New York retailers get online

New York retailers get online – wine industry

Thomas Pellechia

By definition, to engage in retail is to sell a product directly to the consumer. A purist might further argue that retailing requires personal contact between buyer and seller, which is just about how it was done for centuries.

Today, however, the Internet challenges conventional buying and selling. Online shoppers eschew boundaries: They buy from sales people they have never met and from businesses they faithfully assume physically exist–somewhere. But New Yorkers shopping for wine on the Internet can rest assured that wine retailers do exist at an identifiable physical location.

Interpretation and enforcement of wine and liquor rules are the purview of the New York State Liquor Authority (SLA); one of the agency’s responsibilities is to issue retail licenses. After an applicant submits to the SLA a plan and a certified check, the bureaucracy kicks into gear with a vigorous personal criminal investigation, as well as an investigation into the applicant’s finances. In addition, the SLA solicits comments from four licensed retailers closest to the proposed new retail location; negative response from one or more can easily precipitate a hearing.

Licensing can be a slow and frustrating process, but more vexing than the pace is the fact that after extensive investigation of the applicant, the retail license is seemingly issued to the physical location. You cannot apply to the SLA for a license without architectural plans or accurate drawings for the physical location of a retail shop, plus proof that possession of the location has been secured either through a rental lease or proof of ownership. And once in business, the owner must submit for SLA approval any changes or renovations planned for the retail shop. If the owner later decides to move to another location, an application for a new license is required.

The arrival of the Internet prompts this question in the New York wine retailing business: How long will it be before the SLA-mandated retailing walls come down? To some, including this writer, the demolition appears in progress.

Bricks And Mail Order

One of the most successful New York State bricks-and-mortar wine and liquor shops is located in Westchester County, not far from the Connecticut border. Traffic at Zachy’s 5,500 square foot store has been brisk almost from the day its doors opened in 1944. Yet a great deal of the recent success of Zachy’s wine retailing (wine accounts for 90% of its sales) emanates from the store’s “Wine Gazette” mail order catalog, which developed–slowly– in the 1970s.

Retailers complained about Zachy’s mail order business from the start. After prohibition, and because of SLA regulations, licensed retail wine sales in New York became a collection of local small businesses throughout the state. Many “old-time” retailers even believed it was the job of the SLA to protect their local business from competition. Complaints or no, though the SLA has a predilection for bricks-and-mortar, it does allow mail-order retailing, provided wine is shipped within state borders (a potent wholesalers’ lobby has kept New York from being among the enlightened wine-producing states with reciprocal wine shipment agreements).

Despite Zachy’s success, and the success of other retail shops that followed suit, mail order wine retailing generally stems from the physical location of a retail shop: Most customers visit a shop at least once before they get on its mailing list, at least according to Zachy’s proprietor, Jeff Zacharia. So I asked this question: Do online buyers fit the same mold?

Then And Now

Zacharia believes that the Internet fits the same kind of mold today as mail order in the United States did in the 1970s, when his grandfather and father invested their money in that retailing trend. With that in mind, Zacharia put money into Zachy’s Internet site in November 1999, and by February 2001, Forbes Magazine ranked the wine and spirits retail site at the top of the nation’s Web retailers.

Sales figures were not available for this article (Zachy’s would say only that they are up), but two things about Internet retailing seem clear to Zacharia. He says, “Internet buyers are mostly a breed apart from in-store buyers. And not all mail order catalog buyers are prepared to shift to the Internet–so far, only a portion of customers who receive the ‘Gazette’ by mail have opted for e-mail instead.”

Still, Zacharia believes that the Internet pays off, provided the Web site is well planned and instituted. He views establishing a Web site as another “nuts and bolts” approach to doing business.

Good wine retailers spend years tasting, studying and learning about wine. Knowledge is their first stock-in-trade. Many work alone because they find it time consuming and frustrating to impart that knowledge and experience to others. But building a wine retailing Web site means having to “input” much of that knowledge.

“You don’t have to teach Web site writers about the products,” Zacharia says. “You just have to learn a few things about the technology so that you can talk to and understand the technicians; if they have done it before then they already know about a retailer’s needs. Above all, make the site easy for people to use. I have learned that there are so many Web servers and browsers, and that not all browser versions can handle all the features available. Customers must have an easy way to contact you so that you can discover problems as soon as they develop.”

