I have been an observer and participant in the change of the retail landscape in America for over 35 years.
As a CPA in the 80’s, I saw the explosion of specialty retailers. I worked for Touche Ross, once the premier CPA firm for retailers. I saw the beginnings of many power house retailers of the 80’s and 90’s that transformed where and how we shop today (a little thing called the inter-web has changed it again and will continue to change it).
In 1994 I was one of the people who started Beverages, & more! BevMo! as everyone knows it today. BevMo! was an attempt to bring an upscale warehouse concept to the alcoholic beverage retail segment. We opened six stores in the San Francisco Bay Area in 1994. At the same time, Total Beverage, now known as Total Wine, had started a warehouse retail concept on the east coast. These two companies have grown dramatically over the past 20+ years and have had a dramatic impact on consumer buying habits and other retailers’ approaches to selling alcoholic beverages.
I left BevMo! long ago and have been in the wine business for the last 15 years, building brands across the country with the help of our distributors. I have “pitched” my wines in every conceivable store and restaurant across the United States. These stores have ranged from Mom & Pop’s, to the largest retail companies in the country.
Over those 15 years I have seen and experienced changes that have not only been driven by the specialty retailers and large chains, but by the continued growth of the wine category and consumer interest in wine. Few consumer categories have had the consistent high single digit growth over the last 15 years that wine has had. The United States is the largest wine market in the world, but is still one of the lowest per capita consumption countries in the world . We are still not a wine culture in the United States. It is not part of our DNA like it is in Europe. In general we are wine neophytes.
Therein lies the opportunity for small wine retailers.
Large retailers have done a fantastic job of helping drive wine into the mainstream of America. The shelf space and selection increases over the last several decades in large retailers has been stunning to watch. I remember the transformation of shelf space in stores in 2004 once the movie Sideways started the romance of Pinot Noir with American consumers. Every store I went into was adding linear feet to the Pinot Noir section. California ran out of Pinot Noir two years in a row, until the agricultural machine kicked into gear and Pinot Noir came back into supply.
As great a job as large retailers do in helping drive these trends by supporting larger brands, they simply can’t provide the knowledge and service in finding wines that small retailers can.
Of course providing that knowledge and service must have value to the consumer. I believe it will. I believe this because we are so young as a wine consuming country. We are in the first stage of becoming a wine culture. That is reflected by the growth of wine in the largest retailers, who can monetize the macro trend of the overall wine category growth. They can use buying and advertising power to price and sell products at attractive prices on national brands. They have seeded the market extremely well.
The second stage of becoming a wine culture is starting. It’s all about consumers becoming comfortable with wine and becoming interested in trying different brands and varietals. This is best served by the local wine retailer with passionate, knowledgeable staff who provide a value add to the purchasing process.
I don’t think this consumer will be my generation. More likely than not, my generation will continue to buy larger brands at larger stores. That’s who we are. The group that will shift the dynamic is the Millennials. They are not bound by the history that my generation is. They are more adventurous, less dedicated to established brands and have access to information unimaginable by us at their age.
Small wine retailers need to tap into this group. If the small retailer simply tries to compete with the larger retailers on price with national brands, they will lose. The local retailer will need to work harder than their larger competitors to understand what their customers are interested in. That interest has to be supported by product selection and staff knowledge.
Staff knowledge is the key for the small retailer to provide something that the big guys don’t typically provide. The question is how much will this be valued by the consumer relative to the prices they are willing to pay.
Wine is an interesting category regarding this value. I believe people more and more will crave knowledge in buying wine. I’m not talking about internet knowledge. That’s a part of it, but there is still no substitute for talking with a person who is truly knowledgeable and passionate about wine.
If I were running a small wine shop, I would find these staff people…fast. It will be interesting to see how the buying patterns change as the consumer base shifts from the baby boomer generation to the Millennials. One thing is for sure, the retail landscape will always change.
 The Wine Institute Statistics (2015). http://www.wineinstitute.org/resources/statistics