The Wine Collector

Yesterday, the Vinfolio Marketplace debuted and today we're scaling up its market impact by announcing a very significant relationship with VinCellar's leading competitor in the online cellar management software space, CellarTracker (see Vinfolio announces partnership with CellarTracker!).

What it means

1. CellarTracker users will be able to sell wine in the Vinfolio Marketplace using CellarTracker as their "front-end" to Vinfolio's "back-end".
2. Together, Vinfolio and CellarTracker have over 135,000 users managing 12+ million bottles of more than 400,000 unique items worth an estimated $2+ billion in retail value.
3. Buyers of fine wine will soon have access to the world's largest wine "store" (by an order of magnitude).
4. CellarTracker will be able to deliver even more value to its loyal user community.
5. To avoid any possible misunderstandings, we're not merging the companies and we'll continue to compete for new users to adopt our respective cellar management platforms.
   

The background story

CellarTracker's Eric LeVine and I first met in late 2006.  While our companies have been competitors for years, I've always believed in the principle of "co-opetition" in which one may compete in some areas but cooperate in others.  Vinfolio's development of the Marketplace enabled us to define an attractive win-win collaboration because any marketplace's success is defined by the ability to create a critical mass of buyers and sellers.  While Vinfolio had its own sizeable constituency, the opportunity to team with CellarTracker and its community of users offered what I considered to be a preemptive market move.  So I asked myself, "Why not go for it?" and broached the partnering idea with Eric in November 2008.

After working out an agreement in December, Eric and Vinfolio's team have been working closely together since January to ensure a seamless integration between CellarTracker and Vinfolio's Marketplace to support a simultaneous launch of bidding in early July.  CellarTracker users will soon be able to start marking wine for sale from their CellarTracker accounts to offer in the Vinfolio Marketplace.

Bottom line: While we will continue to drive the development of VinCellar's own user community, we're very pleased to be working with CellarTracker to create value for our respective users and the broader wine community.  We remain open to other such partnerships in the future but "execution, execution, execution" is our priority for now.

When I started Vinfolio in July 2003, my ultimate objective was to create an online destination where a virtually unlimited selection of fine wine aggregated from privately owned cellars could be bought and sold with the convenience and cost efficiency that only the Internet can enable.  That moment has finally arrived today with the launch of the first phase of the Vinfolio Marketplace (see Vinfolio announces launch of the Vinfolio Marketplace).

The fine wine supply problem

As a "committed" wine collector from the mid-1990s, I was constantly frustrated with the difficulty in obtaining the wine I wanted to buy.  At the time, I didn't realize the problem stemmed from inherent obstacles that retailers faced in accessing adequate supplies of fine wine in the new release (or primary) market.  Those obstacles, along with the capital required to stock inventory, forced wine collectors to buy from a diverse set of retailers (each with finite inventories) to find the wine they desired.  Even today, the wine retail market is still highly fragmented with over 850 U.S. wine retailers offering at least 50 items (over 400 with at least 500 items) but only a dozen or so with more than 5,000 items.

I realized that the path to building a scalable supply channel for fine wine depended on systematically aggregating the contents of privately owned cellars (i.e., the secondary market) -- in effect, applying the "long tail" theory (see chart below).  We sought to do so by creating VinCellar, our online cellar management application which was recently rated the most innovative wine social media network.  A by-product of users finding value in VinCellar was that merely using it brought visibility to who owns what and positioned it to be the platform from which sellers could easily opt to sell part or all of their collections.

Vinfolio's current business already built upon private cellar supply channel

Vinfolio's business has grown dramatically over the years by consistently sourcing over 70% of its supply (by value) from the secondary market (which ironically became our primary supply channel).  Along the way, we've developed numerous proven business processes and systems including a world-class ecommerce site, warehousing in multiple locations, storage, logistics, marketing, customer service and other skills.

The Marketplace represents the next step function in realizing the original Vinfolio vision by further automating business processes to deliver user convenience and business scalability while leveraging unparalleled access to fine wine managed within Vinfolio's VinCellar online cellar management application. The Marketplace selling platform will also be made available to the trade and other strategic partners (stay tuned for another announcement tomorrow!).

Why Marketplace is compelling

Vinfolio's Marketplace starts with the immediate critical mass of buyers and sellers derived from almost 55,000 users already registered with Vinfolio who are managing over $500 million and several million bottles of wine with VinCellar.

Marketplace redefines the online auction model -- it's not merely a replication of the offline bricks-and-mortar approach in an online context.  For example, there's no upfront consignment required, no listing fees, no time constraints, no minimum quantities, and no other preparation needed to start selling immediately other than marking wines for sale in one's VinCellar account.  With Vinfolio as the intermediary, the Marketplace is completely anonymous with all wine clearing through Vinfolio where it is inspected per published inspection guidelines for acceptance or rejection.

As of today, you can start marking wine for sale in preparation for the early July commencement of bidding and earn free Vinfolio storage credits in the process until May 31. 

Bottom line: Learn more about the Vinfolio Marketplace now.

As a follow up to my prior post, Bordeaux futures: Why bother?, it's now clear that en primeur pricing for the 2008 vintage is going to be in the "reality zone." But as further evidence of the buying opportunities which can arise by waiting until wines are bottled, read this Decanter.com story titled "Merchants: Low Bordeaux 2008 prices 'destroy' value of past two vintages." 

Buying opportunities for the patient

As seems to be the norm, most retailers aren't able to sell all of their Bordeaux futures and are often forced to wait until deliveries occur 18-24 months later to have a second crack at clearing them.  Even then, collector interest has moved on to newer vintages so they can be a tough sell (even without the collateral damage created by fairer pricing of a new vintage).

The Decanter story quotes several prominent U.S. retailers either selling remaining 2006 Bordeaux at half price (losing money in the process) or devaluing remaining stocks of 2006 and 2007 Bordeaux.

Bottom line: Patience can be rewarding.

