Since Mike Osborn founded Wine.com in 1998, he has tackled a complex web of state-by-state regulations, and effectively shut out competitors. Wine.com sales were $60 million in 2011.
How Wine.com Conquered Online Sales
00:07 Mike Osborn: Wine.com is the leading internet retailer. Why? We offer a selection from all over the world, shipped directly to consumers. We started out with a single warehouse in Portland, Oregon. From Oregon, we were able to service about 20 states. Today, we hold 20 licenses to service costumers we service in 42 states. But those licenses have a lot of restrictions on them and have a lot of reporting requirements.
00:36 Osborn: If you find yourself in a category where there are some strong barriers or immovable objects, go focus on the part of the business that is movable, that you can effect. And as examples for us, where to innovate around the way we market wine, in our case, or the website innovations, those were areas that we could innovate and we certainly knew what the immovable objects were, and those were around operations and legal.
01:04 Osborn: Of the companies who have entered the space and accident shortly thereafter, and there have been numerous, are there because they attempt to shortcut some of the things that we've learned that, there are no shortcuts. That the state laws are real and enforced. Today we service 42 states and the district of Columbia which is greater than 90 percent of wine consumption, maybe 92 percent. The fact is, that it was state by state, and we chose, of course, the largest states to enter first. Last fall, in the state of Texas, we were told by that state authorities that we had to stop servicing Texans from an out-of-state warehouse. That required to get, very rapidly, work on legal operations and our supply chain issues. Consumers really, in our own business, suffered by losing about 8 weeks of sales last year, but it worked out.
02:07 Osborn: Building an industry on a product that's made by farmers and made by artists, and then a supply chain that hadn't had a lot of innovations since the repeal of prohibition. So Wine.com are the innovators here. It did take us much longer, but we wouldn't have done it if I'd knew it was going to be this long of a process. But, having gotten this far, the issues we deal with everyday are really strong barriers to entry for others. I mean it's one of the reasons why this is one of the few categories that Amazon.com doesn't participate in.
02:42 Osborn: While we might be the busiest website about wine online, it's a small category and one that requires us to constantly innovate. So take and be creative about the aspects of business that you can be creative in. You got to have creative people who say, "Take that can't and turn it into the action that can change."