Sherlock’s, On the Case

For those who have been active in wine and spirits retailing over the past few decades, the recent rate of change has presented both problems and opportunities. The men behind Atlanta, GA, area beverage alcohol retailing powerhouse Sherlock’s and Sherlock’s Wine Merchants — majority owner Doug Bryant and partner and general manager Craig Maske — understood this as they watched the retailing landscape shift, with outlets like drugstores and supermarkets angling for a bigger piece of the business, with Big Box retailers nibbling at the edges, and with the crash of 2008 reconfiguring the top end of the wine business.

And then there was the evolving consumer desire for the opportunity to shop at more spacious, clean and well-organized stores, modern ones that offered the best-sellers but also focused on innovative and new spirits and beers as well as wines from emerging regions. Clearly, they realized, modernizing their stores and upgrading the customer shopping experience was essential for them in order to maintain a successful position as one of the largest purveyors of beverage alcohol in the state of Georgia and among the nation’s best fine wine merchants.

It wasn’t that the stores were dowdy, and the Sherlock’s brand in the Atlanta area has always stood for quality beverage alcohol backed with supportive, educated and helpful staffers, so there wasn’t any change needed to improve their image in the market or their sales personnel. But since their business was launched in the 1980s, there have been many changes in retailing beverage alcohol, some of which required a bit of a rethink about how best to serve loyal customers and encourage new ones to explore, experiment and experience.

“We’ve been in this business since 1986, and for instance during the 90s and 2000s, the trend was to have big floor stacks of product available,” says Bryant. “And so we had a lot of pallet stacks serving as the main merchandising in our stores. What we’ve seen recently is a tremendous amount of new product introductions, line extensions and flavors and so forth and we figured it was better for us to go away from the big displays – though we still have some of them – and instead put these products on a type of shelving display that would allow us to provide more horizontal exposure and broaden our portfolio for our customers.”

 

Modernizing As Needed

To make that happen, it meant renovation of some of the stores, each of which has well over a million dollars invested in inventory at any one time. The most recent changeover took place at one of the two large Marietta, GA, operations, with the final punch outs and tweaks being crossed off the list in early June. The other large unit was spruced up last summer, and in Atlanta proper, the Buckhead area Sherlock’s Wine Merchant store moved into a new building at the its long-term shopping center location a couple of years ago.

The pair has gone about their upgrade steadily, as needed. With around 50 employees at five operations — three shops focused on wine and beer within the Atlanta neighborhoods of Buckhead, Decatur and Brookhaven, the other two full-fledged 15,000 to 20,000-square-foot stores in Cobb County that also carry spirits as well as cigars and accessories — choices need to be made ad hoc. Additionally, Sherlock’s has teamed with local retailer and industry leader The Cook’s Warehouse in their Brookhaven and Decatur wine-focused stores, creating a fairly unique pairing with high-end cookware, including Le Creuset pots and pans, Wusthof knives and a wide variety of appliances, culinary gear and kitchenware with Bordeaux, Burgundy and lots of superpremium California names.

[At the Wine Merchant stores, the beverage sales breakdown is about 20% beer and 80% wine; overall, at the five stores the sales percentages are about 40% wine, 40% spirits and 20% beer.]

Modernizing was in part driven by competition. “The advent of chains into our industry was part of the reason why we undertook these changes,” says Bryant. “Even though we’re fairly large, we’re also small enough to be flexible and move quickly. We need to meet our customers’ needs if we want to continue to be a leader in the marketplace.”

“We created a complete package in both the big stores with updated graphics, with a sharper, cleaner, more modern and up-to-date feel as opposed to our first generation of retailing stores, with all the major brands piled high on the floor and lots of boxes visible,” says Bryant. “And all indications for us is that this has been a positive change for our business.”

With so many different types of retailers looking at beverage alcohol, wine and beer in particular, and the number of outlets increasing, standing out as a specialist is crucial. “We recognize that; we already have an educated staff on the floor to assist clients, and now we have a clean, fresh shopping environment and an in-depth portfolio, so it’s less appealing for our customers to pick up their bottle of wine in one of the many other outlets that are trying to get into the business and more appealing for them to come to us.”

