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Interview, Part 1: Wine.com Execs See E-Commerce Business Booming

November 27, 2017

Online retailer Wine.com is seeing growth accelerate as consumers increasingly embrace e-commerce.For its fiscal year ending next March, the company—which is majority-owned by private equity firm Baker Capital—is projecting revenue to reach $120 million, with EBITDA expected to total $4 million. Recent initiatives include an updated website and a new mobile app. Over the next five years, Wine.com has set the goal of reaching $250 million in revenue. SND managing editor Daniel Marsteller met recently with CEO Rich Bergsund and founder and vice president, merchandising, Michael Osborn to discuss the progress of the business and state of play in the e-commerce market.

 

SND: How are sales trends right now at Wine.com, and what’s driving them?

Bergsund: We’re growing at about 25%. So we’re seeing acceleration, and it’s coming from a few things we’re doing. We have a membership program that’s a bit like Amazon Prime, where for $49 a year you get unlimited delivery. We have a very loyal, passionate consumer that joins that program—about 50,000 people and growing—and they’re renewing those memberships at a rate of 75%-plus a year. We do a lot of survey work, and a few years ago our customers told us that we represent about 30%-40% of their total wine spend. These are affluent, educated folks who travel and spend quite a bit on wine. We then asked why they don’t buy from us the rest of the time. And they said very clearly that while they loved the convenience and selection of Wine.com, there were times when we didn’t have the wine they were looking for, or didn’t have the right price. So we started working on those two things.

Osborn: At the time, we offered about 5,000 wines. That’s far bigger than a traditional store and many groceries, but it wasn’t enough. So we moved to increase selection in our largest market, California. Today we offer 17,000 wines in California and other states that we service from California. If you order by 1pm, they arrive to your door the next day. In New York and states that we service from New York, we offer about 12,000 wines. We also have a footprint in Texas and Florida where we have 8,000 wines, and a smaller presence in Massachusetts and New Jersey. We’ve really leaned in on answering that demand, and customers have responded. We’ve also sharpened our focus on pricing, which is paying off.

SND: How large a territory do you cover within the U.S. at this point?

Bergsund: We cover 95% of the population. There are still a handful of states that we don’t ship to. We’d love to see free trade across the entire market, but we don’t know if that day will ever come. We have six warehouses, and a total of 38 licenses. We buy primarily from wholesalers, and we pick, pack and ship ourselves, so every bottle that goes to our customers is at some point in our inventory and handled by us. If you order from multiple wineries in the same order, it all comes in one box, which differentiates us from winery-direct sales and some of the marketplace models that exist (such as Amazon Wine), where customers are farmed out to each individual winery for the shipping and customer service component.

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