For 1-800WineShop, the key to becoming a big player in the mail order and online wine business has been its ability to think small.
Small, as in keeping its twice-a-year four-color catalogs to 28 pages and fewer than 200 SKUs, a focused approach that makes it easier for consumers to navigate. Offering gift baskets for as little as $32 and a pay-as-you-go wine club membership for as little as $27.50 a month. Producing intimate in-home wine tastings that build not only sales and the customer base but also goodwill that simply can’t be bottled.
These strategies have enabled the seven-year-old company, which started up with $2 million in funding, to turn a profit, even as flashier online competitors Wine.com and Wineshopper.com disappeared (along with more than $214 million in start-up money).
“They died violent deaths,” says 1-800WineShop founder/president John Lynch of his former dot-com competitors. “We had to survive in the shadow of these overfunded companies. There was no way we could follow their model even if we’d wanted to. So instead we created our own.”
That model has targeted mid-price-range shoppers ages 25-55. In addition to providing these consumers staff on call to make recommendations from an inventory that numbers in the thousands, 1-800WineShop offers them membership in several wine clubs.
Although Lynch won’t reveal specifics, he says that thousands of customers participate, paying $27.50-$59.00 every four weeks for a shipment of wines — some of which aren’t available to mass marketers. The clubs have contributed mightily to the catalog’s one- to two-fold annual circulation growth. “We buy and sell directly, with no distributor,” Lynch says. “That’s a huge competitive advantage. So we can offer our customers better value for their buck.”
Wine club membership has its privileges. These include a 10% discount on gift items, a quarterly newsletter, and invitations to Harvest Party events. Celebrations of food, wine, and music, the parties are held at Napa and Sonoma wineries, cost attendees around $100 apiece, and sell out within days.
The cataloger’s in-home tasting program has been such a hit that it has been expanded from San Francisco to Los Angeles and San Diego, with plans to reach Chicago and the East Coast before long. For $68, the host gets a party for 10-15 friends, a six-bottle sampler, a wine consultant, and gifts and incentives (depending on the sales derived from the tasting). 1-800WineShop. meanwhile, gets lots of new customers.
The company has also recently joined with Wine Country Living, a magazine and TV show boasting 100,000 readers and viewers, to form the Wine Country Club. Wine Country Living will handle the marketing and promotion, while 1-800WineShop will be responsible for the supplying and shipping.
While it has no intention of straying from its core wine club and gift business,1-800WineShop is seeking further corporate alliances and niche opportunities within the $68 billion wine business. “If I were just a catalog, I wouldn’t survive,” says Lynch. “If I were just online, I wouldn’t survive. But we’re a multichannel company. That’s been critical to our success.”