The 2008 Bordeaux en primeur tastings are under way and, not surprisingly, trade attendance is down almost 10% (see Decanter.com story) and this year has its own issues as the market struggles to adapt to the realities of the current economy (see NY Times story).

Why should collectors bother to buy Bordeaux futures this year?

They shouldn't.

Here are the typical reasons cited to buy futures, none of which apply at the moment:

1. Secure your supply - Your favorite wines won't sell out in this economy and with an average vintage. Availability of different bottle sizes later shouldn't be an issue either.
   
2. Obtain better pricing by buying early - All signs are that the chateaux are going to set unrealistically high prices.  Wait it out; they'll come down later.  Moreover, why tie up capital for 18 months when you can buy other (better) vintages, all of which have suffered price declines in the past 6 months?
3. Ensure perfect provenance -They'll be plenty of original wood cases to buy later as soon as the wines are bottled that come straight through the distribution chain to you.

Moreover, why take the risk that your retailer, or someone in their supply chain, goes out of business in the 18 months to 2 years before you take delivery?  Anything can happen in the current environment. 

Bottom line: Ignore the 2008 Bordeaux futures campaign.

P.S. For prior posts on related topics, read Fixing the Bordeaux futures market and Wine futures and pre-arrivals: what's the difference?

There's no question that fine wine prices have been negatively impacted by the current economy with higher end wines more severely impacted than others.  Some people will be forced to sell wine they would rather not to raise cash (which we've seen frequently with private collectors selling through Vinfolio in recent months) or do so for a variety of other reasons (see Common reasons to sell wine). Some potential buyers believe prices have further to fall and are deferring purchases which, in turn, contributes to further price declines (the deflationary spiral at work).

When to buy

If you're a wine collector trying to decide when prices are at the right level to resume buying actively, I would make an analogy to stock investing.  Some investors will look at the Dow Jones Average today and fear it is going down another 50% from yesterday's weak close below 8000; others will view the market as oversold and shift cash back into the market.  Where you place yourself on this continuum is a decision only you can make (is the wine glass half empty or half full?).

As most professional stock investors will tell you, calling the bottom is near impossible and is often not clear until months after it's happened.  The long term outlook for fine wine, however, remains positive.  The global demand for fine wine is only going to grow with the global economy.  In particular, as emerging economies (mostly in Asia) recover, they will drive fine wine demand and higher global prices sooner than the average stock price recovers.

Bottom line:  As with stock buy/sell decisions, it's your money so make your own decision after evaluating multiple opinions and considering the facts.

What is your reaction when you walk into a wine store that is noticeably warm, even hot?  Mine is to turn around and walk out.  Here's my rationale:

1. If the merchant cannot be bothered to take care of wine in its possession, it probably also didn't pay attention to how the wine was handled in the distribution channels prior to delivery.
2. Merchants will argue that in-store bottles turn over rapidly so the higher store temperatures will not have much impact on the quality of the wine.  But how does the buyer know how long the wine has been sitting (or standing!) there?  Fine wines also don't tend to fly off the shelves.
3. The negative impact of high store temperatures is a function of how warm the store is (see story below).
4. Even when a store in a warm weather climate is cooled, what happens to store temperatures after closing when the A/C is turned off?

My recent experience in Italy

I just returned yesterday from a vacation in Florence (which in July is hot -- highs of 35+ degrees C or 95+ degrees F).  Yet, not a single wine store I entered was air-conditioned despite carrying some very expensive wines.  Needless to say, I didn't buy anything.

The one notable exception that I found was in Lucca, Italy (an hour away) where a wonderful shop called Enoteca Vanni had an extensive selection of older Italian vintages mostly housed underground in a network of low-ceilinged, passive cellars.

Bottom line: The condition in which wine is stored is merely one of many criteria which should be considered in where you buy wine (see Criteria for selecting a good wine retailer).

P.S.    See also Wine storage temperature's impact on aging.

P.P.S.    This story was inspired by a recent article on Decanter.com titled "Top stores keep wine too warm" which reviews the situation in the UK.

According to the Luxury Institute's research (as referenced in a recent Newsweek story called Luxury Goes Undercover), "nearly all wealthy Americans (98%) use the Web to purchase [high-end] goods and services, and more than half do it frequently."  The wealthy are "increasingly interested in immediacy and convenience," not to mention privacy and selection.

Wine as a luxury item 

Fine wine prices have risen to the level where wine is now a luxury item (see my 2007 post, Wine as a luxury item).  Yet, only 18% of weekly wine drinkers bought wine online in 2007 according to the Wine Market Council (and almost two-thirds of that was from wineries, not retailers).

Pent-up demand for online wine buying

I believe the 18% figure is artificially suppressed, primarily because of the reduced convenience that complicated direct shipping laws create.  The good news is that wine retailers are now organized via the Specialty Wine Retailers Association.  The SWRA is fighting on consumers' behalf to create a more streamlined regulatory environment that updates shipping laws to conform to the reality of 21st century web-based commerce.

Bottom line: If you're interested in tapping into the benefits of buying wine online, support the SWRA and voice your opinions (in a comment to this post) about how online wine buying could be made more convenient for you.

The following question was posed in a reader comment from my post Globalizing fine wine markets and the rise of Asia:

"Is there any difference in the overall quality of similar wines sourced from [the UK and US] markets?

Answer: Generally speaking, no.

I addressed this question indirectly in my post "The impact of U.S. import labels on Asian wine buyers" but let me expand on my explanation.

1. Buyers clearly need to pay attention to the source of their supply as suppliers/retailers don't all pay the same degree of attention to provenance and handling.
2. Regarding UK sourcing, is wine transferred from Bordeaux to the UK, often in non-refrigerated trucks, better handled than wine transferred in a reefer directly from France to the U.S. that lands directly in a temperature-controlled warehouse?
3. Does the location of the purchase source indicate anything about where the wine has traveled?  You might be interested to know that many Bordeaux chateaux will buy back wine previously sold to UK wine merchants and then resell it as ex-chateau.
4. The large and growing auction market for fine wine in the U.S. is materially larger than London (and the gap is widening).  Moreover, prices tend to be higher in the U.S.  To me, this further confirms that serious wine collectors don't believe there's a quality difference.
5. The emergence and industry adoption of solutions such as eProvenance will help ensure there are no differences in quality regardless of where wine is purchased.

