Are Wine.com Investors Drunk?

from the history-repeats dept

Thu, Jun 22nd 2006 8:31am — Joseph Weisenthal

There are those locations in every town where restaurants keep opening up and then failing, as they fail to heed the track record of those that came before them. The same seems to hold with some domain names, the classic one being wine.com. As ideal as the name would seem to be for an online wine retailer, every attempt to build a business on that domain name has failed. But, like clockwork, the owners of wine.com have raised another $12 million to once again give it a go. This is a far cry from the $100 million that was invested in it the first time around, so in a sense that's progress. It's clear though (as the owners of business.com and sex.com can attest) that a good domain name does not a successful business make. We'll report back in six months when the company's fortune turns again.

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23 Comments

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JerseyRich, 22 Jun 2006 @ 9:04am

Well, you can't say they are persistent!

FIRST POST - Take THAT, COWARD! ;-)
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- LiLWiP, 22 Jun 2006 @ 10:32am
  
  Re:
  Blame this on whatever you want to blame it on. I personally think that it is a combination of MANY things. People do not feel comfortable buying alcohol, particularly wine, online. They prefer to go to a B&M store where they have a person they can ask questions of. Fear of the package breaking in transit... etc... I also feel that wine.com is not marketed well enough. This article is the first time I have heard it mentioned outside of my emails I receive from them.
  
  Great concept, but not good in reality. If more people were wine connesieurs and felt comfortable picking out their own wines, then online sales might turn around.
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  - Chris, 22 Jun 2006 @ 10:35am
    
    Re: Re:
    Wine.com sounds like a good idea to me, but I can't be their customer. It's illegal to recieve alcoholic drinks in the mail in Delaware (and other states). There go some sales right there.
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  - nxdwetiru@mail.com, 23 Jul 2006 @ 9:51am
    
    udqhjacr blrtfv
    izrb egtnlrcih lsor nbtzd ylthxkzu tmskr pxkt
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anonymous coward, 22 Jun 2006 @ 9:31am

As a former competitor to wine.com, i can attest that there is no money to made in online wine sales a.) unless the website is tied to a successful brick & mortar operation b.) derives a substantial portion of its sales from wine club membership programs. For example, K&L Liquors in San Francisco.

Another example in a different industry is opentable.com. they would have been out of business 3-4 years ago if it wasn't for idiot investors that keep throwing money at them hoping that magiacally the business will make money. opentable doesn't even have any competition and they still aren't profitable. Hmmm, what does that tell you?
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- Bond, 15 Aug 2006 @ 12:30pm
  
  Re: anonymous coward - Open Table
  I believe opentable is very profitable 6 yeqrs ago with only 1000 restaurants they were bringing in $7 million .
  Now thery have 5000 restaurants
  
  http://www.opentable.com/info/newspage.aspx?id=77
  
  GUEST LIST
  OpenTable has 36,000 registered members and 1,200 registered restaurants in 22 markets across the country, and it adds about 150 new restaurants a month, Mr. Edwards says. If it keeps that pace, it would have 4,200 registered restaurants within a year.
  
  Mr. Edwards would not give a specific annual revenue figure, but he says OpenTable now pulls in about $600,000 a month. That would put annual revenues at $7.2 million. That's a small figure, but Mr. Dell is bullish about growth. "We're certainly trying to build a company with north of $100 million in revenue per year," he says. He notes that the fine-dining hospitality business is about $267 billion a year, or three times the size of the airline business.
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John, 22 Jun 2006 @ 10:38am

They are 20% more expensive than most boutique wine stores. Add shipping and there is no value gained by buying from them. Warehouse stores like Costco and Total Wine have everyday prices 30% lower.
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Jersey204, 22 Jun 2006 @ 10:39am

I beg to differ
I actually really like the concept...whether that means it can/will be successful is another story. Has anyone ever ordered from wine.com. I have, and I love it. It's easy, convenient, and they actually have great deals on certain wines from time to time. My only concern is their storage and shipping. Do they have climate controlled storage units or trucks for shipping wine. I am afraid during the summer months especially that wine being shipped across the country could get cooked. And I agree, wine clubs and improved marketing would help the company.
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- Mike (profile), 22 Jun 2006 @ 11:54am
  
  Re: I beg to differ
  Has anyone ever ordered from wine.com. I have, and I love it.
  
  Yeah, but which version? It's gone through so many owners and so many restarts, who knows which one you actually ordered from.
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Ladle, 22 Jun 2006 @ 10:48am

And it's almost too bad about opentable; their service is genuinely valuable. (speaking as someone who bought it for a restaurants and installed it, trained staff, etc.) As expensive as it was, we probably did 20% more tables and were despite that able to get rid of a reputation for overbooking.

Can't really be said for wine.com. Too many states that won't allow alcohol in the mail (mine included, though i got some HTF gin for a present once; shh) and prices way,way too high for something that's already quite expensive. They would do better selling home wine cellar systems and corkscrews. Twice the profit, half the inventory headache, and no mailing issues.

I wonder how they would do if they networked buyers to in-state brick-and-mortar sellers? Might be hard to squeze money out of it, but..
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Dam, 22 Jun 2006 @ 10:51am

Not Just Delaware
Wine.com can't ship to half of the country. According to the website, they can only ship to 26 states, and some of them have zip code restrictions.
Not a great way to build an online business.
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- freefood, 22 Jun 2006 @ 11:17am
  
  Re: Not Just Delaware
  That's because it's illegal to send it to half of the country. Check out the bottom of this page: http://wine.woot.com/
  
  On a related note, I'd be interested to see how the aforementioned website does in the long run. They have an interesting business model - one offering every week and always $5 shipping.
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Vic, 22 Jun 2006 @ 11:00am

What a bloody nightmare
This is the first time I heard of wine.com, and I must say, what a waste of space. Try searching for a type of wine and all the site gives you is try a different spelling of your shipping state...

