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Plan to start a long tail online wine store?

Ever thought about selling niche wines on the internet?

Here’s a business venture to do with the long tail of wine. It is what I put on my About Page a couple of years back:

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My Story – the looong version

I had this great idea. I’d create a website that appealed to all those wine connoisseurs who loved niche wines.

I’d work with wine retailers around the world, to offer niches, to wine lovers around the world. Central Otago Pinot Noir with a Central Otago wine store, Napa Valley Merlot with a Napa Valley wine store, the best of Bordeaux with a Paris, ahhh no wait, a London wine store (errr… make that wine retailers and drinkers who could speak English!).

I’d help wine drinkers explore little known varietals from little known regions. I’d work with Masters of Wine, wineries, regional wine trade organizations to show the world how exciting wine was, using the best of technology, and the best of online marketing.

I created a business plan, I had (actually have) a live website that tested the idea, I spent $10,000s on the technology from eCommerce to internet marketing.

I actually was achieving some remarkable results. I was on the first page of Google for my chosen keyword terms, my Google Adwords had a high CTR and a low bid price, given the size of the business and the lack of price competitiveness (about 10% higher than the market) I was getting good conversions – not enough to make a living but respectable for a tiny niche from a small store in a small town.

This was 2008. Then I did some detailed competitive analysis in my major market – the US.

Bugger.

A Silicon Valley funded company, snooth.com, had bet me to the market by a couple of months! Not only had they deep pockets of venture capital cash but they were miles ahead of me in their understanding of the legal shipping compliance issues in the US market…

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A key learning from this experience is the disadvantage of not being within 15 miles of your consumer. This learning was one of the things that led to the development of MyLocalWineStore.com, the forerunner of this website.

The Wine Marketing Plan

Anyhow here’s the key part of the wine marketing plan that was aimed at a particular group of wine drinkers called Experimenters and their particular needs.

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Wine Market Segments

Some Aussie researchers segmented the Australian wine market and found five wine-related lifestyle segments.

They were:

  • Conservative, Wine Knowledgeable Wine Drinkers (20.9% of wine drinkers)
  • Image Oriented, Knowledge Seeking, Wine Drinkers (22.3%)
  • Basic Wine Drinkers (16.8%)
  • Experimenter, Highly Knowledgeable Wine Drinkers (19.0%)
  • Enjoyment Oriented, Social Wine Drinkers (20.9%)

The Experimenter Segment

  • The consumers in this segment share the same connoisseur tendencies and the interest in the provenance of the wine and the associated rituals as Conservatives and Image Oriented.
  • What separates them (in part) from those other two segments is their very detailed knowledge of wine and wine-related subjects. This segment had a significantly higher mean general wine knowledge score than the next highest scoring segment.
  • Although they have this detailed knowledge, they have the desire to learn more and are therefore updating their knowledge on a regular basis.
  • They are also likely to be well-educated, male/female ratio = 70:30, with household earnings in excess of $75,000 per year.
  • The other main distinguishing factor is their approach to buying wine. They like to take a risk when buying wine and they are keen to drink wine that they have not tried before. They are experimenters in their wine buying.
  • They are also keen to ask for advice and seek information about the wines they are considering. This is consistent with their quest for knowledge and their interest in the provenance of the wine.
  • This can also lead to spontaneous buying of wine – perhaps a sales person has recommended a wine and provided information about that wine and this consumer is happy to buy something different based on that recommendation.
  • As a result of this experimenting approach, they do not have a safe set of brands from which they purchase, although it is likely that they become brand loyal to those wines that meet their ‘experimenting’ needs and wants.
  • Their preferred retailers are fine wine stores.

The Aussie researchers were Johnson and Bruwer (2003). The description below is from my own experience and speculation.

