I recently read a blurb about the Wine Outlet in Seattle, Washington. A big part of owner Richard Kinssies’ positioning is bargain wines—consumer wines that have been discounted by wineries and distributors. He positions this as wines that are purposely being marketed as a bargain because of a label change, a switch to screwcap from a cork, etc.
A “closeout” wine retail model is an interesting business model and one that is not duplicated, that I am aware of, virtually anywhere else in the country.
But, why?
Perhaps I’m missing something in the wine value-chain that somebody can point out to me.
Wine is one of the few consumer goods where the general populace isn’t engendered to brand, making a “deal” an even more attractive buying lure.
Think about it. Sure wine is discounted on end-caps and promo when a new vintage is coming in, or a distributor needs to move inventory. But, this is mostly traditional retailing practice and not something that the consumer is immediately in tune with, outside of a wine that *appears* to be a perceived bargain i.e. inexpensive—this is seller action, not consumer marketing/buying tactic.
I recently picked up some Bonny Doon Riesling that was a “buy one, get one for a penny” kind of thing and these wines were a big stinking mess of petrol and suppressed fruit—scarcely drinkable, too. But, oddly enough, I wasn’t upset that the wines were crappy, I was kind of happy that I got a bargain—two bottles for $10.
Such is consumer psychology.
When I see normal wine *sales* I don’t immediately think “bargain” I think that the retailer is simply taking less mark-up than they otherwise would making me question their pricing strategy in the rest of the store. I don’t think I’m alone in this—which makes the notion of full disclosure an even more important lure.
Perhaps, taking a page from the Cameron Hughes book of marketing transparency, this is an idea whose time has come—a $10 wine that has quality at $30. But, instead of this being positioned towards a single wine in a negociant model, it extends to the retailing practice of wine in general. Everybody loves a bargain.
Costco moves merchandise with a real and perceived lack of mark-up. “Outlet” malls dot the countryside whereby name brand goods are sold for significantly less than you could get them in a branded retail outlet. I would hazard a guess that better than 50 percent of Polo shirts are bought discount; I know mine are—purchased for $25 bucks instead of $55 at a department store. Discount retailing moves inventory for the manufacturer and serves as a branding gateway drug to other high quality goods that aren’t discounted elsewhere. But, the wine industry doesn’t seem to follow. There are complementary examples to the “outlet” mall model: the “Big Lots,” “Dollar Store” or other discount retailers whereby name brand goods can be found at a significant discount.
When I buy Campbell’s soup four for a dollar instead of the normal .87 cents, I don’t get upset at the store when I have to pay normal retail, I’m glad for the deal I got previously.
This model in the wine industry? Not so much.
Wineries first argument would be “brand preservation.” But, my argument would immediately cite any number of luxury brands that engage in this model.
The wine industry even has names for wineries that sell all they make—“allocated.” The rest of the industry tries to match production to demand, sometimes less than successfully. What’s not sold is moved by the distributor, written off, tasted at charitable functions or moved into the vaunted “library” program.
Would it be healthy for the wine industry to have a proliferation of “outlets” that move otherwise dead inventory?
I think so.
Imagine with me for a second: you go to a hypothetical retail store called “The Backdoor Wine Outlet” with a tagline of “Fine Wine for Less.” The store itself is shaded from significant natural light, is kept at a constant and steady temperature of 55 degrees, consumers are offered a loaner fleece to keep the chill off, the store is well-maintained and well merchandised with recommendations for peak drinking i.e. if it’s an ’01 Cab, a tasting note would indicate that it’s best between ’04 and ’12. I then know that this baby, in addition to being discounted, in addition to being well cared for in a chilly store, is probably drinking pretty well right now. All of the wines for sale are wines that are in the 80 percent of the 80/20 rule i.e. they are not the ones with a lot of sales velocity despite being in distribution. These are wines that don’t move that quickly for reasons of attention, label design that doesn’t “pop,” label scuffing, or whatever reason there is and they need to have marketed action in order to get sell-thru.
I’m guessing that if a wine retailer, in a state with a lot of brand availability, joined Kinssies’ in this model they would see significant success. Inventory would turn quickly and repeat customers would be frequent because they know that a bargain is always at the ready and they’re likely to run into something new. If you add a “money back, no questions asked, guarantee” I’d feel confident that you could define a niche.
I have a habit of asking questions, some of which that don’t have easy answers, but what am I missing here? Why wouldn’t a re-positioning to the customer, using hallmark tactics from retailers of other consumer goods, work for the wine industry?