So I am not surprised it did not work the first time round...
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Jeff, 22 Jun 2006 @ 11:06am

progress?
" the owners of wine.com have raised another $12 million to once again give it a go. This is a far cry from the $100 million that was invested in it the first time around, so in a sense that's progress"

Doesn't sound like progress to me - an internet based business that cost 1 million to start 10 years ago would now cost around 30 thousand to start up today with lower costs of hardware and bandwidth.

Restarting a 100 million company today could be done today for less than 3 Mil easy. Not a very good start.
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Mike Shizzle, 22 Jun 2006 @ 11:35am

uhh...
"...that a good domain name does not a successful business make."

Lay off the star wars.
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Nobody Of any importance, 22 Jun 2006 @ 12:05pm

Wine about sales
Here it is, no real reason to drink wine at all. Even though there are hundreds of idiot doctors that tell you a glass here and there is good for you. You can get everything your body needs without drinking any alcohol at all, which is the fact people. Now here what you don't want to know wine is a toxin that means poison. Hmmm. this business should fail.
May the force be with you?
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- Yawn, 22 Jun 2006 @ 12:50pm
  
  Re: Wine about sales
  Get over yourself already. The air you breathe is pretty toxic too. These people are just trying to make money, which is what everyone does in our country. But your little rant about wine being bad for you is so lame. So are the cokes or diet cokes you drink. And the water probably is not that great anymore either. So take that little bit of attitude elsewhere. And by the way, I do not drink wine. My partner loves it, but I stick to water. I just thought your post was uncalled for.
  
  The force is with the ones with the eyes to see it, not the ones with their eyes closed.
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- Jersey204, 23 Jun 2006 @ 1:11pm
  
  Re: Wine about sales
  You are right, the alcohol in wine is a toxin. Additionally, sulfites have the ability to cause negative reactions in a certain percentage of the general population; however, to ignore the French paradox which has been backed by an endless number of doctors is foolish. The benefits of enjoying a glass, bottle, or barrel of wine (depending on your drinking habits) greatly outweighs the possible side effects. There's just something about seeing and tasting a wine come to fruition, from vineyard to bottle. When the conversation turns to Hans Solo and Luke, maybe then you should comment...I'm all for wine online.
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Uninvested dream, 22 Jun 2006 @ 12:08pm

my idea - I have $50 invested so far.
I am slowly working on a project in my spare time using my domain winestoremap.com I am using the Google map's api and dumping in my local wine retailers locations. I call them and let them know and see if they would like to advertise or have an enhanced version of their listing. I will be then working on adding in their inventory and pricing. (that will be a neat trick) Then you could search for that perfect wine via location/price/rating and go get it!! I believe most people buy wine spontaneously so the Wine.com has a lot of crap to get around. Doing the same for Cigars too...woohooo. If I programmed in theory then anything could be possible.
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Topher3105, 22 Jun 2006 @ 12:30pm

One big glaring problem
Alcohol is tightly regulated, trying to sell something that is tightly regulated online is a complete waste of time.

Different states, provinces, countries all have different ways of taxing products and regulating sales. They also have local laws which a website has now way to conform to.

For instance, one BIG glaring problem with a website selling alcohol is there is no true way to validate the age of the person buying the wine. I mean, anybody could borrow Daddy's credit card and have some wine purchased and delivered to the prom.

Consider also the taxation of alcohol which is mostly included in the price of the product. In Canada, alcohol is heavily taxed. I am sure a Canadian, or even someone outside the registered state for wine.com, couldn't just buy and import wine like they can with running shoes or bobby pins.

The whole fact that alcohol is tightly regulated is to
a) Ensure that minors don't get access to and abuse alcohol and
b) For those adults that wish to abuse it, make sure to get enough taxation dollars out of them.

And online website violates these two rules for selling libations.

I can't understand how anybody thinking they can sell wine online thinks this would work. Or rather, I can't see how anybody could be dumb enough to give millions to a company that says they can.

This sounds like another investment scam. I could not imagine how any company could squander $100 million on such a dumb concept, except for the purpose of ripping off investors and investing in propery in the Bahamas. I could set up website selling ANYTHING for around $500 in pure costs (domain registration, server space, and access to credit card/pay pal services). It is staggering to think that anybody believes that a website startup requires millions of dollars.
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Yooperbacker, 22 Jun 2006 @ 12:57pm

winezap.com
Re: My Idea winezap.com is doing something like you are setting up. I am not sure how long they have been around. Laws are being changed to allow out of state buying, like here in Michigan. Michigan was allowing in-state sales but wasn't allowing out-of-state. They were taken to court and michigan was told to either stop in-state all together or allow in and out sales. Michigan decided to allow both.
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Anonymous Coward, 22 Jun 2006 @ 6:19pm

"Alcohol is tightly regulated, trying to sell something that is tightly regulated online is a complete waste of time."

Google winelibrary.com. They seem to be doing well working within the framework of what they are allowed to do.

And bear in mind that not every .com business has the potential for becoming a billion dollar IPO but many make the owners a very nice living.
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Patrick Kilhoffer, 27 Apr 2007 @ 11:58am

Investment scam
It wouldn't be that hard to make a profit. It might be hard to make a billion dollars in profit, but there are a lot of opportunities to sell advertising, related items, provide good information, etc that can all be profitable. And maybe they can't compete on pure price, but a lot of people live in areas without good retail acess to a wide variety of wine. I don't know how you would spend that much money doing it, I doubt I would need over a million to do it, but then I don't own the domain.
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