As any wine collector knows, it's difficult to find all of the fine wine you want to buy from a single wine retailer.  As noted before in Buying smartly from wine retailers, you increase your odds of obtaining scarce fine wines by concentrating your purchases because most retailers make some attempt to reward loyal customers with priority access.

Our approach to cultivating loyalty 

In early 2007, Vinfolio created a customer priority program.  Benefits increase with reaching higher annual spending levels ($5,000, $25,000, and $75,000+).  The prime benefit is priority buying access to scarce, allocated, and/or highly rated wines.  These wines are generally highly sought after but given excess demand, I'd always prefer to offer them first to customers who have demonstrated their loyalty to Vinfolio.  So that's what we do -- in a very systematic fashion.

How it works 

For newly puchased wines that fit our criteria for scarcity and high ratings, we literally offer these wines in three successive 24-hour periods to an expanding group of priority customers before releasing any remaining unsold wine to the general public on our website.  Wines that sell out at a given level are simply not presented to the next level.  When signed in on our website, priority customers are recognized and wine available at their benefit level is made available to purchase.

Moreover, the email notification such customers receive that announces newly available wines is personalized to reflect whether the customer already owns a wine being offered and in what quantity (based on the contents of their VinCellar cellar management software account).

Bottom line: If your retailer is not reciprocating your loyalty in some proportionate manner to your spending level, then take your business elsewhere.

Note: This post was inspired by a book excerpt titled "Loyalty is a Two-Way Street" from a new book called Marketing Metaphoria that was written up in a recent article in the Harvard Business School's Working Knowledge email newsletter.

Do the wealthy think we're in a recession?  Yes (see yesterday's Wall Street Journal story, Wealthy See Recession, Poll Says).

Is it affecting their spending on fine wine? No (based on Vinfolio's growing sales volumes as well as those of some other fine wine importers I know).

Why not? Demand for fine wine is determined on a global basis and other parts of the world are still going strong enough to absorb finite supplies.  Moreover, "spending" really only occurs when you consume your wine.  Until then, you are merely converting cash into another asset class, which in this case is likely to grow in value.

The World of Fine Wine magazine' s latest issue (#19) contains a must-read article called "Every one a critic: The future of wine writing."  Mike Steinberger provides a fascinating, state-of-the-market assessment of what he references as the "twilight era" of Parker.  He makes many valid observations about the inroads being made by what are essentially lower-cost (often free) substitutes for professional (fee-paid) wine criticism.  What's going on and how can the professionals respond?

The "good enough" effect enabled by the Internet

Several trends are at work to shrink the size of the "fee-paid" wine criticism market. There's no question that the Internet has provided a platform for talented amateurs via blogs, forums, and community review websites (Note: Vinfolio is introducing community reviews in our upcoming version of VinCellar).  Many of these reviews (although typically free) can be on a par to those of a professional critic's.  Pragmatically, free amateur reviews need only be "good enough" for the reader to substitute for a paid review.  Moreover, if an individual amateur reviewer is prolific enough and/or focuses his reviews on a particular category of wine, regular readers can calibrate their palates in the same way they do with professional reviewers.

What will happen to the fee-paid wine criticism market

Despite increased competition, there will always be a market for fee-paid wine criticism.  Quality in most areas of life is worth paying for and there's no question that the mainstream professional critics are highly talented.  Moreover, the cost of "paying" (typically $75-$125 annually) is relatively modest compared to the cost of a buying mistake.  However, the "business model" of the professional wine critic may need to evolve to maintain their income.

Advice for professional critics

The theme to my advice is to become more aggressive in disseminating one's professional content to combat the rising "noise" levels.  This can be done in a controlled manner while developing new sources of income to the critic.  Here are some ideas to consider:

1. License content to wine websites and online services -  Vinfolio pays annual fees to Steve Tanzer, Allen Meadows, Roy Hersh, and Richard Juhlin for licensing their wine reviews for specific uses within our free VinCellar cellar management software and within our ecommerce site.  Certain access to full text reviews requires a separate paid subscription to the reviewer's site so we can help drive new consumer subscriptions.  As we expand the utility (uses) of a paid subscription beyond the reviewer's own site, I'd argue that we also increase subscription renewal rates.
2. License content to retailers - If consumers are more reluctant to pay, maybe members of the trade who rely upon the reviews to help sell wine will not be.  Right now, the trade must manually cut-and-paste reviews from the professionals' websites (or otherwise enter data) for what may be thousands of items.  These reviews may need to be refreshed if a review is later updated.  If these reviews were available in an automated way via an electronic API, I believe many retailers would pay material annual fees just to obtain the labor savings.
3. Create foreign language editions - Asian markets are emerging as major wine buyers. Why not offer a Chinese language edition?
4. Generate advertising revenue - Sell online advertising to support access to selected free content.
5. Go "on tour" - Wine critics are analogous to rock stars.  Even if the music (content) is free, fans (readers) pay heavily to attend concerts (wine events).

I could go on but you get the idea.  What would you do if you were a professional critic in this situation?

Buying wine involves a certain degree of trust by the customer in his/her wine retailer. 

