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“Flash” Wine Sites Proliferate As Consumers Search The Internet For Better Deals

November 15, 2011

On a recent Monday, website winebandwagon.com was selling Riverbench Chardonnay for $15, with a three-bottle minimum purchase. Wine.woot.com was offering five-packs of Silverado Vineyards 2009 Sauvignon Blanc for $59.99. At WineShopper.com, selections included a Novelty Hill 2008 Cabernet Sauvignon at $14.99—40% below the suggested retail price.

Such deals from these “flash” wine sites become available for limited periods and in limited quantities, all at significant discounts. It’s a trend that’s making waves with wine retailers, as consumers move online in search of better deals.

“It’s an interesting way for (wineries) to introduce a new product or create awareness,” says Amy Kennedy, chief marketing officer at wine.com, which operates the flash site WineShopper.com. “It can also relieve inventory pressure, and the limited-time, limited-quantity nature makes it seem like you’re getting a steal.” The sites also provide access to wines that can be hard to find. “Many of our wines aren’t widely available to the public,” says Jason Seeber, co-founder of TheWineSpies.com.

Some site operators bristle at being called flash wine retailers, because it implies the sale of close-out, over-stocked or no-name brands. In fact, flash wine sellers can include any site offering limited quantities of wine for a limited time.

Lot18 co-founder Philip James says his company focuses more on providing hard-to-find wines. “We don’t consider ourselves a flash sale site, in that we’re not selling wine at 50% off until it’s gone,” he says. “That’s reminiscent of the bargain bin at a retail store. Sometimes we sell at a discount, but not always.”

Ryan Systma, co-founder of the recently launched People’s Wine Market site, is forthright in saying that his business plan includes taking excess stock off the hands of wineries. “We saw that this could be an opportunity in a way that’s not a brand killer,” Systma says, noting that his firm focuses on small, family-run wineries. “We’re trying to help family winemakers move extra cases while also expanding their audience.”

But most sites do promote big discounts—usually 25%-50% or more. WinesTilSoldOut.com, for example, offers a wine a day at 30%-70% off. David Studdert, president of Wine Country Connect, which links wineries with flash site wine.woot.com, says consumer perceptions are evolving. “People have become accustomed to heavy discounts, but the needle is moving toward more realistic pricing,” he argues. “It’s not set at 40% or half off, it just has to be a better price.”

At TheWineSpies.com, all pricing is set with the winery’s blessing. “We’re not about excess inventory or dumping,” Seeber says. “That’s ultimately very bad for the trade, because 60%-70% off is hard to correct.”

Wine importers and producers aren’t averse to flash sales. A look through the wines offered by these sites suggests that any stigma is eroding quickly. “The flash sale sites are our customers—they’re retailers like any other retailers,” says Martin Sinkoff, director of marketing-fine wine, Frederick Wildman and Sons, Ltd. “Sometimes it’s not possible to meet their pricing, so we have to pass. But if it won’t damage the brand, then absolutely.”

The sites can also be a godsend to producers without broad distribution. Hilary Graves, owner of Graves Winegrowers Inc., has used Lot18 to sell and promote her wines. “It’s a very helpful tool to get my wine out to a larger audience,” Graves says. “I only have 600 people on my mailing list, but Lot18 has around 600,000.”

Some sites leave the distributor out of the equation entirely. The Wine Spies, for example, holds wholesale and retail licenses. WineShopper.com takes a different approach. “Ours is still a retail model, unlike the other players in this space who act more as marketing agents,” says Kennedy. “We’re working with wholesalers, because as a retailer we’re bound to the three-tier system.”

Sites that act as marketing agents (meaning the sale qualifies as a winery-to-consumer transaction) usually have a structure in place so that the individual winery isn’t directly involved in fulfillment. That would be daunting, particularly for smaller wineries. At Lot18, for example, James says wineries contract with a warehouse for space, although Lot18 itself handles payment for the space. “It’s a service we offer the winery, although we’re not involved in the selling of the goods.”

All these companies say they follow the letter of the law, whether acting as retailers or as liaisons to market wine directly from wineries to consumers. Wine laws are complex, but shipments direct from wineries are allowed in all but 12 states nationwide. Restrictions on retailers, however, are more onerous. Some traditional retailers argue that certain flash sites skirt the law, shipping to states that don’t allow retailer shipments.

Flash sites began to proliferate when the economy tanked in late 2008 and wineries began to accumulate excess stock. That situation will likely change, but flash site operators insist they’re here to stay. “There’s an infinite amount of wine,” Seeber says. “I’m not worried about running out.” But he does anticipate a shakeout in the number of flash site players.

Kennedy of Wineshopper.com says there will always be a role for these sites, because consumers have become accustomed to looking for deals. “At the end of the day, the players with the strongest supplier relationships will end up thriving,” she says. “The ones who can negotiate the best deals will carry the business forward.”

 

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