A big transformation has recently occurred on LiveTrade and we will be posting a series of blogs to describe in detail how the enhanced platform can be an invaluable resource for all our clients, both private and trade. This first instalment looks back at the evolution of LiveTrade leading up to the recent changes which we believe will have far-reaching consequences.
In its earliest incarnation LiveTrade was simply a platform on which BI published a buying price and a selling price for each wine. This might not seem so revolutionary but the provision of a firm and competitive cash buying price was in fact unique in the wine market. Up to that point, if you wanted to sell a case of wine, you generally had to ask a merchant to list it on your behalf and wait for it to be sold. This could take a long time, especially if the merchant had their own stocks of that wine to work through first. When it did eventually sell, a whopping commission of around 10% would be deducted from the proceeds. The alternatives to this slow and inefficient process were taking your chances at auction (with an even bigger cut to the middleman) or accepting a paltry cash bid, if such a thing could even be extracted from your merchant.
LiveTrade changed this in two ways. First, the bids were competitive. At BI we have always had faith in our ability to trade the market and to pitch outright buying prices at levels which would give sleepless nights to a risk-averse, cash-strapped traditional merchant. Secondly, they were published and continually updated on a screen so the laborious process of calling up or emailing was eradicated for clients, and a degree of transparency and automation finally came to the wine market.
In this first phase, we would typically be happy to bid for top tier wines (first growths etc) around 7% under the price at which we were listing them for sale. If we bought stock at this bid level, we would endeavour to sell it, aiming to lock in a margin of around 5.5% to 6% after a bit of negotiation. Sometimes we would tie up deals where we bought and sold simultaneously, and we would generally be happy to do this at even lower margins since we were not taking any market risk. It was only a matter of time until we started thinking about how we could automate these “matched trades” through the LT platform as well.
As a first step towards this goal, we added an exchange layer on top of the existing market-making platform. Certain clients were able to enter their own interests and if a deal was struck between two external parties our margin was accounted for by a charge made to both the buyer and the seller. Access to this exchange functionality was made available to a limited group of trade clients. Only members of the group could see prices entered by other members of the group, so it was in effect a sealed system which existed separately from the main LiveTrade platform.
We quickly concluded that this B2B exchange was of little benefit to our clients. The trade clients in the group mostly knew each other anyway and hardly needed to go through BI to find each other. This clearly gave them little incentive to post prices. What limited activity there was could only be seen by a small audience and was invisible to most of our clients. It facilitated some deals between a few trade counterparties struck through BI at low margins, but our ambitions were much, much bigger than this.
And so we embarked some months ago on a major overhaul of the entire platform which included many new enhancements but which had at its centre one overriding objective: to create a single unified system which was available on exactly the same terms to every single client and which was a genuine conduit for trade, eradicating frictional costs and bringing significantly better prices to all buyers and sellers.
In pursuing this goal, we did not want to lose the alluring simplicity of that first LiveTrade screen. The design of what has come to be known in-house as LT3G combines the immediacy of a pure market-making screen with the extra functionality which will be so valuable to those who wish to engage more fully. We look forward to posting a series of case studies to illuminate the opportunities which this creates for various types of client, but the following brief description will hopefully suggest how every client can benefit.
The LiveTrade screens, as always, display a firm all-in buying price and selling price for every wine listed. To buy or sell at the quoted price, the process from these screens is simple and quick utilising the familiar approach of building a basket (for both purchases and/or sales) and then confirming the whole order in one check-out process. The quoted prices may, as before, be a direct quote from BI but a crucial change is that these prices may now be derived, in a pre-defined and automated way, from interests entered by any client. We say “derived” because although a client interest may underly the quote, BI guarantees it: when you deal on LiveTrade, you are always dealing with BI and enjoy all of the protections and peace of mind of our standard terms and conditions.
There are of course a host of reasons why you may want to enter your own interest: you may wish to aim for a slightly better price than the current LiveTrade quote; you may have larger size to transact than currently quoted; there may be a delivery timeframe to stipulate etc. So how do you enter an interest? That brings us to the star of the show which is the new LiveTrade Dashboard.
The Dashboard is accessible by every client and includes a host of useful peripheral features, so it is definitely worth exploring. If you wish to buy or sell some cases at a certain price, you enter your target price and quantity into the Order Entry Form and upload it. Your interest, after adjustment for our margin, is then added to the Order Book which is visible to every Dashboard user. The gamechanger is this: if you are the best bid or offer, then your interest also feeds through to underly the headline quote on the LiveTrade screens and (in the case of an offer) the regional listings on our website. Your interest is being disseminated far and wide and you are accessing our entire global client base. In fact, it is even reaching beyond our own client base through sites such as Wine-searcher!
Through the Dashboard, any client, private or trade, who wishes to buy or sell wine has a direct conduit to our entire client base at a margin (or commission if you like) which is a fraction of the current market norm. This is a bold step which will undoubtedly leave some competitors scratching their heads but is based on a very clear vision of how fine wine trading is set to evolve. One thing is clear – the big winners immediately are our clients and of course ultimately, we hope it will be a big success for BI.
If you are tempted to compare this to existing exchanges, then you should remember two things. First, LiveTrade has a dedicated market-maker in the form of BI who will always be happy to make a firm quote and so there will never be any gaps on the screen. And secondly, we have active, enthusiastic clients - literally thousands of them ranging from big wholesalers to private collectors. There have been many online wine exchanges launched in recent years, but they are tech start-ups with no history in the wine market, no clients, no reputation or track record, no capital to speak of. In contrast, LiveTrade is a technological enhancement to an established business which has all of those things in abundance.
Of course, the best way to appreciate what LiveTrade and the Dashboard can do for you is to give it a go so please try it out and do feel free to share any feedback you may have.