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The Long Tail for Wine?

 

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There continues to be a lot of discussion in the wine world about “The Long Tail”, and  am sorry to have to go against the prevailing trend and advise that there is no “Long Tail” for wine - at least not in the ‘category killer retailer’ sense.

For those who are unfamiliar with the concept, a few years back, Chris Anderson, Editor-in-chief of Wired Magazine, wrote a book entitled “The Long Tail”:  Why the Future of Business is Selling Less of More. In this book, he put forth a case that describes the niche strategy of businesses, such as Itunes or Netflix, that sell a large number of unique items, each in relatively small quantities, and the belief the business done with the small volume items, when taken together, can in fact be larger than the sales of the few high volume items. 

On the face of it, wine would seem to be the perfect “Long Tail” category. Tens of thousands of producers, millions of SKU’s, lots of passionate consumers. However, digging in a bit more, it becomes clear that wine, as a product, does not fulfill some of the basic requrements of being a ‘Long Tail’ product.

The Long Tail requires some fundamental conditions that do not and never will apply to wine – I’ll mention only three of the biggest obstacles to wine being a Long Tail product:

 

1)    Storage: The issue is obvious here: You can store a music file on a server at virtually no cost, which can be downloaded millions of times at no incremental cost to the retailer (other than bandwith). Even for books, you can build a large warehouse, without worrying about temperature control, regulations and distance from the producer, and hold vast quantities of titles at relatively little cost. Not so with wine.

2)    In the US, anyway, wine cannot be sold to retailers on consignment. This means that the retailer is going to have to invest vast amounts of capital in the skinny part of the tail, which in and of itself, will make the model unsustainable. There are ways around this legally, but they will require complicity from suppliers in subverting the existing distribution model, and I doubt any major importer/winery will want to do this.

3)    Shipping is a nightmare. Hard to do it in the heat of the summer, breakage an issue, heavy, expensive to move. Compare this to a book, or any digital file delivered over the internet and the challenge is very clear.

Amazon has been getting into the wine business since 2005. Amazon defines the Long Tail model, and today when I searched their site, I found wine books, wine accessories, but no wine. For a business that changed the retail scene virtually overnight, that is a long time for nothing to happen- and I suspect a symptom of the fact that it is hard to use their model for wine. 

So, while The Long Tail may be a fantastic model for books, music and software, it doesn’t really work for wine, and I think that to the extent that retailers are interested in new models for the category, this is not one of them. Having said this, there is probably a model for linking together existing inventories of retailers in some seamless fashion as an aggregator, and this is perhaps already being done, but it isn’t quite the same thing.

I relied heavily on this  excellent Wiikpedia article, which spells The Long Tail theory.

 

 

 

 

 

 

 

 

6 Comments, Comment or Ping

  1. I absolutely agree, when you read the book, you realize that “long tail” applies mostly on Amazon and Netflix practices, explains the blogging phenomena (niche interests), but can not be applied on the entire retail sector. He mentions flour in the book - different brands. Sure, well-stocked supermarket carries several brands, some of them real exotic sounding, but no supermarket carries all possible kinds of flour and no one buys flour online.

  2. Great points, well made - wine is a very different product!

    Amazon have still yet to get to grips with wine. Many of the big guys seem to avoid it - the remoteness that large retailers crave simply cannot be achieved with wine: you need to ascertain what is best, and forge relationships with producers to get hold of it in sufficient quantities. Music can be replicated over and over; fine wine can not.

  3. Jason

    Hi Guys,

    Agree entirely. Jeff over at http://www.goodgrape.com/index.php/articles/comments/rethinking_wine_in_a_long_tail_world/ makes an argument that you can have what is effectively a ‘Long Tail’, but I do not think it really is true to the theory. As Winebloke says, wine is about people and quality. Often, extraordinary selection tends to confound anyway.

  4. Hi,

    i just came across you guys after reading David Meerman Scott’s book about the New Rules of Marketing . . you were mentioned in a foreward by Robert Scoble as an example of a winery that doubled sales in a year using the internet, blogging etc. in highly effective ways. I love your site and am also fascinated by it. Unless I am missing something, I don’t see any info on the wines or an online store. I wholeheartedly agree with you about the Long Tail theory. Many people want to think that wine is just like any other product, but it is not. I’ve been in the biz in Napa Valley for 20 years and wine is unique and requires a very personal touch to effectively sell. I am curious to know your thoughts on online wine sales, either direct from one’s own site or through online retailers. My opinion is that people will buy online if they’ve already had an experience with the wine, or if it came highly recommended from a trusted source, but without that, they are probably not willing to take the risk, It’s expensive and you can’t return it if it you don’t like it. Thoughts?

  5. Hi.

    Yo. So I wholeheartedly disagree. While the logisitics of wine sales currently makes selling wine more difficult than other products, it doesn’t make the basic observation of the long tail, “small volume items, when taken together, can in fact be larger than the sales of the few high volume items”, not apply to the wine industry.

    The wine industry and online retailers/marketers are already making strides in the storage and shipping issues. Sites such as AmericanWinery.com and AppellationAmerica.com are starting to connect consumers with wineries directly, eliminating the need for both the middleman and storage facilities. As retailers such as these and Amazon enter the wine retail/ship business, shipping laws and regulations will be tested and challenged. My strong prediction is that, especially given the current economic situation, the distribution laws will be opened up as governments realize that by allowing wine sales to travel down the tail they will produce more revenue.

    One major bonus for the wine industry - much of the price of wine further down the tail is driven by scarcity. This is true for even current releases from certain producers. Not so true for music and books. The wine industry can make higher profits on those rare (and older vintage) wines way down the tail. This certainly helps the wine industry follow the long tail of sales even with all the current nightmare issues in distribution.

    My two cents.

  6. Jason

    Staci,

    Thanks for your comment.

    I agree with most of your points, however I am still waiting for a single retailer to be able to implement a ‘Long Tail’ strategy. Of course, given the hundreds of thousands of labels in existence, the sale of those wine would be greater than any brand (especially since the biggest brands have miniscule market share). But, I just don’t see a retailer implementing this such as Amazon did for books, or Itunes for music. i just don’t think that the business allows for it.

    Jason

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