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Retailing Means Retooling: Smart Wine Merchants are Not Standing Pat

Posted on  | June 17, 2011   Bookmark and Share
Written by | W. R. Tish

If Charles Dickens were in the wine business today, perhaps he would agree that these are the best of times and the worst of times. The economic downturn, now well into its third year, hangs heavily on consumer confidence. And yet the wine market continues to grow impressively, with the U.S. recently marking its 18th straight year of growth and officially earning the title (albeit largely symbolic) of #1 wine-drinking country in the world.

But national trends and stats don’t necessarily translate to individual wine shops or even specific U.S. markets. After all, retail stores embrace their own sort of terroir, from the most basic sense ( Location, location, location!) to more complex factors such as wide-ranging state laws and availability of products in a given market. In other words, the big picture is nice, but may not reflect any single store’s situation.

I spoke with retailers of varied sizes and locations to get a sense of how they have adapted their businesses over the past two years. Specific adjustments tended to reflect a sense of retailers not revamping so much as retooling. There has been belt-tightening, to be sure, but reinvestment as well. Much of the retooling I heard about fell into familiar categories,pricing, inventory, physical facilities, service, promotions, relationships, marketing. Overall, adjustments that seem to have worked best grew organically out of merchants’ established strategies, allowing them to emphasize strengths and at the same time allowing flexibility to take advantage of deals in their respective wholesale market.

Shelf and floor space as precious real estate
At Suburban Wines & Spirits, about 40 miles north of New York City, owner Lance Cerutti is on the floor daily and also serves as the store’s Italian buyer. His responses to the recession have been both reactive and proactive. On the proactive side, Suburban went ahead with a major store renovation, which included a glass-enclosed room for collectibles and upgraded racking throughout. In the process of renovating, Suburban made efforts to adjust inventory to fit changes in customer shopping patterns. The new showcase room is not exactly a high-traffic area, although Cerutti says demand for high-end wine has been creeping back over the past eight to ten months. Meanwhile, however, he has reactively reallocated space and buying strategies for the rest of the store: high-end Australia racks have been cleared out ( the market’s gone, he notes); the store’s buyers have been passing on crazy, cultish wines; and floor space has increased for what he calls bang for buck regions, namely South America, South Africa and New Zealand. Similarly, at the store’s regular Saturday try-before-you-buy tastings, where Suburban used to regularly open $50 bottles, the norm is now wines that sell for less than half that.

Allocating shelf space is even more critical and challenging in boutique shops. In the fashionable Red Hook neighborhood of Brooklyn, Mary Dudine Kyle’s Dry Dock Wine & Spirits is so small that customers can practically see every bottle from the center of the store. She opened at the bottom of the economic downturn, in February 2010, but has seen success by hand picking selections with an aggressive emphasis on value. Three-quarters of the shop’s 500 SKUs are priced under $20. Anyting I have, it’s a great buy, Dudine Kyle insists; she aims to have every wine in the store taste like it costs $6 more than it does. Dry Dock has also carved out a strong reputation for natural and biodynamic wines, which hold great appeal for the area’s artsy, organic-minded residents. Free tastings both Friday and Saturday have proven another customer favorite. The store recently received a 28 (out of 30) rating and was named Notable Newcomer in the 2011/’12 Zagat New York City Food Lover’s Guide.

Chance to refocus and regroup
For Jeffrey Wolfe, owner of Wolfe’s Wine Shoppe in Coral Gables, FL, the recession prompted some hard decision-making. He closed a second location in South Miami (which had only been open 17 months) to focus on his flagship store. Like the retailers mentioned above, Wolfe shifted his inventory to focus on wines under $20. He was and is mindful, however, of being too strictly price-oriented. For example, even when taking advantage of a special wholesale deal, he avoids fire sale markdowns that might cheapen the image of a brand he wants to continue carrying. Noting an uptick in customers buying mixed cases during the recession ( often for the same money they used to spend on a few bottles), he started a special email program called the Oh My God! case, with 12 pre-picked wines at a great overall price. He also has taken advantage of the past two years to strengthen his personal relationships with suppliers, particularly through social media; this has paid off in the form of more winemaker visits.

