eVineyard’s Vintage Strategy

Online wine seller eVineyard is almost 3 years old, but its challenge began almost 70 years ago. In 1933, the 21st Amendment repealed Prohibition and turned over regulation of “intoxicating liquors” to the states. To become a nationwide wine retailer, Oregon-based eVineyard had to deal with 50 diverse and frequently bizarre sets of regulations.

Instead of lobbying to change laws and skirting regulations by becoming “brokers,” like competitors Virtual Vineyards and WineShopper.com did, eVineyard decided to obtain retail licenses in each state. Like Aesop’s tortoise, the company spent months deciphering laws and getting approvals. Meanwhile, the “hare” competition ran ahead with big ad campaigns, media coverage, huge projected sales, and eventually a merger — and ran through $260 million by May 2001. How do eVineyard execs know that? Because they read their competitor’s bankruptcy filing and bought some of its assets.

eVineyard, whose Web site is now known as “wine.com by eVineyard,” spent about $31 million total, with $2 to $3 million just for the state licenses, says vice president and chief marketing officer Brett Lauter.

Besides the cash it saved, eVineyard boasts the hefty margins of a retailer — 30 to 50 percent — versus just 5 percent that others made as middlemen. It also saves big money on warehousing. Because the feds require wholesalers as part of each state’s liquor-sales system, eVineyard carries almost no stock, even as it offers 5,000 wines for sale on its Web site (www.wine.com). When a customer orders, the request is batched that day to eVineyard’s local wholesaler. The order is assembled at one of eVineyard’s 11 logistics centers, and sent out, all within days.

Best of all, company execs expect profitability early this year, proving the moral once again: Slow and steady wins the race.