 

Personalizing Displays

Bryant notes that merchandising trends have dramatically changed as have customer shopping needs, and today there’s far less appeal to enormous floor display extravaganzas centering on holidays — Santa sleds and trees at Christmas, barbecue sets, beach chairs and tents during the summer, for example. Today, floor space is too valuable to expend on any one brand, and many retailers prefer to have in-store displays personalized at the unit level. In addition, the quality of displays now available from suppliers has decreased, says Maske, making a do-it-ourselves approach likely to work better. “We now personalize the displays in the store ourselves. That approach brands Sherlock’s better in our customers’ minds, and also gives a sharper, crisper, less confusing and chaotic shopping experience for the consumer in general.”

While the square footage of the two full-fledged wine and spirits stores hasn’t expanded, the reset has created a more flexible shopping space. “It’s enabled us to offer a broader selection, more skus and to show them to our customers in a more efficient and better categorized manner,” says Maske. Aisles are easier to maneuver, and now all signage of any type is branded with the Sherlock’s logo. “Whether it’s a sign for cabernet sauvignon or anything else, there’s a much bigger focus on Sherlock’s as a brand, which we think is important to reinforce the changes and emphasize who we are,” says Maske.

Bryant uses flavored vodkas as an example of the ways sudden shifts in consumer interest means retailers need more flexibility in buying and merchandising. “With all the flavors and brand extensions, it’s harder to show the consumer these different products and flavors by just putting them on display the way we used to. This cleaner style creates an environment for the consumer that encourages them to stay in the store longer and that affects the dollar ring.

“There’s been a tremendous influx of product line extensions, new brands and so forth and we feel like this gives us a better environment in which to feature them,” says Bryant. Of course, not every brand extension and innovation makes it onto their shelves. “New products have to fit in our portfolio, and each time we have to consider whether we need multiple items in the category or if we already have a sufficient number,” says Bryant. “It’s the challenge of being a retailer. But today, getting those innovative brands – whether craft beers or spirits, the new packaging formats for wines and so forth — into the hands of our customers, we feel like were doing a good job with that.”

In addition to opening up the space in their recently renovated Marietta store and providing improved graphics and lighting, Sherlock’s execs has taken advantage of the reset to increase point-of-sale information and shelf notes to enhance focus on the expanded product selection and to better merchandise and market all their selections. In the case of new products, especially craft beers and spirits, available only in allocated supply, the new set-up allows the store to present such brands without worrying that they will be lost among giant displays and the bells and whistles once used to drive sales of a single brand. That approach gives the craft or niche brands a greater opportunity to find success with customers without the need to invest in excessive inventory for brands that ultimately don’t perform, says Maske.

 

Local Demographics

These three distinct types of operations – two Sherlock’s Wine Merchants operate in co-location with the high-end cookware outlet while one stands alone, and the two large stores carry spirits as well as wine and beer — makes even more complex the calculation for selecting different products for each store. “It’s definitely different, but we handle it by buying wines in the stores based on the market and the demographics of the area. We feel like it’s important within our stores to have an educated manager in each one who keeps up with the trends in each sub market and we give them the flexibility based on trends they’re seeing and experiencing, to make those decisions, overseen by Craig for all the stores,” says Bryant.

In the stores that have teamed up with The Cook’s Warehouse, the two disparate retailers work synergistically. “We tried to marry the food and wine element together in one store, bringing a comprehensive wine portfolio together with cookware, cooking and wine classes, tastings and more,” says Bryant “It’s a pretty neat concept putting the food and wine aspects together, and where it works, it’s great.” As within many states, Georgia stores are not legally allowed to sell food items in tandem with alcohol, but the cookware connection has been inspired in creating a different sort of shopping experience, and with both cooking classes and wine seminars on-site, the stores have been able to establish brand loyalty with both types of customers.

