How To Kill Your Local Wine Shop
For What It’s Worth
There is a loose connection between this post and its companion piece on focus and specialization. Catchy title aside, my goal here is quite the opposite: I’m trying to figure out what a local wine shop needs to do to survive. I love local wine shops.
The Presumed Competition
There are two rather obvious competitors for a local wine shop (hereafter LOCALSHOP). The first is the big box store, hereafter BIGBOX. BIGBOX sells in volume. Their orders with the local distributor are “give me one of everything you’ve got, and whatever we sell we’ll buy more.” Some of the smaller and more exclusive distributors don’t work with them, and few notice, because those smaller distributors inevitably disappear or specialize and find a sustaining niche. They likely break the law and do things their best distributors don’t like. Their game is volume and variety. Address all the needs poorly and there will still be plenty of market share available.
There are a few things BIGBOX cannot provide. The first is access to exclusive things. Oh, they’ll have some off-vintage first growth in the chiller, but the consumer’s not going to get hooked into anything special. It’s just too much overhead and effort. The second is specialization and personalization. And then there’s this fact: More likely than not, most people working at the store don’t know a thing about anything. Walk into that Total Wine down the street, and see what Jeff tells you after consulting his earpiece. Siri’s a better guide, and she doesn’t even work there. Bigbox is for people who know what they want or don’t care what they get. They’re great for people that don’t care about the experience, want to save a buck, or really just want a case of “red wine, not too dry.”
The next contender is the big Internet wine shop, hereafter NETSHOP. They’re like a big box store, except they’re on the Internet. They have an even wider selection, a flashy website, even more competitive pricing pressure, and all sorts of goofy discount and free shipping details. Not good for instant gratification, but more or less equivalent for everything else. These
… And Flash Sales
This discounts FLASHSALE, our newfangled competitors that generally only exist on the Internet. They sell second labels, odd lots, or things that won’t otherwise sell at a steep discount. Preferably, they sell it in volume. The point is, it’s a deal, and the buyer actually gets what they pay for, if not perhaps what they wanted.
Or, they specialize in exclusive and exotic tariffs at varying price points. They use showmanship and bravado but generally don’t screw up and move a lot of bottles.
Whether we’re talking about Wines Till Sold Out or Garagiste, these folks serve a different niche. They provide some things BIGBOX and NETSHOP cannot, such as exclusivity, rare lots, and incredible value for the money. Now, the exclusivity may come because they’re selling something nobody wants. Or the rarity may come with first having to wait for a shipping container, and then the next scheduled twice-annual shipment. And in both cases, the consumer is taking somebody’s word on it, untasted and untested. If it’s a familiar bottle, this might go pretty well. Once the consumer gets around to drinking it though, they won’t be able to get anymore, so that sucks too.
The point is, there’s a niche served by FLASHSALE. It’s unlikely LOCALSHOP can provide incredible bargains, for numerous reasons. Perhaps more importantly, FLASHSALE provides a steady stream of ads, emails, or other notifications, reminding people to buy more.
FLASHSALE may specialize to a point, but their specialty is “lots that will sell quickly to a giant mailing list.” It’s not particularly personalized or attentive to the consumer’s needs. It’s not really competition for LOCALSHOP as much as a complement to it. Everybody loves a deal, but few do all of their shopping during clearance sales. Also, it’s tricky to get a big drinkable Rhone for that steak tonight if the last 20 cases procured were fascinating and goofy chardonnays from the Jura region.
My Former Premise
This brings me to my other post. My previous notion was that LOCALSHOP’s survival required specialization to compete with BIGBOX and NETSHOP. I still believe this.
But, I made a stupid and unfortunate assumption.