When compared to mail order catalog business, the Internet provides slightly more problems and headaches. The mail order business generally relies on minimal equipment–mostly a printer and a bulk mailing system. Today, Zachy’s requires 40 in-store terminals (black boxes) to host its busy Web site, which remains connected all day. Online inventory is updated daily through a batch-out system that operates directly off the Point-of-Sale cash register system. And to sell efficiently and securely online requires a DSL communications line without which the “Shopping Cart” function cannot operate. But a few months ago the store’s DSL line Internet Provider went bankrupt, causing the site to go down without warning–most mail order businesses do not worry about a bankrupt post office.

According to Zacharia, “We are lucky to have someone on staff who is truly up on the technology. When we discovered that the site was down Richard (Anstett) got us back online within days.”

So, added to the mix of worries in Internet retailing is the possible need for a knowledgeable technical employee.

A New Sales Model Or Add-on Sales Tool?

Though scary, Web site technology is also fascinating. Internet selling takes up little time. In fact, while sales representatives are on the floor dealing with customers, their counterpart computers simultaneously and efficiently take orders online, increasing the average number of sales that the store handles each day. Yet, even with its apparent success, Zacharia sounds unconvinced, at least for now, that selling online is anything more than an alternative to the bricks-and-mortar business.

“We view the Internet as ancillary to our business,” he says. “It is not, in my view, a new business model or a new way to do business; it’s just another facet of the business.

Zacharia’s view of Internet wine retailing is shared by a gentleman who set out specifically to establish an Internet wine retail business in New York, but has had to re-think his business model.

Jeff Hock claims to be the first to apply to the SLA for a retail license with the express goal to sell wine on the Internet. He began his small wine shop in Greenwich Village in March 2000.

Unfortunately for Hock, his application forced the SLA to confront the subject of retailing on the Internet–it took three more months, and a few hearings, before the SLA issued his company, winesby.com, a retail license. While waiting, Hock paid rent on an empty 300, or so, square feet of space. To secure the wine-only retailing license (no spirits), Hock had to convince the bureaucracy that his shop was not just an Internet wine business and that it would be open to the pedestrian public. But that was not the end of the story. Since there is no sense of time on the Internet, the SLA pressed Hock to promise that he would not sell wine after midnight and Sundays, business hours that are closed to bricks-and-mortar wine retailers in New York (Good Grief–Ed.). As a result of SLA fears, Hock’s Web site includes a message to warn customers that orders placed Sunday will be filled Monday; he refuses even to logon to his site Sunday, just in case SLA inspectors are watching.

Within a year winesby.com proved that a small, New York City wine shop can succeed on the Internet, even when the shop mainly serves customers residing within city limits. In fact, the city is Hock’s market. City dwellers do not often have time to drop into the shop, and they do love the delivery service that promises delivery in most of Manhattan within 90 minutes, for a fee. And being the first to start an exclusive Internet wine retail business in New York produced a lot of press for Hock.

“The business was a success almost immediately,” he says. “The market was waiting to be tapped. Soon after I started up I received offers from other online companies to buy me out. I did not sell, of course.”

Hock works almost completely alone. He is at the shop each day to meet his walk-in customers and wholesale wine solicitors. But first, each morning he signs online to check the orders from the previous evening, and then he fills them, using a private delivery service. He gets online a few times during the workday as well.

Winesby.com does not track customers electronically and the company never sends unsolicited e-mail. Hock says, “I don’t like junk mail, and as far as I am concerned unsolicited e-mail is junk mail. I will not subject my customers to that sort of treatment. I believe that a good experience online produces repeat sales.”

Though Hock believes completely in Internet wine retailing, he has had to adjust his business model.

“I have come to understand that the Internet is really only an extra vehicle to selling wine the old-fashioned way, with personal interaction between retailer and customer. Fifty percent of my business is not Internet-generated, and only 10% of my business is completely accomplished by way of the Internet.”

The Competition Is Watching

Hundreds of wine and liquor retailers dot New York City alone–hundreds more are scattered throughout the state–yet wine and liquor retailing in New York is a small community. Zachys.com and winesby.com were being watched. So today a large number of the old bricks-and-mortar retailers are online. What separates zachys.com and winesby.com from most of the rest is spelled out by Hock in this sentence: “I assume that the consumer is online to shop, not to be educated.”

The rest of the online New York wine retailing community seems less concerned about attracting new customers and more concerned about imparting information. According to Julie Comroy, sales manager at Astor Place Wines and Spirits in Manhattan, the store’s Web site was established with no particular sales goal in the plan.

“I don’t believe the Internet will replace human interaction,” she says. “It is really just another way for our existing customers to place orders and for future customers to learn about us. The site is up for the convenience of existing customers, for promotion purposes and to impart information.