The different sub-markets and formats means each Sherlock’s offers a different product mix; the Brookhaven store may be more focused on New World wines while other units might better serve their long-time customers with a wider selection of classic Old World favorites, or more Spanish wines. The Decatur Wine Merchant unit is located in a very trendy area of the city where craft beer and cider are hot, especially among younger consumers, and so the selection there is adjusted accordingly. The number of skus will be roughly the same in the Wine Merchant units, as they are in the two larger stores, says Maske, but each will have a different array of wines, and a different price point skew as well.

While Sherlock’s has long been known and maintains its reputation as THE Atlanta area destination for Grand Cru Bordeaux, rarefied Barolo, rare Burgundies and other classic fine wines, and the sort of personalized service such wines deserve, trends are as important to them as any other retailer, making specific market trends important. For instance, concerning the current red blend boom, a brand like Apothic does well in the larger stores in Cobb County, while brands more aligned with old world blends, Bordeaux or Spanish style, perform better at the three Wine Merchant units.

Even the moscato boom, whose epicenter is Atlanta due to the public’s fascination with their infamous TV housewives, had a bigger impact in some neighborhoods, whether due to demographics or other factors, and those sorts of wines are doing better in the larger Cobb County stores. With downward price pressure on the high-end fine wines proudly featured since the chain’s inception, the differences in how wines at different price points perform store to store has shifted as well — the Buckhead store in one of the city’s most prosperous neighborhoods price points still can support high-end wines, while Cobb County stores are more mass market.

 

Craft Trends

As with most retailers, Sherlock’s works hard to make sure they are in tune with current trends; while flavored vodka line extensions are slowly settling down, shedding the confectionery flavors and becoming more fruit flavor focused, the bourbon and moonshine boom is in play, especially as newer brands emerge. While Georgia has long been known as a gin market, Maske points out that’s mostly down to the popularity of Seagram’s and its flavor extensions rather than a general upsurge, though there has been some impact as cocktail fans among their customers head for the higher end and specialty gins.

“Craft spirits and craft beers are where the consumer is looking for new experiences,” says Bryant. “That’s one where the younger demographics’ interests lay – local, craft, small batch, even local moonshine.”

Atlanta is starting to become better known for craft beers and a new distillery is being built in the downtown area, so the two expect that part of the beer and spirit business to only increase in their area. “The number of breweries that have cropped up in the past few years has been significant around here,” says Bryant.

Sherlock’s did try accommodating brew fans with a growler program at their Decatur store last year, but that was around the time the local market exploded with independent stores that were growler-only, and perhaps because the local market was already flush with other beer-focused businesses, it didn’t take off, and so they eliminated the program. But it’s a sign they are willing to stay current.

“We’re always striving to make sure we’re competitive not only in the state of Georgia but with all the other options available to consumers,” says Bryant. “We work diligently to that end.”

 

Keeping In Touch With Customers

Sherlock’s has always had a great area reputation for fine wine, but with wine as a whole only accounting for about 40% of business and with spirits increasing steadily its share of beverage alcohol, keeping in touch with customers about any changes, specials, new products and such has become the stores’ main form of marketing, “Our biggest marketing effort is an organically developed customer list,” says Bryant. “We send out weekly emails listing our specials and new products, perhaps along with some seasonal promotional ideas. We do some print advertising and, of course, we’re on Twitter and Facebook and our own webpage. In Georgia, we can’t sell online, so we concentrate on building the email database to promote special pricing, discounts, tastings and such on a weekly basis.”

Above all, the two execs figure Sherlock’s major advantage in the Atlanta area is the loyalty they’ve developed with both their customers and employees – many have gone on to careers in wine and spirits at the wholesaler or supplier level — and the unique position of being both large and independent, a local retailer with a high level, national reputation. “I sometimes think of us as a sort of breeding ground — our people are passionate and tend to stay in the industry. It’s a point of pride with us to be a part of that,” says Bryant.

“It’s also a point of pride that we’re local — we are local, artisan retailers with the advantage of a bigger corporate entity because of our size and scale,” says Bryant.

“A client yesterday was in the store and he made the point that he comes to see us because we’re competitive in the market and have a great shopping environment, sure, but his point was we have a staff here to talk about what we sell and they know him,” says Maske. “There are lots of customers who want personal contact, and we build relationships that aren’t available at a big box retailer.”

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