First, this article is not about specific metrics. It is a general perspective, I have searched for metrics and haven’t found a data set that I like or believe tells the story of the off-premise wine trade in the U.S.
A lot of people make inferences of chain retailers and their impact on the general wine retailing landscape. I think sometimes there is a viewpoint that the large or mega wine, beer and spirits (WBS) stores make smaller WBSs less advantageous. I don’t think it is as simple as that. I do think it is much more complex just as the subject of wine is itself.
I have been a former wine marketing manager at large retailer with over 275 stores. I had a great view and understanding of the wine retailing landscape. Wine as I have said many times in my videos and in my writing is a complex product–vastly more complex than any other consumer category. The attributes are many–such as vintage, variety, region, style, cuvée and vastly limited supplies.
While some off-premise retailers are huge and sell a lot in the US they are not necessarily category killers–there are simply too many labels and to few places to sell all of these wines.
Wine retailers try to sell their private labels wines for good reason–there is a healthy margin in doing so but it does require more hand selling. The “easiest” to sell are very well known brands which have razor thin margins. But the wine retailing landscape and especially in brick and mortar is as relevant today as it was a generation ago. While DTC (direct-to-consumer) has been growing and will continue to does not provide a solution for all wine buying households. DTC can be a wine club or perhaps an online wine retailer and the limitations are that the assortment may not be strong as a wine enthusiast might prefer.
I am curious and I do have doubts on warehouse retailing. I personally do not like shopping at a warehouse retailer–the lines, the time investment to shop is large and I don’t have the time to go to shop in person and the experience is not me. I don’t like the wine assortment options either. I do think there will be a decrease over time for this type of retailing activity. I do think that many people especially wine interested in getting wines from many regions, many varieties and so fourth but will seek a different way of getting their wines.
As it relates to online wine retailing, the barrier to entry for an online wine business is relatively difficult–not just a mere list of licenses to obtain (which can be difficult on it’s own) but the ability to flex the business to update with new SKUs and ability to support new SKUs does require IT support.
Amazon has carried wine and it seems has eased up on the gas pedal. I use to see a lot more wine a few years ago. I recently completed a search for 10 different wines; well known, lesser known and I only found one wine out of 10. To a customer who might have had a multiple of searches would give up and assume that Amazon is not in the wine business. To a wine consumer you have to either be in business or not. I’ll be curious to see if Amazon who is tremendously successful in almost all other categories if they delve back into the category.
There are holes in many assortments in many brick and mortar wine retailers. And it may not be just holes in assortments but it is also meeting the expectation of customer experience.
Here are my specific examples to support the above. I visited my local neighbourhood food and wine retailer–it is a retailer that has a approximately 600+ wine SKUs; heavily assorted in French and California wines. Being back from a trip from Sicily I asked for a white and red Sicilian wine that I wanted to buy (and yes I do buy wine). I could only buy a Nero d’Avola. I did look at other San Francisco retailers and these two additional wine retailers had several red and white Sicilian red wines. My point on the a hole in assortment is that I am not alone especially if I am making a meal for guests I will always buy a white and red wine – I think this retailer instead of capturing a sale–lost it (at least not selling a white wine to me).
Assortment coherency is not just a nice to have but a must have. Coherency is if you are offering only white wines from a particular region and not the red wines–if they have sparkling wine–why not pick up the sparkling wine. Maybe a consumer might be thinking a particular regions white wines… it is an opportunity to point out other wines available. It is not just cross selling but it is reminding consumer of the full spectrum of wines.
I was at wine generalist in San Francisco’s Russian Hill and it was on my quest for Sicilian wines that particular day. I got a white and red and the owner of the store said to me “you know we have a Nerello Mascalese Rosato.” I like anyone else is in such a hurry didn’t see it and because of his suggestion I picked it up–so this retailer increased my shopping basket by 50%. I was surprised to find a white, red and a rosato from a generalist wine retailer. The owner was focused on me and my purchase and he was doing a great job. Not all of my wine shopping experiences are as good. I actually came to this generalist wine retailer as I had been to an Italian-French wine retailer nearby. I didn’t stay too long at this small specialist wine retailer because I and three other customers were ignored. The shop associate was with a customer and only focused on this person. No “hello” or “I’ll be with you shortly” to me or the other customers. I kept thinking this shop associate not only lost my sale–lost the other consumers. Interestingly we all went to the generalist retailer and we all bought something. I had been a fan of this small retailer and in that instance was turned off. The sales associate was focused on what appeared to be a long time customer who literally ran in–he was in his running clothes. I won’t go back because while I can appreciate a small store with one associate–I certainly have patience to wait but being totally ignored helps me to think my money is not needed.
While I care a lot about regions, labels, varieties the other three customers (by they way they were friends hanging out together) I don’t think cared as much as I did and they found a few wines at the generalist retailer. The take away is that if a wine retailer is not greeting and treating all of it’s customer with interest and respect–that customer will go somewhere else.
I attend a lot of wine events and I always find brands wanting to break into the US market. There is not enough shelf space either for online or brick and mortar retailers. While there are some very large retailers there is room for the independents. Retailing for other product categories is down but I do not think wine will follow the same trends of the general retailing community. The independent or smaller multi-chain retailer is as relevant today as it was a generation ago.
Service is king and experience and assortment is equally important. Unless there is some radical change in ABC (Alcohol Beverage Control) laws and there is a a profound ABC simplification wine retailers of all sizes are still and will be needed. We have an estimated 40,000 ABC laws in the US on the books and that too regulates online wine retailing activity. I doubt simplification will happen ever–we have lived with the 40,000 ABC laws since the 1930s.
As long as there is wine, people who want to buy wine and as long there are many producers there will be the need for many off-premise retailers online and brick and mortar for the foreseeable future not just monoliths. It will be up to independent wine retailers to seize the day and optimise their client base or not.
James the Wine Guy
Demystifying Wine…One Bottle at a Time from all wine regions around the world.
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