Experimenter Typical Occasions

  • fine dining at home or at a restaurant with close friends
  • at home relaxing after work
  • wine tasting, events or tours

In comparison some other segments’ typical occasions

  • Drinks with the girls on a Friday night (Social)
  • Premium Wine Bar with colleagues and boss (Image Oriented)
  • BBQ in the weekend (Basic)

Personification

  • Imagine a 45-year-old  lawyer.
  • He doesn’t really care what people think of his clothes or his car, though he does appreciate authentic, high quality, crafted products.
  • He’s quite introverted (or doesn’t like small talk) though he still likes sharing a good bottle of wine with friends at a fine dining establishment in Manhattan, NY.
  • It’s important to him that he comes across as being knowledgeable and discerning but not flashy or egotistical or a ‘wine snob’. He wants to feel relaxed and confident. He likes to try all sorts of different wine varietals and wines from different regions. He likes taking risks on wines he hasn’t tried before and doesn’t have a set of safe brands he sticks to.
  • He reads the Wine Spectator magazine as well as various wine blogs and wine websites such as www.winelibrary.tv. He goes on wine tours in the States and goes out of his way to attend local wine tastings and events. Anything that extends his knowledge of wine interests him, intensely.

He might look like this (man in glasses):
inspiring businessman

The Experimenter – IS / IS NOT

IS

  • Highly Knowledgeable about wine
  • Inconspicuous, does not make untoward public displays of knowledge
  • Risk takers
  • Quest for knowledge, seeks advice, reads media
  • Keen to try wines not tried before
  • 70% Male
  • High Income
  • (e.g. average of AUD$75,000)
  • On average Younger (estimate of 35-49)
  • Tertiary Educated
  • Professional
  • Buys from Fine Wine Stores
  • Shops for variety
  • Spends on average (median) AUD$17.40 per bottle
  • Buys 1.92 bottles per week (median)

IS NOT (versus other selected segments)

  • Has only a little knowledge (Image Oriented)
  • Pretentious wine “snob” (Conservative)
  • Safe Brands (Conservative)
  • Does not seek advice, has “enough” knowledge (Conservative)
  • Uneasy about trying new wines (Conservative and Image Oriented)
  • 60% Female (Social)
  • Medium Income
  • (e.g. Social’s average of A$50,000)
  • Older (Conservative and Image Oriented)
  • Secondary (Basic)
  • Blue Collar
  • Buys from national liquor chains (Basic and Social)
  • Makes safe brand decisions (others)
  • Spends on average AUD$12.20 (Social) and AUD$15.60 (others)
  • Buys 1.04 (Social), 1.6 (Basic, Conservative) and 2.08 (Image Oriented) bottles per week

How the Experimenter reduces risk

Johnson and Brewer in 2004 researched risk reduction strategies for segments outlined in their 2003 research above.

They found that Experimenters used the following strategies to reduce risks depending on the wine price point:

<AUD$15 per bottle (Basic ~US$7)

  1. Rely on favourite brands
  2. Price
  3. Rely on well known brands

AUD$15-25 per bottle (Premium ~US$7-14)

  1. Opportunity to try before buying
  2. Seek information before buying
  3. Price

>AUD$25 per bottle (Super Premium ~US$14+)

  1. Seek information before buying
  2. Opportunity to try before buying
  3. Price

Seeking information before buying” is either the first or second risk reduction strategy an Experimenter has for the higher price ranges.

In comparison the Conservative segment would rely on favourite brands for the middle price point then look to have an opportunity to try for the other two price points. The Image Oriented segment would look to try before buying except for the bottom segment where it would rely on brands.

Note the major disadvantage of online stores is their inability to offer tastings. The major advantage is the ability to offer extensive information.

The Long Tail Wine New Venture

The offer is based on the theory of the Long Tail (Anderson, 2006) ,

…our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.


Traditional retail economics dictate that stores only stock the likely hits, because shelf space is expensive. But online retailers (from Amazon to iTunes) can stock virtually everything, and the number of available niche products outnumber the hits by several orders of magnitude. Those millions of niches are the Long Tail, which had been largely neglected until recently in favor of the Short Head of hits.


When consumers are offered infinite choice, the true shape of demand is revealed. And it turns out to be less hit-centric than we thought. People gravitate towards niches because they satisfy narrow interests better, and in one aspect of our life or another we all have some narrow interest whether we think of it that way or not.”

There are 191 wine grape varietals from 38 wine producing countries and hundreds of districts.

Experimenters are restricted to a relatively small number of wines (perhaps two dozen varietals from a dozen countries) in their local fine wine store due to the constraints of physical shelf space and distribution. They can try to explore wines through knowledgeable retail salespeople in those stores, at wine tastings events, wine tours, wine magazines and newspaper reviews. They could also join mail order wine clubs.