There is nothing that prevents NETSHOP from specializing. Let’s call that SPECIALNET. Chambers Street Wines is an amazing wine shop. They have an incredible selection of extraordinary wines that appeal to the enthusiast. If one buys old Rieslings from them, they’ll get singled out for special lots of old Rieslings. If one is interested in private cellar sales, one will hear about them. So, SPECIALNET can, in fact, focus and specialize. Given their potentially larger access to customers and distribution, they can specialize more aggressively in both. They don’t need to compromise their selection to please the local customers. They don’t need to compromise their procurement to maintain connections with the biggest distributors.
SPECIALNET may not be quite in the business or really getting to know the individual consumer, but nothing prevents this. A SPECIALNET that does their work, keeps track of what the consumer thinks, strikes up a conversation every now and then, and follows through in future communications … well, they’ve got a killer platform. With the advent of modern CRM, SPECIALNET can in fact be sufficiently more capable and advanced than any LOCALSHOP.
I think the average LOCALSHOP dramatically underestimates how easy it is for SPECIALNET to deliver 80% of the individualized experience that comes from visiting a local shop in person.
What SPECIALNET lacks in direct in-person interaction can be augmented with technology. SPECIALNET will never forget that, despite generally dismissing Gamay, there was a beautiful Fleurie that the customer liked three years ago. They can probably even figure out that it’s because the Fleurie had great acidity and balance, two things that are of chronic importance to the customer. They won’t try to sell them a 16% Cabernet, because they know the customer’s wife is sensitive to high alcohol levels. This doesn’t require some sophisticated prediction network (though one doesn’t hurt); it’s all about augmenting a human with a sophisticated database. Call it a force multiplier. It still requires a human touch, but the scale and efficiency is vastly better.
So, specialized and focused wine shops exist on the Internet. They can be every bit as good at procuring, selecting, and selling wine, if not better.
Here’s something to ponder: This doesn’t just mean extraordinary shops like Chambers. Wine.com has a private client service and private wine buyer that offers exotic parcels and procures lots from collectors. Granted this service is more likely to provide access to obviously exclusive lots than the odd and extraordinary, but let’s be honest: Nobody really gives a fuck where they buy their DRC as long as it comes with good provenance. It’s not like the skill of the wine merchant matters when one’s goal is to procure a case of Lafite. Lafite is Lafite, and one already knows they want it. No merchant provides the service of “hey, have you tried this first growth, you might be interested in it” because that customer does not exist.
Matt Kramer famously made this point (sadly I can no longer locate, and/or it’s not longer available for free) much to the chagrin of many local wine merchants. He argued that buying expensive obvious wines locally was stupid. One should just go to the Internet and get the best price. Whether or not anybody agrees this is the right advice, it’s what consumers are going to do. They have no reason to develop loyalty over these sorts of parcels.
Despite the title of this post, I still hold that none of this spells certain doom for LOCALSHOP. Specialization is still step one. Any shop that models itself on the local liquor store of decades past (“well, we’re the liquor store in town, so you’ll buy your wine here”) is doomed to fail.
What does LOCALSHOP offer that makes it relevant?
Immediacy is a clear winner. No shipping is faster than “in my hands, now.” The local BIGBOX has this too. So it’s the coupling of immediacy with specialization that makees this a relevant strategy for LOCALSHOP. In the hands, out the door in ten minutes, and it’s something the customer’s going to actually like. Most likely it’s faster than waiting in a checkout line at BIGBOX, as an added bonus. There are plenty of consumers that don’t have cellars; they decide they’re going to cook some salmon tonight, and need a bottle of wine on the way home from the grocery. There’s the guy that works at the gas station across the street that buys a six pack of whatever interesting beer is in stock this week, every week when he gets off work.
LOCALSHOP helps the customer try before they buy. They’re likely to regularly pour wines to taste, and might even be willing to crack something that somebody’s not sure about, especially if they’re local. Thinking of buying a case, but want to check a bottle first? No problem. Especially when the customer is branching out and does not yet have 100% faith in their merchant, this is a great opportunity to quickly gain exposure to many wines and only purchase things that are sure winners. It’s good for the customer and it’s good for the shop, since the careful shop will learn a lot about the customer a lot faster than can be done via cardboard box and email. BIGBOX sucks at this just as much as NETSHOP, since it’s more interested in pushing volume on something their distributor wants to move than it is in building loyalty and making the customer happy.