A quick definition of "trust"

As succinctly described in The nature of trust from the Slow Leadership blog, "trust" boils down to four key elements:

1. Meeting obligations to protect others' interests (not just your own)
   
2. Acting with honesty and integrity
3. Openness
4. Keeping promises
   

Applying the elements of trust to wine retailers

Here are 10 ways wine retailers can develop that trust and the resulting higher sales derived from it: 

Wine ratings can be a contentious subject and I've already done my own rant on them last year (see How to use wine ratings successfully).  But I wanted to expand further on the last part of that post addressing how retailers use professional ratings.  Here are a few approaches a retailer could use:

1. Show highest ratings selectively - The selective representation of ratings is the norm for retailers.  The goal here is to promote the highest possible ratings but only when above a threshold to encourage buying.  The quality of the source is less important than the number. The actual commentary on the wine may or may not be provided.  A corollary to this approach is that wines with ratings below the threshold are displayed without their low ratings (the theory being that bad ratings are worse than none).
2. Display professional comments without the ratings - The philosophy here is that the descriptions help sell the wine but the ratings might turn people off so hide them from the buyer.
3. Show all ratings, good and bad - This method provides transparency (at least for an identified set of sources). It recognizes that many wine collectors will independently check ratings using their own paid subscriptions to reviewers' sites if none are provided or a rating is missing.  Moreover, as ratings are only one input into a purchase decision, I could easily argue that a poor rating on a wine from a favorite producer creates buying opportunities as price likely reflects less buyer demand.

Deception?

Let's face it.  Methods 1 and 2 are less than totally honest ways of dealing with customers.

Transparency builds trust 

As far as I know, Vinfolio is the only wine retailer who voluntarily offers up all ratings, good or bad, for a reasonably complete set of professional sources.  This transparency enables our customers to make informed purchase decisions without spending extra time looking up reviews and breeds trust in our brand. 

To be fair, taking this approach is easier for us than most retailers because we pay to license all review content from major reviewers such as Stephen Tanzer, Allen Meadows, Roy Hersh, and Richard Juhlin (see today's press release on the addition of Juhlin and our content partners page).  This content is deployed both in our free VinCellar online cellar management software and within our online store.  So whenever we are selling a wine reviewed by one of these parties, the most recent rating from each source is automatically displayed (without censorship!).  See example below:

In addition to our current licensed content partners, Vinfolio also manually adds Robert Parker and Wine Spectator scores wherever possible (and yes, we would be glad to license their content too if we could persuade them to do so).  But the lack of an automated way of mapping their reviews to the wines we are selling means we will always have "holes" for these valuable sources. Finally, Vinfolio also tries to provide its own ratings and reviews whenever there are none from professional sources (or to supplement them).

Bottom line: Which approach to retailers' use of ratings would you prefer as a buyer of wine?  What would you do if you were a retailer and why?

If you could save $50 in shipping costs or $50 on wine purchases but not both, would you instinctively prefer one form of savings over the other? 

Shipping costs are a "hot button" for consumers -- they hate paying them.  Despite saving gas, parking fees, and their time by shopping online for what is typically a much broader selection at cheaper prices, it seems that consumers perceive any shipping charge as a complete waste of money.

But, someone has to pay for shipping.  Fedex and UPS never give it away, even to high volume retailer customers.  The problem with shipping wine is that it's heavy -- 40 lbs a case and more for high-end heavy cabernet bottles or champagne.  While many wine retailers already provide shipping at cost and concentrate their volume with one shipper to negotiate the best discounts on behalf of their customers, it's hard to ship a case of wine cross-country by ground for less than $35-$40.

If the retailer is paying for shipping, then you are probably paying for that benefit in some other way.  There is no "free lunch" in a profit-oriented economy.

The online shopping study summarized in an excellent post titled "New Industry Standard this Holiday Season?" on the Rethink Wine Blog seems to conclude that online retailers believe that they stimulate more sales with shipping-related promotions than a straightforward sale. My own experience in using Amazon's Prime shipping service confirms this as my Amazon spending soared once I signed up (even though it cost $79/year).

Bottom line:  Which option would you prefer, free shipping or wine discounts?  Can the economics of a service like Amazon Prime work in the wine industry given relatively low gross margins, high shipping weights, and nightmarish interstate shipping laws?

If you've ever come across a wine you'd like to buy when reading an online tasting note, blog post, or article, you now have a one-step way to quickly check Vinfolio's wine store inventory using our new browser toolbar add-on for Internet Explorer 7 or Firefox 2.  Click here to read more (and to access a link to install it into your browser toolbar).

Remember, even if we don't have the wine you're searching for in inventory, you can click a "Get quote" button which submits a no-obligation request for us to try to locate the wine for you and respond with price and quantity available.

In addition, clicking a wine name within our wine store brings up a "detail page" with other useful information, including the U.S. retail average price (derived from data supplied by Winesearcher.com) and the latest auction price data drawn from Vinfolio's Wine Price File.

Acker Merrall Condit's PR firm sent out an email yesterday (which I've replicated below) that is offering an entire cellar (see "The Man with the Golden Cellar" catalog), claimed to be among the world's top 3, for a mere $20 million. 

I've discussed the trend towards the purchasing of "instant cellars" in prior posts (see Sold for $1.05 million! and "Instant" wine cellars vs. developing a wine advisory relationship) but the sheer audacity of this proposal is to be admired.  In this case, which is Acker's first attempt to sell an entire collection, Acker's CEO John Kapon says (on page 11 of the catalog) that he is doing so because he considers "this collection to be a work of art" and that there should be a chance to keep it together.  He also acknowledges it might create some buzz (he's right).

While it would be a major exercise to perform a "sum of the parts" valuation of the component wines in the auction, I suspect the $20 million figure reflects a healthy premium to any such analysis give the reference to "a work of art."  However, I would also not be surprised if a wealthy Asian buyer emerges and pays the tab.  After all, it would sure save a lot of time and effort, not to mention generate instant credibility in the wine collecting world.  The credible alternative of selling the wine via an auction also focuses the mind of any buyer to act by the October 17th deadline or the opportunity will be lost forever.

Contents of the October 4, 2007 Email Sent by Acker's PR Firm

The bull market for fine wines shows no sign of retrenchment. The London International Vintage Exchange Index - an index of the top 100 investable wines - rose 42% in 2007-- trading at its highest level since its inception in 2000. Prices on the most sought-after vintages shot-up by 90% this past year, and new investors from Russia, China and the rest of Asia, are clamoring to get into the game in even bigger ways.

Now, for $20 million, a single investor can instantly become one of the world's undisputed top collectors-overnight.

