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Do Case Discounts Actually Stifle Wine Purchases?

Thursday, April 26, 2012

This question has been on my mind for some time so I thought I'd get it out there for discussion both from consumers and retailers alike.

If you're like me and many of my friends, your cellar is full, you've got more wine than you need and yet you're always in the market for certain specific wines. If a retailer has a wine you're looking for, and that retailer has a pricing model where for example a mixed case is 20% off - what do you do?

Do you put together a 12 bottle case of other wines you know you'll eventually drink? Do you get together with friends to split a mixed case? Or do you consider the whole production a hassle and delay the purchase indefinitely?

Are case discounts actually having the opposite effect they're intended to have?

There are basically three pricing models in stores in this respect: Low, medium, and high case discounts.

  • Low
    On the low side we have operations where the first bottle is offered at the maximum discount. There are no case discounts.
  • Medium
    In the middle is a more moderate 10% - 15% discount for a mixed 12 bottle purchase.
  • High
    At the other end of the spectrum are placed where 25% or even 30% discounts are offered for mixed case purchases of 36 bottles. Typical margin for a retail wine shop is 33% so when a retailer offers a 30% discount it's usually what's required to get the prices down out of the stratosphere.
For both the middle and high discount case purchase models, sale items are typically excluded because offering a wine for 30% off would create a situation where the retailer would sell a product for less than they paid for it. Not that a retailer would like to do this, but it's illegal in Massachusetts. Sale items usually count towards reaching the required quantity of bottles, but they're not discounted below their sale price.

Which model works best for consumers? And which is most effective for retailers?

My reason for writing this is I often find myself not buying from retailers whose model requires hefty case purchases for favorable pricing.

If there's one thing a deal hound hates it's paying more for something than he has to. Even if it's just a few dollars here and there, it's a percentage game because over time the dollars add up.

Some retailers will give you a case discount if you're a regular even if you buy just 2 or 3 bottles. While this sounds good in theory in reality it's annoying to both consumers and retailers. It's annoying to consumers the first time they visit a shop and the employee who typically gives them the discount doesn't ring them up. And it's annoying to retailers because once a customer gets a discount they expect it forever.

What do I Like?

I like a model where I only have to buy what I want, and everything I buy is at the best possible price. I like receiving emails offering specific wines at very aggressive prices that I can pick and choose from, buy what I want, and over time build towards a case purchase. Then, I'll either pick it up at the store or arrange for shipment a couple times a year.

This is different than what I look for when buying, for example, a bicycle. Or tires. I don't buy bicycles or tires often enough to sweat it. I just visit a local shop or two, consider convenience and service, and go with my gut instinct.

But when you're buying wine again and again it pays to think about this stuff. 

Consumers: What do you think? Looking back over the past couple years which models have earned more of your business?

Retailers: What are your thoughts on this? How did you decide to go with the case discount model you're using? And what trends have you seen as you've run specials offering deeper discounts with lower quantity purchases?

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