A close-up look at how a liquor store is using IT and a World Wide Web site to increase sales.
Warehouse Wines & Liquors turned to a state-of-the-art inventory-management system and a Web site to keep its bottles flying out the door
Working the phones in his cramped back office, wine and liquor merchant Michael Berkoff can still cut a deal the old-fashioned way. "Shoot me 25 cases of Markham sauvignon blanc," he says to his wine distributor. Just like that, Berkoff has snapped up Connecticut's entire supply of a vintage soon to be in hot demand. Through a tip, Berkoff had learned that the Wine Spectator, the bimonthly bible of wine enthusiasts, has given Markham sauvignon blanc a coveted top rating in an upcoming issue. Now he's cornered the Markham market.
Although a moment like that is to be savored, Berkoff knows he can't rely on the occasional hot lead if he wants his Warehouse Wines & Liquors Corp., based in Stamford, Conn., to keep growing at the enviable rate of 30% a year and remain one of the nation's top-10 highest-grossing liquor marts. That's why this fourth-generation liquor retailer now counts less on the grapevine than on an array of integrated on-line resources that give him an edge on the market and a cachet with his customers.
Berkoff began converting the family business into a state-of-the-art operation in 1993, and he hasn't looked back. As Warehouse's president, he oversees the company's customized inventory-management system, a Novell-run network that instantly links register sales to inventory records. He uses a specially adapted software package to forecast market trends and consumer buying patterns, and also maintains an extensive customer database. And last year he set up shop on the World Wide Web, using the site for both marketing promotions and credit-card sales. The Web site has been so effective that Berkoff projects that 10% of the company's expected 1995 revenues of $12 million will be generated on-line.
With his old system, Berkoff's inventory records lagged a day behind sales. If the store ran out of an inventoried item and had to sell a new item that hadn't yet been inventoried, the item was keyed in as "miscellaneous." The result? "Our inventory was always off hundreds of items a week," says Berkoff.
Adapting a program designed by Atlantic Systems specifically for liquor stores, computer consultant David Bialik outfitted Warehouse with five 386 computers that serve as cash registers and log inventory through the Novell network, giving the store an up-to-the-minute, item-by-item rundown of its stock.
With the store's new system, "we've reduced our out-of-stock problems by about 80%," says Berkoff. "We know to the second what we've sold."
It's that kind of precision that enables Berkoff to keep his deep-discount pricing intact month after month. ("We give you the lowest price in Connecticut," his New York Times ads boast.) At the same time, it allows the store to carry products that turn over slowly or appeal chiefly to the connoisseur. Warehouse maintains a constant inventory of some 14,000 items; the average among the state's liquor retailers is 1,000. Yet Berkoff has been able to increase his inventory turns from six to eight times a year and boost profits by 20%.
Berkoff also wanted to track changes in consumer taste, which can often be unpredictable. Enter David Bialik again, this time to streamline the "forecasting" function included in the Atlantic Systems package, which monitors customer purchasing patterns and keeps a running history of product sales. At Berkoff's request, Bialik added a 90-day program to run on top of the basic 12-month statistical model, giving Berkoff the ability to spot new trends and key fluctuations on a dime.
Take the sudden surge of interest in AlizÉ, a white cognac mixed with passion fruit that last year sold about 5 cases a month but is now moving to the tune of 40 cases a month. If his cutting-edge number crunching shows that the demand for AlizÉ is more than a passing fancy, Berkoff projects he may be buying as many as 130 cases a month for the holiday season.
The program also dovetails with Berkoff's expanding customer database, which he uses for specialized direct-mail promotions. Customers are invited to have their names and addresses logged into the system, which then keeps a running record of what and how much they buy. Those folks who've been flocking to the store for hot brands of tequila, for example, might receive a targeted mailing when Berkoff runs his next tequila special or introduces a new label.
Despite the tangible benefits he was reaping from his on-line innovations, Berkoff was at first skeptical when Bialik proposed setting up a Warehouse Web site. "He didn't think we computer nerds drank wine," Bialik chuckles. Almost from the moment the site was launched, in November 1994, however, Berkoff needed no convincing that viticulture and cyberculture were a happy match. "The fact is," he now says, "people who drink fine wines and microbrews all like playing with computers. We've tapped the fine wine collector on the Internet."
Warehouse also has tapped the big spenders. Whereas typical Warehouse store customers spend $40 a visit, its Web-site customers spend an average of $250 a pop. The Web has been pulling in wine enthusiasts from all corners of Warehouse's tristate territory -- New York, New Jersey, and Connecticut -- and orders have come in from as far away as Tokyo. All this even though Berkoff began including Warehouse's Web address (http://www.netaxis.com/wine/wine.htm) in his print ads only last July and has been offering only a limited selection of his total inventory on-line. At present, Web browsers can scroll through product names and prices, and call up product descriptions, serving recommendations, and other information that interests them. The goal, Berkoff says, is to furnish users with "a full wine and liquor information site, not just a sale site."
In the near future, Bialik promises, the site will encompass the entire Warehouse inventory in all its profusion and variety -- an order of magnitude unthinkable in a conventional print format. Fired by the booming response to the store's first year in cyberspace, the company is also committed to listing Warehouse on as many Web directories as possible.
It's all worlds away from the days when Michael Berkoff's grandfather and great-grandfather ran the business from a Harlem storefront, and an aspiring young actor named Sidney Poitier delivered orders on his bicycle. Still, that doesn't surprise family patriarch Bob Berkoff, Michael's grandfather, now retired in Del Ray Beach, Fla. He remembers that even as a teenager, his grandson was thinking big. "He would tell me, 'Grandpa, I can do it better than you.' And he was right. Michael's just a natural retailer."* * *
Wendy Marx (firstname.lastname@example.org) is a freelance writer based in Stamford, Conn., who specializes in technology and marketing.