Beginning October 5 through the 17th, the New York-based wine retailer Acker Merrall Condit (host of the world's largest-ever wine auction in 2006, which grossed $24.4 million) is looking to break new ground this year by offering a single buyer the opportunity to acquire one of the world's masterpiece wine collections in its entirety. Impeccably curated over decades and ranked as one of the world's top-three collections, it aggregates a portfolio of 1,500 of the best-of-the-best wine lots (roughly 12,000 bottles) that closely track the Liv-ex Index.

If no single investor steps up by October 17, the collection will be sold at a blockbuster auction attended by Wall Street high-rollers and international investors at New York's internationally acclaimed, Le Bernadin restaurant on October 19 and 20. Absentee bidding is expected from around the world via web and speaker phone.

John Kapon, president and CEO of Acker Merrall Condit, says that many of the investors he meets love to collect wines and to share a bottle with colleagues and friends. Aside from the high-yield on their investment, fine wine is a potent business tool, helping to cultivate and cement key relationships. "This collection is so extraordinary, the wines so rare, that it couldn't be recreated over a single lifetime. It's truly one-of-a-kind, like a Picasso."

John Kapon is available to discuss all details of the collection and auction. Let me know if you're interested in speaking with him.

Thanks for your consideration.

Why do wine collectors lose their economic wits and overpay for wine sold at auction that can be purchased for much less from reputable retailers?  They're literally throwing money away.

Possible reasons for overpaying at auctions

1. Excellent provenance is worth paying a premium to obtain but how much of a premium?  Would you pay 20% more?  100% more?  The premium may vary based on how long a period the wine has been "protected" (see an earlier post called The wine authenticity premium).
2. The desire to "win" overtakes rationale behavior.  Drinking during the auction itself (which can be encouraged) doesn't help maintain clear thinking either.
3. You miscalculate the per-bottle price being paid because your bid needs to factor in the quantity of bottles in the lot, fixed bidding increments, and buyer's premiums.
   
4. The stated "uniqueness" of the lot helps you rationalize paying more to get it.  Perhaps you're not aware of where else you can buy the same wine from a reputable source.  The same people who sell their collections through auction houses often prefer the market pricing, privacy, and speed of selling their collection outright to a retailer or other member of the wine trade.

Example of recent Zachys Stormby celler auction of Yquem

On September 28, 2007, Zachys held its auction of Dr. Nils Stormby's cellar.  The catalog documents the provenance of the wine and it's about as good as it gets.  Still, the prices paid by collectors were significantly higher than estimates, with the large Yquem section of the sale achieving two to three times its estimates (see Decanter story "Yquem collection goes for US$2m at Zachys Sale").

Yesterday, I received an email from the Antique Wine Company (AWC) in London, pointing out that their enormous selection of 1,372 bottles of Yquem was far more attractively priced in comparison to the prices paid at the Zachys auction (with numerous examples of vintages such as 1916, 1929, 1953, and even 1967 where AWC prices were about half or less).   Stephen Williams, the Managing Director of AWC, called me today in response to my inquiry and cited certain examples, such as the 1929 Yquem, where AWC's bottles were more pristine than Zachys' photos and condition descriptions.

Bottom line: Wine collectors should check retail sources in advance of bidding at auction to understand market alternatives and/or tap a more convenient (immediate) purchasing method.  If you missed out on any Stormby Yquem lots, it's not too late to get the same wines - just give AWC a call (especially for older vintages) or ask your favorite fine wine retailer.  For older vintages, you should also ask about provenance and to see condition photos.

The press has been filled with stories about counterfeit wine in the past few months.  Any solution for absolute authentication needs to start with the wine producer for obvious reasons.  But for a solution to be workable for the trade and consumers, a simple method for them to verify the wine's authenticity is needed.  A security seal called Prooftag (adopted by Blankiet Estates and some Burgundy/Bordeaux producers) meets this test whereas Kodak's offering (adopted by Colgin, Vineyard 29 and Staglin, see press release) does not.

Overview of Prooftag technology

Prooftag is tamper-evident strip (about 1 cm wide and 5 cms long) which is applied to run from the foil capsule onto the bottle.  The technology works on a three dimensional signature called bubble tags that are made from a clear resin which create bubbles in unique (random) patterns during a hardening process.  Read more about why these tags are impossible to reproduce.

Tags also have a unique number assigned and both are then scanned with optical readers when created (by the manufacturer, French company Novatec) and recorded in a central database. 

The key advantage of Prooftag - Easy verification

There are 3 levels of "controls" to verify tags.   The first level is based on a quick visual inspection.  See example to right where the top image is an original strip and the lower one has been tampered with.  The strip might also be ripped.

The second level of control requires using the identifier on the tag to retrieve the unique bubble pattern image from the company's database.  Simply visit this authentication page, and enter the identifier (click here for the animated tutorial).  According to the company, over 99.95% of people tested can complete a visual authentication in a few seconds.

For the trade, optical readers that use an algorithm to calculate a signature for each bubble tag (analogous to how fingerprint readers work) can then be connected to the company portal for electronic authentication.

Possible issues with Prooftag's solution

I presume simply peeling off the strip (even if it remained unripped) would create the damage shown in the second image above (although I didn't see this scenario proactively addressed on the company site).

What about the long-term "stickiness" of the label in varying cellar conditions?  If for some reason the Prooftag came off accidentally, it could render the bottle valueless.  It seems likely this use case has also been considered.

Potential flaws in Kodak solution?

Kodak's system is based on applying invisible markers to printing inks, paper, and other packaging elements.  But these invisible markers are only readable with proprietary handheld readers.  Putting aside the low probability of an individual collector ever buying a reader, trade members might still do so if they care about selling authentic bottles.  The problem is when Vinfolio inquired about obtaining a reader for this purpose, we were told that they're available only to customers!  Huh? This virtually defeats the benefit of marking the bottles at all.  

The other obvious flaw with the entire Kodak approach is that it does nothing to stop a counterfeiter from refilling a bottle with something else (unless the markers are in the foil capsule and it is not resused after a bottle contents are replaced).

