Wine Prices Slashed; This Offer Won’t Last

april 20,2011

WHAT do you consider a bargain in wine? Ten percent off? Twenty? How about 40? That was the discount that Wines Til Sold Out offered recently on 2006 Chateau Angelus, a top Bordeaux that was being sold for nearly $100 off its original price of about $250.
Prices that seem too low to be true are typical of the dozen or so flash wine sale sites that have popped up over the last two years. The sites offer limited amounts of wines at discounts that are shockingly steep but highly temporary. Typically each sale lasts for no more than a day or two before the sand in the hourglass runs out.
“The deals are usually screaming,” said Jim Barnyak, a Seattle financial manager and frequent shopper of such sites. “Deals that any wine store can’t come close to touching.” Early each morning, Mr. Barnyak checks for e-mails alerting him to the next hot sale. “Sometimes you have to respond within 15 minutes to get the really good bargain.”
In just a few years, the flash wine market has grown to about $100 million in annual sales, about 25 percent of the overall online wine market, according to an estimate by the wine industry consulting firm VinTank. Whether it can sustain that gangbuster pace is far from clear. Many industry veterans predict that the glut will dry up in the next year or so and that winemakers will be straightening their clothes and glancing around to see if anyone noticed that they’d participated in anything so undignified as deep-discounting.
But out of desperation can come opportunity. Some in the wine industry say that flash sites may outlive the surplus that brought them into existence and prove themselves useful in other ways. The sites have “brought new customers into the space, and boosted their comfort level in buying wine online,” said Michael Greenlee of the Napa-based wine consultancy Amedeo.
And for producers, flash sites might turn out to be a sophisticated sales team, giving customers information about the wines — and winemakers information about the customers. Until recently, wineries rarely had problems selling their bottles to a public with mounting thirst. But as a result of the recession and a consolidation of distributors that has made it tougher for wineries to get their products into stores, some winemakers have watched entire vintages stack up.
Enter the flash sites. A welcome pressure valve for the industry, flash sales have allowed wineries, particularly at the middle and higher end, to unload huge numbers of bottles in staggeringly short times, albeit at drastically reduced prices. Not long ago, WineAccess blew out the better part of 700 cases — 8,400 bottles — of 2006 Keenan Merlot in under 24 hours. The profits on such sales may be small or nonexistent, but at least they give the wineries cash to pay for the next vintage’s barrels and grapes.
Even in the depths of the recession, though, many in the industry were powerfully averse to slashing prices.
Jack Stuart, the winemaker for Benessere Vineyards in Napa Valley, recalled that, after he had sold some wine through a flash site, the owner of the site talked about establishing a long-term relationship.
“I sort of laughed to myself, thinking ‘This is not a sustainable business model,’ ” he said. “There’s no way we could afford to sell a significant proportion of our production this way.”
As the recovery creeps forward, resistance to slashing prices is apt to grow. Gary Vaynerchuk, the online wine marketing phenomenon behind Wine Library and Wine Library TV, predicts that the wine surplus will last longer than some producers expect, but that eventually “things will go back to normal.” When that happens, he said, flash sites will be forced to evolve, and some will probably not survive. Their style of doing business may make the difference.
Most flash sites operate under one of two models. Some are retailers, negotiating tremendous discounts, buying the wines either directly from the winery or through wholesalers, and then fulfilling the orders themselves. Mr. Vaynerchuk’s Cinderella Wine is in this category, as is Wines Til Sold Out. These sites tend to feel like online analogues of stores like Costco — cavernous and devoid of personality, but exuding a no-nonsense, deep-discount vibe.
The other model for a flash site is the marketing agent that sells wine but never takes possession of it, leaving the hassles of shipping legalities and order fulfillment to the wineries. These sites, like Wine.Woot and Lot18, specialize in “hand-selling” bottles, in part by educating consumers about the wineries.
Many in the wine industry say that in the post-surplus world, these sites are better positioned to succeed because they can help wineries build their brands, communicate directly and creatively with customers, and create interactive communities of buyers.