According to Comroy, Internet traffic at Astor’s site has doubled in the past year, but sales on the site account for less than 5% of the store’s overall retail wine sales. The low sales percentage is a likely result of the site’s layout–it is heavily weighted toward regional information, wine and food pairing, and promotion of special events and tastings at the store.

Ian Griffith oversees the Web site for 67 Wine and Spirits, an uptown New York City retailer. He agrees with Comroy when he says, “It is not realistic to expect we will drive sales on our Web site. It is mostly for promotion and for information, plus we run a separate site for wine auctions.

Any e-mail contact that 67wine.com makes with customers is targeted to reinforce the concept of a knowledgeable staff at the store, almost guiding potential customers to pay a visit. And, according to Griffith, 67wine.com has settled for lower standards so that the site is usable for just about all who sign on– complicated uploading graphics are at a minimum.

What Does The Future Cost?

After paying initial connection fees, which are relatively low, selling wine at retail on the Internet quickly becomes expensive. The money goes to an upgrade to DSL technology, security encryption software and to credit card processing fees, which are added to bank and private card company processing fees. And then there is the expensive shopping cart technology, the innovation that allows customers to “fill” a cart online without having to bounce back and forth between the inventory list and an order form. But the combined Internet sales records of Astor Place and 67 Wine and Spirits probably would not justify investing in the shopping cart software. Both stores, as well as Jeff Hock at winesby.com, save processing money by accepting orders from an online order form or by e-mail, and then they process orders off line through the cash register. The orders are followed up with a confirming e-mail. But even this system costs money as it takes up extra staff time.

Though the success of online wine retailing in New York has yet to prove definitive, those who ignore the general trend toward online retailing will likely pay a price. That is what Darrin Siegfried believes and it is why he had the Internet in his plan when he opened his shop in one of Brooklyn’s fast-changing, old neighborhoods. To Siegfried, his store, Red, White and Bubbly, will grow vertically, and that means he must also reach out to potential customers on the Internet. But he echoes much of what other wine retailers say.

“I believe that Internet wine customers will fall into two categories: the collectors and the regular customers who have already visited the store and can trust shopping online.”

Personal Net Experience

Six months ago, and after a protracted battle with a community board, I received a license to sell wine at my newly-established bricks-and-mortar retail shop located in Manhattan’s East Village neighborhood. After a brief past experience with marketing and selling on the Internet, I was unconvinced that it was a tool I could use to sell wine. In fact, I believed it was best for my shop if I used the Internet as a tool for imparting information only. And then, after talking with our lawyer about the SLA’s attitude toward the Internet, my partner and I were sure it was best to drop the subject from our license application.

I am not so sure about wine retailing limitations on the Internet today. I believe the Internet will change the way wine is sold at retail in New York, but I still wonder when and how the change will take place. Specifically, I wonder when the regulatory system will understand and acquiesce to the new world of retailing. More importantly, I wonder how much change the restrictive SLA system will allow.

(Thomas Pellichia is a wine retailer in Manhattan and a freelance wine and food writer, columnist and author.

RELATED ARTICLE: Business Models And Samples

Before the SLA signs on to Internet retailing, wine retailers need to take a closer look at their business models for online selling. A quick search online easily shows why zachys.com and winesby.com are successful. Most of the rest offer an abysmal array of sites that are either difficult to navigate, not regularly updated or (worst of all) overly boring displays of pomposity. One retailer’s site knocks the competence (not to mention candidness) of its implied competitors, which is neither an advanced nor an endearing sales technique whether off or online.

The following list is a sample of New York retailers online: zachys.com; winesby.com; astorwines.com; 67wines.com; sokolin.com; sherrylehmann.com; garnetwine.com; iswine.com; wineaccess.com.

RELATED ARTICLE: 2,000-Year-Old Wine Reported In China

A bottle of 2,000-year-old wine sealed in a bronzeware container has remained locked for over a decade, since archeologists recovered it from a grave occupied by an official of early Eastern Han Dynasty (25-220) in Beihai, a scenic beach city in southwest China’s Guangxi Zhuang Autonomous Region, according to local news reports.

The bronze vessel, with hoop handles and decorative patterns, carries same 5 kilograms of wine, which is supposed to be the oldest so far found in the world, It can be felt moving around inside if shaken. Conservators here say that as a valuable article buried with a master, the wine must be pure and aromatic.

The archeological site of Hepu County, Beihai, was one of the departure ports along the ancient Sea-Bound Silk Road, linking trade between China’s coastal region and the Middle East and Europe over 2,000 years ago. It should have been normal for a ranked official to keep foreign wine in his afterlife.

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