Internet Wine Sellers Still Woozy on Web Fumes

As we comb through the dot-com rubble, we come across a lot of failed e-commerce companies that had everything going for them but nevertheless missed the mark. They faced bad timing. Bad management. Bad luck. Some combination of the three.

And then there are all the dot-com ideas that never should have gotten boatloads of venture capital in the first place. Yes, hindsight is 20/20, especially in 2001.

But even a die-hard Web enthusiast would have to have trouble justifying the vast amount of money poured into the vats of dot-coms aiming to dominate online wine selling.

Wine.com surprised no one when it recently announced that it was laying off about 160 people. The site was left with fewer than 50 workers, a lot of them probably wondering what happened to the US$180 million in venture funding the company soaked up.

Stop Whining

The idea behind all of that funding, of course — stop me if you’ve heard this before — was to grab hold of the massive, burgeoning market for Internet wine sales.

Yes, it sounds silly now, but it must have made sense to some fairly smart people last year. Too bad there wasn’t at least one person around who was a bit less smart.

Just a Little

Funny thing is that Wine.com started out really small and kept busy carving out a nice little niche for itself as a high-end seller of fine wines.

Its original target audience was made up of people who knew what they wanted and did not have to check their credit card balance before placing orders.

It was a niche that Wine.com might want to crawl back into right now, assuming it’s still vacant. That is, if those money’s-no-object customers aren’t out kindling a campfire with their stock options right now, instead shopping online for expensive wine.

A Toast

What drew Wine.com out of its cozy niche was competition in the form of Wineshopper.com. That site had its own vat full of venture funding, not to mention the personal stamp of approval of then-Midas man Jeff Bezos.

The two companies apparently set out to outspend each other. Both hired massive staffs and threw money around. Then Wineshopper.com stumbled out of the game, blaming software woes for some of its problems.

No matter what they say now, the fact remains that Wine.com and Wineshopper.com were waging a multimillion dollar battle for dominance of an imaginary market, like two drunks fighting over a woman who wants nothing to do with either of them.

Promise, Promises

Yes, online wine sales have their appeal. Buying wine online lets the consumer avoid the humiliation of walking into a wine store not knowing the difference — to borrow from John Cleese’s “Fawlty Towers” — between a Bordeaux and a Claret.

But the interstate barriers that were supposed to dissolve did not go away so quickly. Moreover, the issue of verifying age became a virtually insurmountable problem, because technically, doing so meant delivering the goods only when someone 21 or older was there to accept them.

In other words, selling wine on the Net creates added costs for merchants without a corresponding level of consumer benefit.

Poor Blend

After pouring a lot of money down the drain, Wine.com and Wineshopper.com eventually agreed to a testy merger. The two will go on in some form, maybe forever. Yet their founders are complaining about how the venture capital has stopped flowing halfway through their grand experiment.

But is it really their fault? After all, they were drunk on Web fumes, just like everyone else in 1999 and early 2000.

Wine on the Web? What a great idea. No doubt someone actually said the words “Can’t miss.”

Missed the Party

The trouble, it seems to me, is that no one asked a skeptic to attend the meetings. Everyone was a yes man because everyone was on the same money buzz.

The hangover is going to last a long time, but will eventually fade. Let’s just hope the dot-com world remembers what the headache felt like — so that before another binge starts, someone will phone that guy who’s always doubting things, and ask him come over to splash some cold water on the party. Before things get carried away again.

What do you think? Let’s talk about it.

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Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.


2 Comments

  • It’s much too easy to jump to the conclusions to which Mr. Regan hastily leaped. Wine.com did not represent all of e-commerce, or even all of Internet wine sales. The fact is, it was based on a questionable business model — one that had only a single revenue stream. Other models have a significantly rosier future — especially as more legal shipping states come on line.

    Cheers from Napa, California!

    • 1. Merchants like K&L Wines and Geerlings and Wade who had established B&M shops and expanded into the online realm will continue to do well due to their diversified “cellar” if you will.

      2. Other online retailers like eVineyard.com will also continue to do well. Dane pointed out the labyrinth of shipping laws pertaining to alcohol in this country. Press releases from eVineyard indicate that they are 100% licensed in each of the markets they serve- accomplished by establishing facilities in those states that prohibit interstate shipment. This lends to Dane’s second quote- “others with different business models…” and is absolutely correct.

      Cheers from wine country!

      Dave

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