The dot-com phenomenon has made its way into the beverage alcohol industry, and there’s no telling what the future will hold.
It was only a matter of time. First came the wave of dot-com start-ups that attracted millions of dollars in venture capital, strange ads on television and a fair amount of interest from consumers, if only for the novelty of ordering a product from a virtual store. Then, just as many of those ventures were finding themselves squeezed by competition, along came the next wave of dot-coms, this time aimed at helping businesses source products more efficiently, streamline order processing and in some cases cut out middlemen.
So, it was no surprise when e-commerce came to the beverage alcohol industry. In the past year, about a half dozen business-to-business (B2B) sites serving the wine and spirits industry have gone on-line on the Internet. And there may well be more soon.
What the sites purport to do is save retailers time and money, and expand distributor and supplier customer bases. In practice, all of the sites have a long way to go before they are universally available to retailers, but they are beginning to prove themselves, customer by customer.
How They Work
Each site promotes its point of difference — technology, industry knowledge or neutrality, for example — but they are more alike than different. In essence, these sites are extensive product catalogs that retailers can access at their leisure from their back-office or home computers. They can use these catalogs to obtain information about specific products and place orders through wholesalers. Right off the bat, that saves retailers the time of having to comb through several printed price books or catalogs to find products. But it’s the bells and whistles on these sites that will likely make e-commerce attractive not only to retailers, but to wholesalers and suppliers as well.
“This is a relatively new space for retailers that has exploded in the last few months,” said Derek Bromley, co-founder of BevAccess.com, New York. “We came at it as buyers. We wanted to see how we could pull out costs at the buyer tier of the three-tier system. We honed in on ways to save time at the distributor tier and ended up with an e-commerce solution that saves time and money.”
Each site takes product catalogs from participating wholesalers and combines them in a master database. The sites also solicit product information (such as descriptions, tasting notes and reviews), promotions and advertising from suppliers. Retailers who log onto the sites can then search for products by type, price range or distributor, access product information or find out about special promotions and discounts.
Retailers can also place orders directly on the sites. Most of the sites let retailers “shop” the master catalog, adding items to their shopping carts. Once they’ve completed their shopping, retailers can then look at the list of products in their cart and see which distributors carry them. Retailers can decide to split their orders among wholesalers, depending on product availability, pricing and relationships. An added feature of most sites is the capability to maintain a portfolio for each retailer, so retailers can easily see what products they usually order and in what quantities. Some sites are even automating the process for retailers.
The big benefits to retailers are having product and pricing information available at their fingertips and streamlining the order process. A major benefit to distributors also ends up as an added bonus to retailers, too. Time retailers save by placing their orders over the internet also is time saved by distributor reps in taking the order. That allows them to spend more time showing retailers new products or explaining upcoming promotions.
“The wholesaler has an interesting position in all this,” said Jill Glikbarg, co-founder and vp marketing of WineBuyer.com, Palo Alto, CA. “Sales reps can now go on-line to retrieve product information directly from suppliers, things like p-o-s materials, shelf talkers and tasting notes on particular brands, making salespeople even better informed. But you can’t pour wine on-line, which is where sales reps can now spend their time.”
Working Within the System
All of the B2B sites have been careful to acknowledge and accommodate differences in beverage alcohol regulations from state to state. And unlike e-commerce exchanges in many other industries, they don’t intend to (and can’t legally) cut out any middlemen.
“We truly are creating products and services for all three tiers,” said Jim Price, vp business development and marketing for Indianapolis-based eSkye.com. “We give retailers the ability to buy from distributors and we’re building systems to allow distributors to buy from suppliers.”
E-commerce entrepreneurs are working hard to actively include suppliers on their sites. Supplier advertising is low-key on most sites, but several provide an interactive feature that puts supplier information in front of buyers at opportune times. On some sites, when a retailer adds vodka to his shopping cart, for example, an ad for a site sponsor’s brand of vodka, or a promotion for a particular brand of vodka may pop up on-screen. Suppliers also get the benefit of accessing the database to find out what retailers are selling in different parts of the country.
Most site builders also suggest that distributors and suppliers can expand their customer bases by utilizing the capabilities of several e-commerce providers.
“The success of B2B sites comes down to a matter of critical mass,” said Glikbarg. “There are 800,000 buyers out there. Each one uses at least three or four wholesalers. In order for this to happen, distributors have to be willing to play with everyone and be non-exclusive. This is another channel for them, another way for them to get their book out there in front of customers.”