Bottom line: Wine producers deciding between these and other anti-counterfeiting options need to consider how the trade and consumers will interact with the technology.

P.S. Here's a link to the Decanter.com article which prompted this post.

How long should it take for wine purchased on pre-arrival coming from Europe to be received by your retailer?

A recent thread on the Mark Squires Bulletin Board on eRobertParker.com titled No longer a fan of Premier Cru attracted over 100 posts and I was struck how many times this issue was raised, often in the context of wines long since released such as 2003 Bordeaux.

Factors affecting timing

• In stock status at supplier at time of retailer's purchase (is it a supplier pre-arrival too?)
• Payment to supplier by retailer (no wine is released for pick-up until payment)
  
• Collection of purchase by retailer's logistics partner (should be within 1-2 weeks of payment)
• Frequency of container shipments (typically every 4-6 weeks)
• Time "on the water" (typically 30 days to California from Europe)
• Time to process the container contents upon arrival (10 days max)

Other than Bordeaux futures purchased at the outset of a new campaign (which should be 18-24 months max), most pre-arrival purchases should arrive within 3-6 months from Europe.

Why it might take longer than 3-6 months

1. Known period before supplier receives wine - If the wine was not in stock at the supplier when purchased, your retailer should be told the estimated time before the wine is available for pick-up (trade sources expect to be asked this question in this situation).
2. Did your retailer have a written invoice confirming his supply before selling the wine to you? If your retailer was speculating by offering wine for sale that he would try to "backfill" later once he'd sold it to you, then you're dealing with the wrong retailer.  This circumstance would also explain extended delays for wine long since released  (such as 2003 Bordeaux) as the pricing of supply could have moved against the retailer since he sold you the wine.  The longer he defers fulfilling your order, the longer he defers recognition of his loss.
3. Supplier defaults - The supplier may not have honored his written commitment to your retailer (or may be experiencing his own delays receiving the wine from his source).  There are a variety of reasons this could happen but as the customer, it shouldn't be your problem even if the wine ends up needing to be sourced elsewhere at a loss to your retailer.  However, depending on the scarcity of the wine, it might add a few months to the delivery period.  Any period beyond a few months is not reasonable absent a specific explanation of what happened.

Bottom line: If you're experiencing longer delays than 3-6 months and are not provided with specific reasons, then you can assume your retailer's slow payment is at fault as everything else is fairly predictable.  If you agree with my hypothesis, you should at least consider whether you're comfortable with being a creditor to your retailer when the evidence indicates a "stretched" financial condition.  The longer the delivery delays, the more concerned you should be.

Related posts on pre-arrivals

1. Why buying pre-arrival wine makes sense
2. Wine futures and pre-arrivals: what's the difference?
   

Whether to buy wine on sale depends on why the wine is “on sale” and whether the final price is really “below market.”  Here’s a quick guide to when the retailer’s rationale for a markdown makes sense for the consumer and when it doesn’t:

Deal

1. The retailer has a small quantity of a well regarded wine left that he wants to clear.  This is a common occurrence but don’t expect to get a full case or even six bottles.
2. The retailer obtained a volume discount and is passing along the savings.  Note that many fine wines are hard for the retailer to purchase “in volume” so the higher end you go and the smaller the wine’s production, the less likely this is to occur.
3. The wine is selling too slowly at its initial price so the retailer is cutting the price to recycle his capital into faster moving items
4. Fine wine with cosmetic damages to labels or capsules may be discounted as their resale value by the collector has been negatively affected but that doesn’t matter if you plan to drink it.
   

Not a deal

1. Everything at the retailer is “on sale” all the time.  Usually this means the “initial price” is a sham and the sale price is often comparable to normal prices elsewhere.  This marketing approach plays on consumers’ desire for getting a bargain even when it isn’t one.
2. The wine is past its prime, increasing the risk that its taste is negatively affected.
3. The wine is just poor quality with a low price that reflects it.
4. Identified bottle conditions indicate potential damage to the wine itself (as opposed to cosmetic flaws).
   

Final price check worthwhile

Ultimately, if you’re inclined to buy an “on sale” item, you might wish to go online and check one of the wine price comparison sites like Winesearcher.com to see how the pricing stacks up with alternatives.  You should also weigh the value of factors such as shipping costs, any wine guarantee offered, and the reliability of the retailer in your decisionmaking process.

Bottom line: Take advantage of the right sale opportunities to extend your buying power.  

P.S.    Here’s a link to Vinfolio’s sale items which are almost all in the category of “well regarded wine with small quantities available.”

The Wine Spectator's Peter Meltzer addresses this topic quite well in a recent post in his Collecting Q&A online column (read it before continuing -- it's brief).

While auction houses tell you that you're buying "as is" and one could argue that the detailed disclosure of every fill level, label tear and other bottle condition is meant for you to factor this information (and any risk it may imply) into your bid amount, Peter's right that auction houses are empowered to make exceptions to preserve buyer relationships.  A lesser known fact is that their contractual agreement with the seller enables them to pass any liability incurred from accepting such a return back to the seller.

Every major auction house sales contract that I've seen has a "rescission of sale" clause.  This enables the auction house, usually in its "sole judgment", to accept a customer return for a variety of issues (including quality) and rescind the sale (meaning the seller doesn't get paid or reimburses the auction house if he's already been paid).  Whether the auction house actually bothers an important seller client for what may be a small adjustment is another matter but they have the recourse to do so.

On a related topic, you might enjoy reading an earlier post from 2006 called "Returning faulty wine to retailers."

P.S.    The photo is of a 1976 La Tache that you would not want to have received.... 

Buying wine on pre-arrival often gets a bad rap as in a June 5, 2007 article appearing on Wine Spectator Online titled "Pre-arrival wine purchases are only for patient people."

Definition of Pre-arrival

"Pre-arrival" is a term used to describe wine offered for sale prior to its arrival at your retailer.  Why would your retailer do this?  Because faster sellthrough of inventory creates a better return on capital which in turn keeps consumer prices lower.

