insight. Tom Burchfield discusses why a more data-led industry can help businesses make better decisions and create a more transparent, efficient market for all participants.
You were the Head of Market Intelligence, and your role has shifted to Head of Decision Intelligence – what exactly does that mean?
What it doesn’t mean is a shift away from the market, but instead an increased focus on bringing relevant Market Intelligence and, more broadly, data to each of our different customers and users. What is relevant and therefore helpful to one customer might not be so useful to another. We want to help all of our customers make more profitable decisions more efficiently. This move sets us up to be able to do just that (if I do it right!).
How has the role of data in the fine wine trade changed over the last 25 years?
The availability of data has exploded. Via the internet, data feeds and APIs there is now an almost overwhelming amount of data. Whereas 25 years ago the challenge was a lack of data – or the available data was very narrow and was not dynamic – now the challenges are knowing which data to trust and how to make sense of it all. The good news is that as we move further into the AI era, our ability to take that wealth of data, make it understandable, relevant and usable is increasing by the day.
Why do you think fine wine has been slower to adopt data-led decision making than some other markets?
The fine wine market moves at a much slower pace than other markets, having its own natural annual harvest and release rhythm, and is driven by both collectors and investment companies. We still see some buying decisions that the data doesn’t justify – some collectors will buy a wine because they love it, not because it makes complete rational sense. Adoption of data has thus naturally been slower.
But at a business level, we are definitely there now, with third party price, stock availability, critics ratings data amongst others being put at the heart of most fine wine companies’ strategic and tactical decision making.
What is the risk for businesses in fine wine that don’t shift towards a data driven model?
The risks are huge and reach across a business’ operations. A practical example is how different your decisions would have been in late 2022 to mid 2023 if you hadn’t been able to see the turn of the market. Demand had started to falter earlier in 2022, prices were starting to soften. It was a time to reduce risk by cutting buying (eg. Bordeaux EP 2022), liquidating any positions where you could maximise margin, thinking twice about any big investments. It’s just one example where not having access to market data would mean making some very different and potentially damaging decisions.
With the market now showing signs of recovery the same could be true but in reverse, and we are seeing certain merchants looking to buy the dip.
In short by not putting trustworthy data at the heart of your decision making you open yourself to all kinds of risk, including missing out on opportunities, and that’s not just at a fundamental strategic level.
At a more tactical level, not using reliable and dynamic data means you risk selling too low, buying too high, selling the wrong stock, selling the right stock at the wrong time, not giving your customers reliable advice. Each bad decision has a cost, and those costs add up pretty quickly over the course of a year. Conversely each good decision means more profit.
Where do you see the Liv-ex data offering going, what do you hope to bring wine merchants that they can’t access elsewhere?
Trade will always be fundamental to Liv-ex as it is trade that generates data. However, we know that the trade a member does on Liv-ex might account for only 5% of their turnover. Because we sit on the deepest set of transactional fine wine data (which continues to expand), we are best-placed to turn that data into a decision-making system that supports our customers across the other 95% of their business.
In short, we want to have all the data that a fine wine merchant needs presented in a personalised way that fits seamlessly into their day-to-day jobs. For example, we’re currently working with customers to build AI-driven tools to make key parts of their job easier to carry out – watch this space for more news in Q3.
In terms of data collection and generation, this means increasing the breadth and regularity of our mid-prices, expanding the number of publicly available lists we collect, building out supply and demand trends. But then making it easy for our customers to understand and act upon the data that is relevant to them.
Want to see how Liv-ex helps businesses spot market shifts and make more informed decisions? Learn how the Liv-ex Bid:Offer Ratio has historically signalled changes in market direction months in advance in our blog.