With three expansive stores in New Jersey, selling not only wine but also beer, spirits and gourmet food, Gary’s Wine & Marketplace is a big enterprise. Sales have continued to grow over the past two years, but that was all the more reason that Gary Fisch, a famously hands-on-owner, recently hired the company’s first overarching marketing director. Sue Guerra, who has a multi-disciplinary background (PR, sales, retail, design, wine writing), is working with multiple teams and buyers, essentially to bring cohesion, from signage and advertising to email blasts and syncing of Internet and in-store promotions. It’s a process that will unfold over months. One early project was to create evocative in-store displays for important genres of wine,2006 Brunello di Montalcino, for example. The idea behind this approach, says Guerra, is that we want to attract customer attention to an entire category of wine, particularly when it is being trumpeted by the press. This is different than what the distributors usually do at retail, which is to create POS and display signage for individual brands.

New art of the deal
In the current wine market, there are more wine SKUs and outlets where people can buy wine than ever. At the same time, the current economy has trained people to be hyper-conscious of pricing. We hear of the new normal and $15 is the new $25, etc. Indeed, the pressure of price-conscious marketing and shopping is squeezing prices up and down the spectrum. But people are still buying wine. Lots of it. The challenge for merchants is how to sell wine at all price points in the new Value Age. (That’s a good challenge to have, all things considered.) The net result is that we may finally be seeing the grip of ratings loosen in the retail marketplace as merchants come up with creative new ways to present great buys to a thirsty public.

In Skokie, IL, Schaefer’s is pushing value in multiple ways. Taking a page for the Internet flash sale sites, Schaefer’s has developed its own 24-hour deals, running from noon Friday to noon Saturday. Examples, according to beverage director Mick Ter Haar, include Jordan Chardonnay for $19.97 and Ruffino Aziano Chianti for $9.97. In addition, Schaefer’s knocked out a wall between the store’s main floor and warehouse to create a back room that houses large-lot deals: 30-50 wines at a time, for which the store has stockpiled 50-150 cases of each, priced at 25-40% savings off suggested retail. The idea, Ter Haar notes, is to present the wines as great deals, not close-outs.

Vine & Table, a large gourmet market in the Indianapolis metro area, established a Pick 24 table in January 2010, showcasing 24 wines under $24. BethAnn Kendall, the wine director, points out that deals on the table rotate frequently and often include bottles that normally sell for $30. The aggressively priced display is just one of the store’s innovations since the recession began. Vine & Table has also ramped up its social media outreach, created a Champagne room, upgraded its website and become a sponsor of the new public TV series Vine Talk with Stanley Tucci.

Over-delivering
In general, these tricky economic times are keeping wine merchants more conscious than ever of the wine experience they can deliver to customers. Randy Kemner, proprietor of The Wine Country, in Southern California, recalls over-thinking the recession when it first hit, tightening inventory and stocking more well-known labels in anticipation of people cocooning and seeking comfort in brands. He now says he was happy to have been misguided, and credits his customers with teaching him that his original strategy was still the right one. For The Wine Country, with an impressively global scope and strong autonomous buyers, quality is key, and people still recognize it along with price when searching for value. We never paid much attention to Robert Parker scores, and we are manic about wine and food together, says Kemner. The stupid era in America is fading, if not gone. You have better odds of pleasing people if you have picked quality wines. Interestingly, during the recession, Kemner adjusted The Wine Country’s popular wine-of-the-month program to have a $15/bottle price cap, rather than $10. In April, a Cru Beaujolais was featured; in May, the $12.99 La Celestiere 2009 Vin de Pays de Vaucluse (red Rhône blend). Success at the higher price point did not surprise his staff, who are used to stocking eclectically and selling persuasively. The average per-bottle price at The Wine Country has only dipped $1 over the past few years, proving that there are plenty of people set on drinking well during the recession, even as they watch their pocketbooks.

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