New York retailers get online

Wines & Vines, Nov, 2001 by Thomas Pellechia

By definition, to engage in retail is to sell a product directly to the consumer. A purist might further argue that retailing requires personal contact between buyer and seller, which is just about how it was done for centuries.

Today, however, the Internet challenges conventional buying and selling. Online shoppers eschew boundaries: They buy from sales people they have never met and from businesses they faithfully assume physically exist--somewhere. But New Yorkers shopping for wine on the Internet can rest assured that wine retailers do exist at an identifiable physical location.

Interpretation and enforcement of wine and liquor rules are the purview of the New York State Liquor Authority (SLA); one of the agency's responsibilities is to issue retail licenses. After an applicant submits to the SLA a plan and a certified check, the bureaucracy kicks into gear with a vigorous personal criminal investigation, as well as an investigation into the applicant's finances. In addition, the SLA solicits comments from four licensed retailers closest to the proposed new retail location; negative response from one or more can easily precipitate a hearing.

Licensing can be a slow and frustrating process, but more vexing than the pace is the fact that after extensive investigation of the applicant, the retail license is seemingly issued to the physical location. You cannot apply to the SLA for a license without architectural plans or accurate drawings for the physical location of a retail shop, plus proof that possession of the location has been secured either through a rental lease or proof of ownership. And once in business, the owner must submit for SLA approval any changes or renovations planned for the retail shop. If the owner later decides to move to another location, an application for a new license is required.

The arrival of the Internet prompts this question in the New York wine retailing business: How long will it be before the SLA-mandated retailing walls come down? To some, including this writer, the demolition appears in progress.

Bricks And Mail Order

One of the most successful New York State bricks-and-mortar wine and liquor shops is located in Westchester County, not far from the Connecticut border. Traffic at Zachy's 5,500 square foot store has been brisk almost from the day its doors opened in 1944. Yet a great deal of the recent success of Zachy's wine retailing (wine accounts for 90% of its sales) emanates from the store's "Wine Gazette" mail order catalog, which developed--slowly-- in the 1970s.

Retailers complained about Zachy's mail order business from the start. After prohibition, and because of SLA regulations, licensed retail wine sales in New York became a collection of local small businesses throughout the state. Many "old-time" retailers even believed it was the job of the SLA to protect their local business from competition. Complaints or no, though the SLA has a predilection for bricks-and-mortar, it does allow mail-order retailing, provided wine is shipped within state borders (a potent wholesalers' lobby has kept New York from being among the enlightened wine-producing states with reciprocal wine shipment agreements).

Despite Zachy's success, and the success of other retail shops that followed suit, mail order wine retailing generally stems from the physical location of a retail shop: Most customers visit a shop at least once before they get on its mailing list, at least according to Zachy's proprietor, Jeff Zacharia. So I asked this question: Do online buyers fit the same mold?

Then And Now

Zacharia believes that the Internet fits the same kind of mold today as mail order in the United States did in the 1970s, when his grandfather and father invested their money in that retailing trend. With that in mind, Zacharia put money into Zachy's Internet site in November 1999, and by February 2001, Forbes Magazine ranked the wine and spirits retail site at the top of the nation's Web retailers.

Sales figures were not available for this article (Zachy's would say only that they are up), but two things about Internet retailing seem clear to Zacharia. He says, "Internet buyers are mostly a breed apart from in-store buyers. And not all mail order catalog buyers are prepared to shift to the Internet--so far, only a portion of customers who receive the 'Gazette' by mail have opted for e-mail instead."

Still, Zacharia believes that the Internet pays off, provided the Web site is well planned and instituted. He views establishing a Web site as another "nuts and bolts" approach to doing business.

Good wine retailers spend years tasting, studying and learning about wine. Knowledge is their first stock-in-trade. Many work alone because they find it time consuming and frustrating to impart that knowledge and experience to others. But building a wine retailing Web site means having to "input" much of that knowledge.

"You don't have to teach Web site writers about the products," Zacharia says. "You just have to learn a few things about the technology so that you can talk to and understand the technicians; if they have done it before then they already know about a retailer's needs. Above all, make the site easy for people to use. I have learned that there are so many Web servers and browsers, and that not all browser versions can handle all the features available. Customers must have an easy way to contact you so that you can discover problems as soon as they develop."