Wine.Woot, the first flash site, which made its debut in May 2006, offers literary narratives to accompany its daily 24-hour deals. (A recent sale of Riverbench pinot noir fronted a hard-boiled scenario that began, “It was a cold, gray night in Baghdad by the Bay. … A thick fog hung on anything foolish enough to be outside, but I had more pressing worries. There, in the doorway to my office, stood the Riverbench Winery Estate Pinot Noir 4-Pack gang.”) Each sale is accompanied by a “vintner voice mail” with the winemaker talking about the bottle. Winemakers also chat online throughout the day with Wine.Woot’s highly active and engaged community.
Matt Licklider, a founder of the Lioco winery in California, was skeptical about flash sites, but recently gave Wine.Woot a try. He liked the experience, particularly the time he spent interacting with consumers on the site’s chat board.
“I had probably 25 different conversations going on simultaneously with a group of people I regarded to be quite savvy about wine,” Mr. Licklider said.
The Wine.woot model, he said, might promise a cheaper and faster way of doing business. “If I have to sell wine at wholesale cost to Wine.Woot, that’s essentially the same price that I would sell to distributors in various states. Then I would have to buy a plane ticket, fly to visit the market, stay in a hotel, rent a car, take the distributor and his salespeople out to dinner and spend three days selling all that wine. You can see how inefficient and expensive all that is.”
The Wine Spies has a hybrid model, offering both a marketing and retail component, as well as a gimmick. The site casts sales as “missions” in which two characters known as Agent Red and Agent White are charged with tracking down wines. Along the way, the site provides quite a bit of information, including lengthy winemaker interviews. Discounts of at least 20 percent are part of the business model, said Jason Seeber, a k a Agent Red, but are not the sole point of the site.
“That discount is meant really to entice people who might otherwise hesitate to buy a wine they don’t know,” he said. “If we’re selling this wine at 25 percent off with a very detailed review and a comprehensive interview with the winemaker and we really tell the story of the wine in a very accurate way, all those things are going to lower the barrier to entry.” The Wine Spies has experienced annual double-digit growth since its debut in 2007, Mr. Seeber said.
Besides helping to reach more customers in less time, flash sites that specialize in marketing can also provide the kind of direct connection that can be hard for winemakers to come by. “Outside of direct-to-consumer sales, wineries are pretty much ignorant as to who’s buying their wine,” said Paul Mabray, the chief strategy officer of VinTank. “They sell it to the wholesaler, retailer or restaurant instead of the actual consumer, so their guess is as good as any who’s actually buying it.”
Other flash sites are evolving to build relationships with customers beyond their monitors. Eric Bolen, a marketing consultant for WineAccess, has recently started offering “private sales” of exclusive wines to their best customers. “We then deliver all the names to the winery, who then sends them a handwritten note inviting them in for a special private tasting,” he said.
Likewise, Mr. Greenlee of Amedeo said that he is working with One King’s Lane, a discount home-décor site that recently added wine to its portfolio, to package wines with experiences like vineyard tours and meals at the winery.
“The wineries are interested in keeping the relationship with customers beyond the sale,” he said. Mr. Greenlee added that such package deals might be a way to reach new customers beyond the hard-core consumers who are, he said, the primary users of sites like Wineaccess.com.
Whatever the future holds, the fate of online wine retail will no doubt be dynamic. “It’ll be fun to see who’s got the chops to do different things off the platform they’ve created,” Mr. Vaynerchuk said. “To see who just ends up being a flash and who ends up being a flash in the pan.”

Source: http://www.nytimes.com/2011/04/13/dining/13flash.html?_r=1

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0922-870-5178
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Mimosa Drive past Holiday Inn, Mimosa Leisure Estate,
Angeles City Clark Freeport Zone, Pampanga, Philippines 2023

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3003C East Tower, Phil Stock Exchange Center,
Exchange Rd Ortigas Metro Manila, Philippines 1605
(632) 637-5019 0917-520-4393 Rea or Chay

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