Olson and Granoff's approach is working. Virtual Vineyards is becoming widely known as the best store on the Web.
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Virtual Vineyards was a response to a particular situation -- the rise of the wine superstore and the accompanying loss of the personal touch in the vendor-buyer relationship. But what inspired Olson and Granoff is a general phenomenon. Over the past 20 years, the growth of superstores has pushed small high-end producers out of a wide range of sectors, including furniture, books, sporting goods, and specialty foods.
American retail may be a miracle of low prices, but the degree to which it has been dumbed down by layoffs and low wages affects the efficiency of commerce as well as the morale of consumers -- and not just on the high end. The success of Virtual Vineyards suggests that the market for the type of service that was once standard in those sectors has not disappeared with the emergence of the superstore; it has just gone underground -- or in this case, into cyberspace.
Analysts impatient with the growth of Internet commerce often suggest that what's needed is some sort of technical tweak, like better credit-card security or simpler access procedures. No doubt those are important, but the big inhibitor might be a simple lack of trust in the vendors themselves.
The average consumer in the average Web store has no history with the company -- and in many cases may have never even heard of it before he or she surfed by. The Net is unregulated; it has no customs or community standards. What is the risk of running into a vendor who is incompetent or unpleasant, if not fraudulent? How much weight can be placed on product descriptions, given that vendors sell to people they have never seen and never will see, and know it? If you have a complaint, where do you go? Most on-line retail Web stores are run by the producers of the product being sold. Those producers might know a great deal, but they are financially committed to a single sales outcome, and that fact tilts the scales against their credibility.
And on most Web sites, there are no faces, no voices, often no names. (Occasionally there's an 800 number.) The site server could be anywhere today and somewhere else tomorrow.
The most common response to the trust problem is to stick with established brands. That's safe enough, but it leads to the loss of perhaps the most attractive feature of the Internet: participation in a worldwide market.
Virtual Vineyards comes at the credibility issue from three directions: a strong voice tied to a specific person, software that expresses and focuses that voice, and inventory drawn from a range of producers. (In April the company had 250 labels from 50 wineries.) Virtual Vineyards isn't tied to the products of any single winery, so it gives the customer a channel for complaints about a given producer.
The kind of information-based, expert marketing that Virtual Vineyards provides does present some difficulties. For one, it's self-limiting. Past a certain depth, the expert's command of the stock begins to weaken, and the software gets too elaborate to use easily. And past a certain number, the Web store becomes a superstore, which is self-defeating in terms of niche marketing.
The information-based model also raises prices -- the expert has to be paid -- which means that customers could use the site to find what they want and then approach the producers with a side deal, offering to split the retailer's profit. (An informed consumer is a competitor.)
Olson hopes to deal with the difficulties by making the service Virtual Vineyards provides ever more personal and intimate. For example, he can use customers' own preferences, gleaned from their order histories, to present wine options in line with previous orders. By selling more that way, Olson and Granoff can lower their commissions, thereby making their virtual store even more attractive.
It is possible that those analysts who worried that the Web would throw distributors out of business had the story exactly backwards. If Virtual Vineyards is an example, the Web may turn out to be a great engine for "intermediation," opening the door for tens of thousands of retailers, distributors, and sales agents to use their unique expertise to introduce buyers to producers.
Looking back, historians might reflect on the paradox that the killer application, the competence that pulled a technophobic citizenry onto the most anarchic and antiestablishment of media, ended up being not price at all but the technology's ability to resurrect the virtues of the custom shop.
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Fred Hapgood (hapgood@pobox.com) is a Boston-based freelance writer who specializes in science and technology.
