One of the biggest challenges facing online entrepreneurs today is that we are all entering more crowded markets than ever before. For me, I own and operate an online wine club where my competitors fall into three main categories.
First, there’s a group of wine clubs, around 10 in total that basically predate the internet. Their websites aren’t that pretty. But, they make hundreds of thousands of dollars in monthly sales due to their huge subscription bases. One of which even owns the trademark for the largest search term in our industry…..and they’re lawsuit happy so I’m scared to even post it here.
Second, there are major media backed wine clubs. Newspapers went heavy into the wine club space a couple of years back and brought their email lists to bear, often with several million people on them. More and more companies are looking at creating a wine club as a logical way to increase their bottom line. From the New York Times, to the Wall Street Journal to Turner Classic Movies most recently, the number of major media backed players is only set to increase.
Third, there’s a smaller group of venture capital backed wine clubs. Sure, these tend to get the most attention in the press, but they’re losing money hand over fist (in one case, about $50MM was lost). They’re perhaps the largest problem over the longer term, largely because venture capitalists tend to be smart folks that figure stuff out. They haven’t figured out wine as of yet though because although algorithms can predict a ton of stuff incredibly well, no one has found an easy way to create the type of inputs needed for an algorithm to be successful. Wine is still, after all, an agricultural product and there’s so many differences between one vineyard and the vineyard next door due to winemaker choice, that computer programs still have trouble keeping up. After all, we find pretty clearly that consumers do not necessarily like vintage after vintage from the same winery because they can change so much.
Ok, so there’s three main types of wine clubs and then, there’s us. I lost my brother in law/business partner about a year ago (ie he took a normal 9-5 job, with a pay check etc). We were floundering. Sales were good enough that closing didn’t make sense. But, sales weren’t strong enough to replace two tech salaries in the San Francisco Bay Area.
I knew when he left, that I had to get smarter. I can’t do much about that first group, some people are going to love them, others are going to cancel. I have to beat them at gaining new customers moving forward. The second group isn’t really a concern for me, after all they’re selling generic crappy wine, whereas I am priced at the highest portion of the marketplace. 2 of my 3 wine clubs exist in the ultra premium level of wine that sits above $50 per bottle on average. That’s ok, I want to tell the story of wineries that exist close to my house and Napa Valley and Sonoma are both within an hour’s drive.
The 3rd group is where I have to try. I have to win. I have to bleed out that venture money.
How I can save cash while earning a living for my family, while they run through millions in cash, largely has to due with open sourcing on the web.
I’ve been on 3 different wine specific software systems. None offered what I needed. They were built for their average client, a winery, which doesn’t accept prepaid orders which are the huge profit centers for my business. So I had to get smarter about my software. Plus, there were some serious SEO issues being created by these folks and their annoying habit of creating what I’ll call a gobbildy gook URL, as well as a cleaner marketing URL.
Enter WordPress. About a quarter of the web is built on WordPress, so it simply was time to get on the winning team.
Instead of paying hundreds of dollars a month for a software platform, Woocommerce offered the chance to pay a couple hundred dollars per year, for a better and more consistent product.
WordPress also opened an entire range of other possibilities. All of the sudden, website design wasn’t a five figure and 6 month long undertaking, it was a couple of weeks and a couple grand, again for a better product.
When it comes to online marketing, we all think of traffic, but rarely do we ever think of conversion rate. Again, open source software allows me to slowly, but surely as time goes by, improve my conversion rate. On our old platform, it was almost impossible to A/B test. Now I can set those type of tests up through Optimizely, or any number of other, either free or small fee service providers.
There’s an entire group of companies that tell small businesses, about how a complete website redesign will fix all their conversion rate issues. One of my venture backed competitors had an online job advertisement some time ago, for a full time programmer devoted completely to the practice, making well over six figures. Optimizely, if you aren’t familar is a rapid growing business to business software that helps enterprise level clients improve their conversion rates one page at a time. Testing runs in real time. The huge advantage for me is that quite simply, I get the same software, but as a small business I get it for free. I don’t think that a piece of software is as valuable as a programmer or two, but given the way Optimizely integrates with WordPress, I’m fairly certain I can save a few hundred thousand of dollars per year compared to my more well funded competitors and receive about 90% of the production.
Lastly, marketing. Not everything happens online, even for an online business. So much wine is sold every day through the internet, but it is dwarfed by the wine sold by your local grocery store (assuming you live in a state where their alcohol laws exist in the 21st century). I try and get in front of people as much as possible. I organize fundraisers for local schools, I pour at art gallery openings and pretty much I talk about wine with people that aren’t actively looking to buy wine, but everyone eventually buys a gift. Opening up the offline marketing world has helped to give me the time, to build my online business in a sustainable manner.
I know that as a Millennial that I’m suppose to only care about what happens online and via social media, but I find that the best customers I have, I’ve had some interaction with. Part of what makes my wine club continually successful is a personal touch for people that join. They receive a welcome email from me directly, as well as a brief note in their first package. I know that as soon as I have some level of interaction with them, outside of an order via the website, the average time they continue to be a wine club member jumps almost 100% longer than those I have no added interaction with. Part of that uptick deals with what is the great bane of every subscription businesses existence, the rate at which credit cards go bad. When I have to contact people, either via email or over the phone to get their updated credit card information (our software does pull in quite a few of these on its own, there is an automated system in play to encourage people to update their cards online after they’ve gone bad) it helps immensely to have had some interaction with them already. I’ve tried to outsource this part of my small business in the past, much the way my competitors do with customer service representatives, since after all making what amounts to collection calls, sucks. But, the percentage of saved credit cards was less than half of what I get personally. I think that’s a combination that I simply care more and can talk more accurately about the types of wines that are going to be sent, as well as the simple fact that it’s harder to turn down the guy whose name is on the website.
So how do you compete with competitors that are established, backed by major media, or by venture capital? You get smart. You bleed them dry at points, whenever possible. The wonderful part about open source software and the wider internet in general is, it is often possible to gain 90% of the value of expensive, specialized labor, often for free or pretty close to it. It’s the type of thing that I hope, over time, allows a small business to grow into much greater.
Mark Aselstine is the founder and current Proprietor of Uncorked Ventures, an online wine club based just outside of San Francisco. They focus on small production wines made in California, Oregon and the state of Washington. Yes, the travels to wine country make the rest of the job worthwhile.