Pre-arrivals can be created when a retailer buys wine from any source if the retailer chooses to begin selling before the wine has arrived.  Sourcing from a local distributor or directly from a producer (e.g., a Napa winery) simply means a shorter wait (a few days to a few weeks) than if the retailer sourced the wine directly in Europe (which could take 3-6 months or longer).

Reasons to buy pre-arrivals

1. Snooze, you lose - It's common industry practice for highly sought-after wines to be sold as pre-arrivals.  If you wait, you may not be able to buy the wine later at similar price levels (or at all).
2. Lower prices - There are various reasons contributing to lower prices such as (a) better retailer capital utilization and (b) the fact that there are often fewer parties (and mark-ups) involved in the supply chain.
3. If you're cellaring the wine anyway - For most collectors, much of what they buy on pre-arrival is not for immediate consumption and will be cellared.  Therefore, whether the wine arrives in one week or six months is generally less important than securing the wine at a good price.
   

Areas of confusion

1. Futures vs. Pre-arrivals - The term "futures" is analogous to "pre-arrival" but is normally associated only with new releases.  See a prior post (Wine futures and pre-arrivals: what's the difference?) for a full explanation.
2. Type of wine - Pre-arrivals may apply equally to newly released wine or a 20-year old vintage.  For example, Vinfolio routinely sources both newly released and older vintage wine in Europe and sells all of them on a pre-arrival basis.
3. Free retailer use of your money - Most people I speak to about pre-arrivals bring this point up.  There is no such retailer benefit (at least for a reputable retailer).  Speaking for Vinfolio, our standard is to pay all international sources within 15 days of making our purchase commitment (and sometimes we do so immediately to secure a parcel others are competing to buy).  Payment is clearly required before foreign sources will release wine to our logistics partners.  The sooner it is released the sooner our customers get it.  Receiving their wine, in turn, tends to generate further orders.

Questions to ask your retailer

1. When is the pre-arrival expected?  How often are the retailer's estimates wrong?  Vinfolio provides timing estimates for every pre-arrival wine in our online wine store.  There are some factors the retailer cannot completely control which is why they're only estimates.  If you absolutely need wine by a fixed date, either avoid a pre-arrival purchase or ask your retailer when the wine is arriving before your buy (and give yourself some extra room for delays).
2. Does the retailer have a written invoice confirming its own purchase from the supplier?  There are retailers who broker wine they don't own (and don't have on reserve with a supplier) on the theory they can backfill the supply based on orders received.  When they can't, your order tends to get cancelled.
3. Are you notified proactively by the retailer upon the wine's arrival or is the responsibility yours to remember to chase them?  Vinfolio emails customers automatically when wine is received in our warehouse.  Customers may also check order status online or call/email our Customer Service department any time.  For many other retailers, the onus is on the consumer to manage their records and remember to chase the retailer until their wine is delivered.  Note: Vinfolio's free online VinCellar software is designed to handle tracking pre-arrivals from any retailer as part of its capabilities.
4. What's the retailer's history of failing to deliver and what are you offered as compensation in such a circumstance?  If the market value of a wine has appreciated since you ordered it, getting your money back is an inadequate remedy for the retailer's failure to deliver.  While we have not had to invoke it, Vinfolio has a published policy described in our terms (listed on our site) which includes a 125% refund.  

Conclusions

Pre-arrivals generally serve the collector well but understanding how they work helps set appropriate expectations.  As the Wine Spectator Online reporter discovered, where you buy your pre-arrival also makes a big difference to your experience.  For advice in that realm read my prior post, "Criteria for selecting a good wine retailer".

Yesterday's article, "Are ratings pointless?", in the San Francisco Chronicle provided an in-depth analysis of the 100-point wine rating scale.  The short answer to their rhetorical question is "no" but let me explain how I think about the use of ratings and the key underlying factor driving consumer interest in them.

Why wine consumers want ratings - Reviewer "triage" is a proxy for their own effort

The sheer volume of fine wine produced annually overwhelms the individual consumer's ability to determine what to buy based on his or her personal preferences.  By leveraging the time of reviewers with respected credentials, the resulting ratings and wine descriptions provide an invaluable service by helping prioritize buying decisions within a finite budget.  The consumer's goal is spend his or her money wisely and to achieve maximum drinking pleasure while avoiding outright buying "mistakes."

Determining which rating sources to trust 

Rating sources don't have to be preeminent professional reviewers like Robert Parker, Stephen Tanzer, or Allen Meadows.  As my post of only two days ago highlighted (see What influences your wine purchase decisions?), "wine-knowledgeable" friends are the most frequently mentioned source of influence (72%) followed by wine retail staff members (61%).  The consumer only needs to perceive the rating source as having a good probability of having made an accurate assessment.  This probability assessment or "trust index" is essentially the result of a personal calibration process between the individual consumer's subsequent experiences with wines reviewed by a given source and the level of agreement between the consumer's opinion and the source's.  That's why friends and retail store staff "compete" well against professional reviewers.

Personal taste ultimately trumps professional ratings

The same post I referred to earlier also notes that 87% of consumers agreed with the statement "I trust my own taste more than I do the wine critics."  While there are "score chasers" out there who seem to fall into the other 13% bucket, this extremely high agreement rate indicated that most consumers use wine ratings as a mere input to their purchase decision process.

Use of professional ratings by retailers

Most retailers selectively present only the highest rating, from whatever source they can find, to provide a positive buying rationale to a consumer. This has always irritated me as the source may not be one I "trust" most for the type of wine in question, and even if it were, more information, including divergent opinions from other trusted sources enable me to make a more informed purchase decision. 

That's why Vinfolio shows multiple rating sources whenever we can find them such as the example shown on the right for a $200+ bottle of Kistler pinot noir.  Even if you trust the Wine Advocate, the wine divergence of views on this wine (from Burghound, Tanzer's International Wine Cellar, and the Wine Spectator) will interest you.  Upon reading the text reviews (achieved by clicking on each box when on our site), you may choose to discount selected opinions or not. 

