Death to the Fine Wine Retailers!

April 7th, 2008 → 11:58 am @ Josh Hermsmeyer


Are wineries that sell direct ruthlessly competing with the clicks and mortar crowd?

That’s one of the questions David Williams poses in the latest issue of Wine and Spirit (UK). After taking the reader on an extensive survey of the past and present of online wine retailing, David asks whether the current buzz about wine/web 2.0 is fundamentally different from previous wine e-tailer failures.

Looking forward, David identifies direct-to-consumer as the third revolution in online wine sales. I think he’s absolutely right (I’d better, I’m betting our winery on it!). But he also thinks that direct-to-consumer sales will come at the expense of wine retailers and merchants, and Capozzi (that’s me) is held up as an example of a producer embracing the model and looking to cannibalize sales from clicks and mortar wine retailers.

Here’re some quotes for context:

…[A]ccording to Gormley, there is much more to come from the web.

“I think we’ve got an awfully long way to go,” he says. “What’s happened online so far has basically been improvements on the existing models of direct selling. But the real step change is still to come.”

Gormley reckons the seeds of revolution lie in the ability of consumers to make direct contact with their favoured producers, and to buy their wines directly from them – a kind of virtual farm gate, leaving retailers to act as “sourcing partners who basically just do the logistics”.

A virtual farm gate. I love that image. Rusty, creaky gate hinges and all. It conjures up the kind of one-to-one opportunities that direct interaction with wine lovers provides. Drop on by, have a chat. Maybe buy some wine. Lovely. Serene. Downright agrarian. Which is why the following juxtaposition is a bit jarring:

It’s a model that appeals to forward-looking producers such as Josh Hermsmeyer in California’s Russian River Valley. Hermsmeyer is well-known in cyberspace as the man behind the thoughtful pinotblogger site, which tells the story of his attempts to build his Capozzi family winery from scratch. And he is convinced that, for boutique fine wine producers if not bigger brands, the possibilities afforded by the internet could make fine wine retailers a thing of the past.

So, just for the record, I never said that I think fine wine retailers would be a thing of the past. It’s an interesting idea, but one that I completely disagree with, as you’ll see below.

I simply think that distributors and unnecessary middlemen that add no value will become a thing of the past. And even then, as David notes, I was only talking about small wineries. Big producers will always need distributors to move the volume of wine that they produce. For them, the distributors add value.

So Jill and all the rest of the awesome fine wine retailers out there, you can put down your knives.

More quotes:

“It seems to me that the change really will be at the high-end,” Hermsmeyer says. “Using social media, wine lovers who want low volume, artisanal wines will be able to go straight to the source and easily interact with the principals behind their favourite winery.

“Since the time and effort it takes to cultivate real, meaningful relationships with people doesn’t scale, I think this is where the small guys have a pretty sizable advantage over the big ones. Our customer bases are much smaller, so more personal attention can be paid to the folks who are truly passionate about our brands.”

Not everybody believes this is the future of wine retailing. As you might expect, Bennett thinks otherwise, and says: “There will always be a role for people like us who can give their authority on what we consider to be the best wines around. It’s very hard to buy direct in Burgundy, for example, unless you know your stuff.”

Bennett is absolutely correct. There will always be a role for people who have built up authority and trust with consumers to use their influence to recommend good wines. The wine world is way too cluttered and complex to navigate without some guidance. That guidance could come from a friend, a sommelier, a professional reviewer, a wine blogger, or a retailer. All of these folks add tremendous value. So, as long as the wine world stays complex and cluttered, they won’t ever go away.

More than that though wineries that rely on direct to consumer sales to make their business work would be foolish to view fine wine retailers as anything other than partners. Third party recommendations are crucial in the wine industry, and having a brand advocate that also happens to sell your wine is a powerful thing. Their passion and knowledge of wine will attract consumers and will help you grow your brand.

And as far as the internet goes, online tools are making it ever easier to create profitable relationships with such partners.

Retailers and Wine Bloggers as Partners

As just one example, imagine if every wine blogger suddenly became a tiny equity partner in your wine brand. If someone likes your wine enough to write about it, shouldn’t they be able to monetize their influence and get a cut of any sales that resulted from their recommendation? Isn’t this precisely what wine retailers do offline right now?

This isn’t a new idea, and it isn’t hard to implement. In fact I wrote about how to do it almost two years ago. People do it all the time with goods on Amazon. It’s called an affiliate program, and the web makes setting up such a system shockingly easy.

What’s holding back such a system from taking root doesn’t have anything to do with technology or the internet. It has to do with many wine bloggers viewing themselves as independent wine reviewers instead of independent wine retailers. The dominant wine blogging model is to be a small scale Robert Parker instead of becoming a small scale Kermit Lynch.

No Mini Kermit Lynches? Why?

Both Parker and Lynch have an unquestionable passion for fine wine. Both have acknowledged expertise. Both are well respected. So why aren’t there more mini Kermit Lynches out there?

No one who has spent the time to build up credibility with their audience is going to squander it by recommending a crap wine just to make a few short-term bucks. And if they do, they’ll quickly lose their influence and readership anyway. The blogoshpere is self-correcting.

So what gives? It’s a rhetorical question obviously, because I really don’t know the answer.

All I do know is that direct-to-consumer will be much more profitable for wineries if they can build their own Long Tail network of micro-retailers and blog partners.

And that means partnering with wine retailers of all shapes and sizes, both online and off, not trying to kill them.

That’s my take at least. What do you all think? All comments welcome.