Let’s see, what else.
LOCALSHOP provides a third place. Gather there for the weekly tastings. Try something new. Meet a winemaker. Catch up with a small distributor, learning about their portfolio and recent trips through wine country. Exchange stories about child-rearing with the proprietor. Find out about a new hot dinner spot. Trade some gossip. Now, SPECIALNET may have a great brick and mortar store, and those of you that live near such a place have my jealousy. Technically then it’s a LOCALSHOP too. But, for most people, LOCALSHOP is the only place that provides this service: the experience of trying and buying wine and developing a community around it. And, well, nobody wants to hang out at BIGBOX. All I feel in a big empty warehouse with aisles of liquor and wine is despair and hopelessness. Wine is such a social pleasure that I believe this more relevant than many grant.
Small special orders are a thing most NETSHOPS and BIGBOXES and even SPECIALNET don’t want to deal with. It’s not that they cannot or will not do them, but it’s often not worth their while. It’s not really worth LOCALSHOP’s time or money to do it either, except they may have a little more flexibility with their distribution chain. The real reason, however, is the personal attention and loyalty. As soon as LOCALSHOP handles a special order or two, it’s likely to be the first place in the mind of the customer to go buy wine. They’re going to tell their friends hunting for something to check out their LOCALSHOP, where they’ve had great luck getting their hands on stuff they specifically wanted. LOCALSHOP also provides a great opportunity to protect a consumer (especially one buying at least case quantities) from their impulses. Let’s say a customer loves a particular wine and they hear the new vintage just came out. In all likelihood, LOCALSHOP has tasted that wine and can steer them away if it’s a dud. BIGBOX and NETSHOP are more than happy to move the dud. LOCALSHOP’s customer base is not ephemeral and ever-changing, so it does things to encourage them to come back.
Laws are a another good reason. In some states it’s expensive, inconvenient, or even illegal, to buy from anywhere but either a local shop or state-run liquor store. Sort of hard to argue against the local shop in those cases, as captive audiences are a bitch!
And, then, there’s the stupid things that come up. Wine tastings. Charity events and fundraisers. Parties. Weddings. Corporate orders. These are all the dumb things that are inconvenient or impossible for everybody else. Again, LOCALSHOP may hate this stuff, but so long as they hit home runs here, the customer is going to keep shopping there, as will their friends.
Some people just prefer shopping in person. They like directly interacting with a person, quite possibly the same person or small population of people. They value them for their expertise, their relationship, and that certain special something that comes from shopping in person. There are going to be fewer and fewer of these people over time. Pretty soon buying wine in person will be the hipster thing to do!
Others really don’t know what they’re shopping for and don’t want to be bothered to think about it. For them even going on Amazon and reading product reviews of something is going to be too much work. They just want a red wine. Trick is, they want something they’ll like. Their mental cycles are spent elsewhere, and it’s LOCALSHOP’s job to figure it out with minimal hassle. It relates to some of the previous concepts, but there’s definitely a market for the non-expert with no interest in the medium that needs an expert’s touch.
Being friends or family with the owner is another good one, for somewhat obvious reasons. This doesn’t generally scale, and there’s a fine line between being friends and a customer that’s tricky to read properly. Certainly not a general strategy for keeping the business alive.
So, if LOCALSHOP wants to die a slow and miserable death, the key is (still) to not specialize and to not cater to the unique things it provides that NETSHOP, SPECIALNET, FLSASHSALE, and BIGBOX cannot. Operating in a state with shitty liquor laws is a bonus, too. If this model is accurate, I cannot imagine how a LOCALSHOP that disregards differentiation in these areas can comfortably survive in the long run.
