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A sign of the times in the retail wine trade?

Wednesday, April 22, 2009

I subscribe to as many E-mail wine deal newsletters as possible. Even if I'm not able to take advantage of many of the offers given that I live in MA, I find it interesting to keep up on wine deals from around the country to see what's going on in the wine business.

Recently, I received the following newsletter from a retailer that I wanted to pass along. I made some minor modifications to it to keep the identity of the retailer anonymous, and asked for the retailer's permission to re-publish it. I thought it was incredibly authentic, enlightening, and indicative of the reality at hand for the wine trade today.

When things get tense in any relationship, people's true tendencies show up. In the case of the wine industry, I believe what we'll start seeing more of is big retailers acting like bullies as their profitability is threatened. And judging by the tenor of this newsletter, they'll start squeezing smaller retailers by exerting pressure on distributors to bolster their pricing power:

"What else is going on? Where to begin? Well, a year ago, my largest wholesaler, bending to pressure from the largest chain wine/liquor store in the state refused to sell me anymore deals. Apparently a tiny “one man operation” posed much too many obstacles for a decades old operation with hundreds of locations. You might guess I am being paranoid but I actually have the e-mails from the chain, to my wholesaler and then, eventually, an e-mail from my wholesaler telling me that if the chain can not control my pricing, then no more deals.

I can buy deals from other wholesalers but not on the recognized name brands that you have become accustomed to. My sales began to plummet, partially because of low consumer confidence and largely because of lack of what I built my business on, tremendous deals. The deals I did get sold out much slower than before as people began cutting back on spending across the board.

To give you an idea of how bad it has gotten, in March 2008, I did $36,000 in sales ON ONE DAY! In the entire month of March 2009 I did $28,000 in sales.

I know I positioned my business as a convenient, “buy thru e-mail” operation but I have to generate enough walk in business to cover my fixed monthly expenses like rent, insurance, utilities, loan payments, etc. before I can even consider spending $20-$30K on a large deal that likely will take me ten weeks to sell ~vs~ ten hours a year ago. Quite frankly, lack of sales volume and even lack of customers buying 2-3 bottles is driving me to the precipice of going out of business. It is hard to fathom considering a year ago I was flying high and posting double digit sales increases every month. I haven’t broken even one month since then.

Today is my Birthday. I am 43. Over the last twelve months I have lost a wife, my health and seen my business come unwound and nose-dive towards insolvency. I don’t know if I have the right to complain because six of my customers fought cancer in the past year and some of them didn’t survive.

So I have very little to complain about all things considered.

But I don’t want to let a big chain squash me like a bug. If I lose this business, I lose a rather large sum of my parent’s retirement fund and also all of my life’s savings. I would likely lose the house I have called home for 13 years and everything else I have worked 21 years in the wine business to build.

So I implore you, I will even swallow my pride and beg you, please buy your wine here even if I am not promoting a half price deal at the moment. The support I get on a daily basis allows me to have cash flow to buy big deals and also pay the rent, etc. My prices are on the low side of fair meaning you are unlikely to find lower prices at any other retail store in town on the same products and more importantly, you personally hold the welfare of me and my family in your hands.

I have always tried to offer good service, selection and fair pricing. Certainly the stress of the last 12 months has worn on me but I want to let you know that each and every one of you is very important to me, both as customers and as friends. So I am making one last attempt to salvage the store over the next 60-90 days. Please support me any way you can. Even bottle purchases help very much. Remember we have good deals starting at $5 a bottle all the time.

Thank you very much!"

Now, I'm the first person to dismiss the notion of supporting "mom and pop" retailers for the sake of supporting the little guy. In my view, each component in a wine distribution chain needs to provide value, otherwise why should we support it as consumers? However, the situation described in this newsletter is striking to me because it is eerily similar to how I would run a small wine shop. Offering deals, running the business lean, and maintaining personal relationships with customers (especially over the Internet) are exactly the things I would do if I had a wine shop. However, this retailer is being squeezed by a larger retailer and their seemingly anti-competitive business practices. Since when was this acceptable?

Adjacent to this, I'm always surprised when local wine stores don't want me to re-publish their deals on this blog. "Why wouldn't stores like free promotion?" I think to myself. Isn't the upside of reaching more customers greater than the prospect of a competitor intercepting the details of an offer you're running? However, in light of E-mails like this one, I can see why wine stores can be cagey about revealing their deals. There are larger forces at play in the wine trade, and the net effect of this is higher prices for consumers. And that is something I can't get behind.

Question of the Day: What do you think of this situation?

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