Despite these ways of finding wines in the “offline” or physical world, by and large these channels and media are hit (or mainstream focused) and my speculation is that they do not satisfy Experimenters desire for appealing niche wines (the odd wine tasting and wine tour aside).

Online wine stores have filled some of the gap – two dozen countries and three dozen varietals in wine.com but there are so many more wine niches to explore.

My venture concept was that despite the birth of online wine stores and wine related websites Experimenters have yet to be shown the long tail of wine. Even when there is a larger choice than normal they are unable to sort and filter wines in ways that make most sense to them.

Therefore there is still a latent demand for long tail niches in the wine market.

Anderson (2006) in his book The Long Tail says,

The secret to creating a thriving Long Tail business can be summarzed in two imperatives:

1. Make everything available.

2.  Help me find it.”

The following website concept is based on the speculation that most wine niches are not in practice available, and that long tail consumers need more guidance and advice in filtering wine options to make a purchase choice.

Here’s the specific online eCommerce product features to find those wines:

  • Categorization by varietal, region, vintage, various profiling methods (e.g. body, aroma); be able to dig deeper into a particular area of interest by filtering categories (e.g. $30-40 wine, Pinot Noir, Bannockburn, 2004, black cherries, medium body)
  • Detailed wine descriptions including tasting notes (colour, aroma, dryness, body, acid, tannin, length), viticulture (e.g. location map, clones, yield, brix at harvest, soil, growing degree days, frost and rain), wine making (e.g. winemaker’s name, wine making process, % new oak barrels, alcohol %), wine labels.
  • Regional wine information by subregion, varietal, personalities.
  • Standardization of SKUs – ability to compare apples with apples e.g. Mt Difficulty Pinot Noir 2006 is not the same as 2007 yet the barcode is the same. This makes it tricky to computerise, categorise and compare.
  • Reviews by professional wine writers and the amateur wine community assessing quality (e.g. intensity, complexity, texture, balance, and length) and recommendations.
  • Ratings and competition medals awarded with the ability to categorise (or filter) wines by ratings, medals and competitions.
  • Simple and Advanced Search ability.
  • Recommendation Engine using “also purchased this” process based off other customers’ sales data.
  • Recommendation Engine using technical analysis of preferred wines or styles to suggest wine brands based on that customer’s specific preferences.
  • When reading a wine blog or article can use a hyperlink to easily purchase interesting wine (strong sales affiliate network).

Note its for the knowledgeable Experimenter who wants this information. If you choosing another target market you may not feel obliged to offer this amount of technical information but perhaps rather more emphasis on social proof in terms of ratings and other customer reviews.

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For you wine marketing geeks here’s the sources:

Anderson, C. 2006. “The Long Tail. Why the future of business is selling less with more”. Hyperion.

Johnson,  T, & Bruwer, J. 2003. “An Empirical Confirmation of Wine-Related Lifestyle Segments.”  International Journal of Wine Marketing Volume 15 Number 1 2003

Johnson,  T, & Bruwer. 2004. “Generic Consumer Risk-Reduction Strategies (RRS) in Wine-Related Lifestyle Segments of the Australian Wine Market” International Journal of Wine Marketing  Volume 16 Number 1

Thach, L, & Olsen, J+ 2005. “The search for new wine consumers: Marketing focus on consumer lifeStyle or lifeCycle?” International Journal of Wine Marketing, 16 ~4

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  1. […] This post was mentioned on Twitter by Bruce McGechan. Bruce McGechan said: Plan to Launch a Long Tail Store Selling Wine Online? Read about why or why not. #wine #retail #marketing #ecommerce http://bit.ly/cnw9r7 […]

  2. […] a previous post about my Long Tail Wine Marketing Plan I wrote about a particular market segment called the Experimenter. This keen group of wine drinkers […]

  3. […] Advantage vs Pure Play Internet RetailersApril 19, 2010 · 0 commentsIn previous posts  A Plan to Launch a Long Tail Store Selling Wine Online and  The Long Tail Wine Website I outlineda wine drinker type, called the Experimenter, who wanted […]

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