In addition to the things mentioned above, there are many assumptions about things LOCALSHOP can provide that others cannot.
First off, let’s dismiss with an obvious defense: The Shop Local movement. There isn’t a thing local about shopping at LOCALSHOP. Sure, the proprietor lives in the area, but it’s likely that the local BIGBOX manager does too. Maybe they report to some evil overlord in another state or country, but let’s not mince words. Wine is a global by-definition product. In most of the United States, it’s going to be procured from a series of distributors as part of the three-tier racket. Enough bullshit already, there’s nothing local about it. Now, there’s the notion of “small businesses run by people that are part of the community” and occasionally this means something, but it’s time to be honest here: The reason these campaigns exist is because those businesses want to stay in business, not because the consumers actually care. Depending on people “shopping local” is not a way to survive.
Another one is “easy returns.” I’ve never had problems getting returns/replacements for flawed bottles or goofs Online. If anything, it’s been even less of a hassle because NETSHOP and SPECIALNET just take the customer’s word for it if they’re not jerks. I’ve never tried it at a BIGBOX, because inevitably that would mean visiting the customer service vestibule and going back and forth for a few hours. I really don’t like the WAL-MART experience, folks. I don’t think anybody else does, either.
Exclusive access and small allocations just aren’t a thing. It’s available directly from the winery or via another retailer or member of the distribution network. The exception is, perhaps, small odd old lots sitting in some warehouse. See FLASHSALE. LOCALSHOP trying to FLASHSALE is a waste of its time. Access to selection is not a differentiator. Careful pruning, pulling, and selling from that selection is somewhat more realistic. But, attempting to corner or control the market just isn’t going to work for LOCALSHOP. They don’t have enough purchasing power to corner any market in practical terms. Even if they buy out an entire production of a given small-production wine, it will surely show up in other shops with a new vintage. Or their distributor will only allow them half the allocation the next year. Every time. LOCALSHOP has no control of their purchasing capability in the future.
Not getting screwed: Order something online and … the wrong parcel shows up. Or it’s ordered but one doesn’t actually get it. This occasionally happens with sleazy sites, I’m told. I once, from a halfway reputable site, got the wrong vintage on something. Ended up with the wrong bottles and the right bottles. I’m just not convinced getting screwed happens that often, especially with the rate at which the Internet customer base will crucify a retailer in every social media outlet available. This is just a story told to scare people away. All of the positive stories will inevitably cause this strategy to break down. In fact, with local shops I’ve often been at the mercy of the distribution channels or had something sit on order for months that was due to arrive “next week” only to have my order cancelled because it cannot be fulfilled. The three-tier system gives LOCALSHOP very little control of inventory not already in its control. See also their complete lack of ability to control their supply chain in the previous paragraph.
Maybe we can dwell on the more practical things. LOCALSHOP can introduce the customer to something new and crazy that they would not have otherwise tried, right? Here’s my challenge: Drop $250 on a 12-pack sampler from Chambers. I promise it’ll make LOCALSHOP’s specialization look positively WAL-MART. While LOCALSHOP can pretend it’s into discovery and trendsetting, the harsh reality is it moves a lot of predictable varietals from predictable regions. That’s how it stays in business. LOCALSHOP cannot afford to pour or sell a natural wine that smells like rotting melons and tastes like dirty feet. Said wine does not taste like “a nice chardonnay with no oak that isn’t too buttery and is bone dry.”
Reality Sucks Right Now In Retail Wine
I think the stark reality is that it’s difficult for LOCALSHOP to survive if it doesn’t adapt to the changing market.
Most of them are going to die slow deaths. Few will miss them, because they will have moved on. Dependence on old models, assumptions, and consumers that no longer exist isn’t going to work.
It’s going to take the really special shops that have an edge, an incredible focus on the customer, and a focus on delivering the things none of the alternatives can. Anything less is certain failure.
I have not come across many of these shops, but like good independent bookstores, they still exist and will still continue to exist.