When Wine.com CEO Rich Bergsund found out Amazon was entering the online wine market, he was terrified he would be put out of business.
"My first thought was one of dread," Bergsund says. "Then I realized I needed to think of a way to compete."
Bergsund figured his business had some distinct advantages over Amazon.
"A big retailer will never be able to offer the same service or selection as a specialty business," Bergsund says. "If small businesses realize their strengths, they can stop fearing the 800-pound gorilla."
Over a business lunch, Bergsund began sketching on a napkin and realized his selection, infrastructure, information and customer service were better for wine buyers.
Use Your Advantage
As Bergsund saw it, the only advantage Amazon had was Prime, its loyalty program. So he decided to create a loyalty program of his own. The Steward-Ship program is $49.99 and allows the customer to enjoy free shipping for a full year.
Bergsund's program gave him a distinct advantage, because Amazon still charges by the bottle for wine shipping, even with Prime.
"I figured out for a mixed-case of wine, it could cost almost $100 to ship," Bergsund said. "For our loyalty program members, it's free."
Startups and small businesses can play up their strengths the same way Wine.com did.
"Amazon is the threat to specialty retailers online, like Target and Walmart are in the physical world," Bergsund says. "The key is to know your customer so well that the big businesses can't compete with your merchandise."
When you sell a specialty good or service, like wine, the best way to beat out big businesses is to offer better merchandise and service tailored to the customer. "Big businesses that sell everything just don't have the resources to do that, plain and simple," Bergsund says. "It's the absolute best way to stand out."
4 Keys to Success
Bergsund's average customer ranges in age from 30 to 50, and is looking for four things—selection, value, convenience and information—which can be applied to almost any customer anywhere.
1. Selection: Bergsund talks to the best people in the industry about wineries all over the world and figures out how he can bring what the customer wants into his store. He is also careful to offer a variety of price points—cheap wine for every day and expensive wine for special occasions.
"It's important to analyze your customers, and have something for everyone," he says.
2. Value. In addition to his loyalty program, Bergsund has a section of highly rated wines under $20. Because the wine is relatively cheap, customers feel they can take risks and try wines they normally wouldn't, increasing how much they spend at checkout.
3. Convenience. One obstacle Bergsund had to overcome with selling alcohol is that someone over 21 must sign for it. This was a problem if the person who ordered the wine wasn't home. Bergsund's solution: Allow Wine.com shoppers to choose when their product is delivered.
4. Information. On Wine.com, shoppers can read reviews written by other customers. They can read descriptions about the type of wine, how it tastes and the area from which it comes. Even the winemaker lists a description of the product.
"Today's consumers demand more than ever before, meaning businesses always have to be innovating," Bergsund says. "Specialty retailers have the advantage of knowing their customers better and meeting their needs."
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