The story of how a Bay Area wine maven and a software expert started selling wine on the World Wide Web.
Robert Olson and Peter Granoff found that on the Web, information sells wine. It may be the way to sell everything else, too
One day in the summer of 1994, Bay Area wine maven Peter Granoff sat down with his brother-in-law, Robert Olson, to kill a bottle of product.
"I knew Robert had left a great job at Silicon Graphics," Granoff says, "and I wanted to know why."
"I think he was worried about how I was going to support his sister," says Olson.
Olson began by telling Granoff about his work at SG: he had managed a marketing team that had sold software for interactive television. SG's effort had been a cutting-edge enterprise, taking Olson to some remote corners of computer science. Typically, software is supposed to minimize the load on system resources. The software Olson had sold minimized response time. The software had to analyze a query, define the process needed to reply to it, find where the supporting data were stored, pull them together, format a reply, and pipe it back to the user, all in less time than it would take for the next request to arrive.
During that project Olson began thinking about taking the art of "real-time programming" into another context: customer management in on-line retail. Programs interrogate several databases in parallel, format the retrieved information into one-of-a-kind, just-in-time Web pages, pick up the hits that constitute a customer's response to that Web page, and then swing through the cycle again, all more or less instantly. The more he thought about it, the more he wanted to be the first to start building and selling this new customer-support software.
And that was why he had left SG.
Unfortunately, Olson said, he wasn't getting many return calls from vendors. At that time few vendors had a clear picture of what the Internet thing was anyway, and those who did couldn't see the point in running complicated (and expensive) software. How hard could it be to digitize a brochure or even a catalog? Why did people need more than that?
"They just didn't understand the potential," Olson recalls.
But Granoff found his brother-in-law's tale compelling. During almost 20 years as a teacher, taster, consultant, and sommelier in San Francisco's restaurants and clubs, Granoff had seen a wave of consumer demand for low prices and no-fuss transactions shake his industry to the core. Wine outlets had reacted by building superstores and buying larger quantities of fewer wines, using the clout of their size to squeeze lower prices out of the industry. As their stock simplified, the outlets realized still more savings by replacing experts with clerks and relying on the advertising budgets of large producers to take care of educating consumers.
Those changes delivered lower prices, but they also crowded out producers that were unable to sell in quantity, offer discounts, or afford large promotional budgets. In a 15-year period, Granoff had seen hundreds of small wineries -- those producing fewer than 5,000 cases a year -- abandoned by their distributors and retailers.
The market was only responding to demand, but that didn't make Granoff like it any better. Small producers had been the backbone of the sommelier's career. They were the quality end of the business, and he hated seeing them replaced by a system that couldn't be bothered with an order of fewer than 50 cases. Besides, Granoff was convinced that a market for specialty labels was still out there; the success that restaurants and clubs had had with the better California wines told him that people were still avid for quality. It was just that the market was geographically too diffuse and demanded too much care and feeding to interest the superstores.
That evening Granoff and Olson decided that each was the solution to the other's puzzle. Olson would bring his vision of interactive, high-service "Web stores" (his slogan: "High tech, high touch"). Granoff would bring his relationships with the small wineries, his command of the subject, and his reputation. Together they would open an on-line retail store that would act as an agent for both the vineyard and the customer. Presenting wines the old-fashioned way, its proprietor would taste -- and be eloquently responsible for -- everything in stock. And their earnings would be based on commissions from sales. In short they were going back to the future: selling wines traditionally but using the newest technology.
Virtual Vineyards went on-line in late January 1995. It was an immediate hit with both wine buyers and the press. Olson won't give exact figures, but he does say that business has been increasing by an average of 20% a month. Today sales are at about $1 million.
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From the first days of the commercialization of the Internet, low prices were expected to be the killer application. The public might or might not be interested in playing games on-line or surfing the White House Web site, but the hook that was going to pull "the rest of us" onto the Web was the promise of finding the best price for anything. (The catch phrase was "wholesale from your desktop.")
The argument had three legs: First, the function seemed compatible with the technology. If computers are good at anything, it is at spotting and weighing the difference between higher and lower numbers. You cannot ask a database to find a dress that is "fierce but not outrageous" (at least, not yet), but a software agent or search engine could be expected to start with a product description like "T-shirt dress, raspberry or navy" and come back with a list of vendors arranged by price.
