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How Can Wine Shops Survive the Threat from Online Stores?

There's an interesting discussion going on within the Wine Business Network over at LinkedIn in the Wine Business Network. The premise is that small, local wine shops are suffering due to increasing competition from online resellers of wine. Whether or not this premise is even true will depend whether or not the state a given local shop is in allows shipment from out-of-state online resellers. Some states make that illegal, others make it incredibly difficult. And one can also debate whether such prohibitions benefit consumers. However, for the sake of this article which is an expansion on the comment I left in the LinkedIn discussion, we'll just assume the premise is true and momentarily set aside the consumer-choice issues.

I think that laws, both state and federal, have given many small or local wine shops a substantial break. I'm not saying that they aren't facing difficulties now. However, those they do face are coming later and are, in many cases, much milder than those faced by local shops of other types. The most obvious example is bookstores.

Faced with challenges from Amazon and others online plus big-store brick-and-mortar chains, particularly Barnes & Noble and Borders, the mom-and-pop bookstores are almost all gone. Even stores which seemed like invincible institutions in bookish towns, such as Cody's in Berkeley, have disappeared. It seems that only those shops with a particular niche (rare books or depth in a single topic) are hanging in there in any volume. And, unlike wine in states such as NY, best selling books and magazines can be sold in grocery stores and on any street corner.

In the long run, wine shops do face virtually the same threat though. I'm not a shop owner and haven't thought for countless hours about the issue, but one fairly obvious tactic for the local shops is to offer customers things that they value but can't get online. I would suspect that these include: excellent personal service AND a personal, human-to-human relationship, wine tasting, winemaker dinners, wine education, wine descriptions that go beyond tags with Parker Points, help with specific food pairings, specialization in local wines, and the ability to provide wine (chilled if need be) that can be consumed in 30 minutes (rather than the customer needing to wait until after the next UPS delivery). Of course, many local shops offer a lot of this already. They are probably more successful than their competitors who do not. And some of these techniques can also help the small shops compete against large brick-and-mortar stores, such as BevMo and Costco, as well as supermarkets in those states that allow them to sell wine.

I think it's also essential that the small stores reach out to those customers who may be online-oriented through that medium. Not doing so means a huge loss in mindshare. One question on the LinkedIn message thread was from a shop owner who wondered if he should list his stuff online even though his price on a given wine might be $2 higher than that of other online outlets. It seems clear to me that, while he might not gain every sale of that wine to his regular customers because of the price delta, not selling online guarantees that he won't get any of the sales at all. Some is much better than none. And, while services like make it easy to comparison shop, if he does a good job of driving his storefront customers directly to his site and adds additional value there, most will not bother with comparison shopping. But don't just go online, get on Facebook too. [A study released today showed that Facebook reached 52% of active social network users in February and that time spent there by the average user was six times higher than that of the nearest competitor (MySpace).]

Online shopping is not only about price comparison. It's about convenience and selection. I shop online when I don't have time to go to a store. I shop online for things I might not be able to find locally. And I especially shop online when one of my favorite stores sends me a note about something really interesting. I rarely compare prices and never do so on bottles that are less than $20. When I do shop online, I do it with a store where I also feel I've established a genuine relationship. (My preferred online store also has a local physical presence.) By engaging with existing customers online, via email and via social networking, local shops may well be able to hold their own. And they might be able to broaden the apparent breadth of their inventory by offering products that they don't stock but can reliably source through distribution. It's much easier to sell people on future delivery online than in a storefront.

I'd love to hear your thoughts on this topic.

This article is original to Copyright 2010 NorCal Wine. All rights reserved.

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