Your opinion

Please feel free to add your own comments on how to use wine ratings successfully.

When I launched The Wine Collector blog back in late October 2006, I stated that one thing I would not do is write wine recommendations and reviews in my blog.  Doug Wilder, our Director of California Acquisitions and Sales, was already writing about California and other domestic wine in his Free Run Juice blog and in his free weekly wineletter, The Wilder Side of California. 

Now, I'm pleased to announce that we recently launched the Vinfolio Staff Picks blog where our collective team of wine experts will tell you about their personal favorites on a regular basis and why they like them.  Generally speaking, the wines covered will mostly be international wines to balance out the coverage which Doug provides on the domestic side.  In addition to reviews and recommendations, the Staff Picks blog will cover other topics relating to drinking wine and having fun.  Laura Conway, our Editorial Manager, will be the blog's facilitator (that's her photo on the right).

Please check it out and subscribe via your RSS reader using the Subscribe link on the blog's home page.  You can also see all of our RSS feeds (and subscribe by email if you prefer) by visiting Vinfolio's master RSS page. 

Note: I just noticed that the new Staff Picks blog is not yet on the master RSS page but we'll get that fixed quickly.

Wine clubs, those subscription-oriented wine-buying programs offered by wineries and others to broaden your taste horizons are usually defined by the following basic characteristics:

1. Monthly or quarterly shipment frequency
   
2. Fixed price for a specific number of bottles, usually with a predetermined contractual commitment
   
3. A thematic element for each club which defines the type of wine you'll receive
4. All subscribers to a given club get the same wines (or drawn from the same limited subset of wines)
   

Flaws in the traditional wine club model

1. Targeted at more novice wine enthusiasts - To keep the price per shipment down, the vast majority of wine clubs select relatively inexpensive wine as subscribers tend to have less wine knowledge and are therefore more price sensitive.
2. Pricing structure is not transparent - There's an inherent conflict in the pricing structure because you sign up to pay a fixed price for some number of bottles.  The club operator, however, wants to minimize his costs so he can make a profit.  The component bottle prices in your shipment are never provided.
3. "One size fits all" - Other than generic criteria associated with what types of wine fall within the typically broad parameters of your selected wine club, you get the same wines as everyone else who signs up.  Buying the same wines in volume is how most operators make their money.  The need to have enough of the same wines often precludes smaller, boutique wines from being obtained.
4. Wine "dumping ground" - Wineries may package wine that isn't selling to move through the club as it's a "guaranteed" channel.
5. Inflexible - It's hard to skip a shipment without cancelling (which may not even be possible).
6. Weather conditions when shipping wine ignored - Extreme temperatures, hot or cold, can cook or freeze the wine in your shipment.  Operators should not blindly ship wine on the appointed schedule regardless of weather but most do.
   
7. Notice of forthcoming shipment not provided - Wine must be signed for by an adult.  If no adult is home, the wine shipment will sit for one or more days in a non-climate-controlled delivery truck or warehouse.
8. Customer service generates cancellations - Operators seem to believe that reminding subscribers of their forthcoming shipments or providing other notices just stimulates cancellations so they minimize such interactions.

Vinfolio's personal wine clubs

When Vinfolio decided to offer its version of wine clubs, we sought to address the flaws above.  Our fundamental premise is that a wine club is simply a more efficient means for many consumers to receive personalized advice on what to buy.  While our customers may call their Executive Wine Specialist (EWS) for individual recommendations at any time, they may be too busy to do so.  So capturing their detailed individual preferences for their EWS to use in hand-picking their wine, and pre-agreeing to a flexible schedule of shipments is simply more convenient and saves them time. 

In short, we view wine clubs as merely a customer's preferred or supplemental method of buying wine from our retail business where each and every order is tailored to an individual's preferences, where our entire inventory is available to select from, and where the shipping/delivery options are sensitive to weather conditions or the temporary inability to receive a shipment (for whatever reason).

Key elements of Vinfolio's personal wine clubs

1. Suitable for all knowledge levels - Our program is designed to serve all wine knowledge levels from novices to experts.
2. Complete customization - Customer's club choice is amplified by any specific preferences desired.  E.g., mix of red and white wine, price range per bottle, preferred (or disliked) producers, varietal preferences (or dislikes), etc.
3. Unique wines per customer from large inventory - Customer's assigned EWS hand-picks wine drawn from Vinfolio's complete retail wine inventory of almost 2,000 wines before each shipment which meet the criteria.  
4. Transparent pricing model - The price of a shipment is simply the total of published retail prices of each wine selected (constrained by price range per bottle specified) plus shipping costs.
5. Vinfolio's "finer" customer service - One week prior to a shipment, we email a reminder so the customer has plenty of time to modify preferences, skip a shipment, request a different ship date, ask for the wine to be added to free storage for later shipment, or cancel altogether.  Weather holds are automatically applied if conditions do not permit the safe shipment of your wine (just as we do with all retail purchases)
   
6. VinCellar integration - All items purchased are automatically added to the customer's VinCellar online cellar management software account (also standard for any retail purchase).

If Vinfolio's redefined, personalized approach to wine clubs appeals to you, learn more.  It's really just a more structured way to build your wine collection and to try wines you might not otherwise buy.

 

A recent thread titled "Wine-Searcher used for teasers?" appearing on the Mark Squires' Wine Bulletin Board on the eRobertParker site struck a chord with me.

Most wine collectors use one or more of various wine price comparison engines to search for a wine they're interested in buying.  Winesearcher.com is the most popular of them.  A common problem encountered by users is that the wine being advertised is often "just sold yesterday" or otherwise not available when the collector seeks to buy it.  Are retailers engaging in "bait and switch" tactics?

Retailer input is a big part of the problem

1. Data collection by "scraping" - Most data appearing in Winesearcher is collected by "scraping" it from the retailer's web site, meaning a software program "crawls" the retailer site's unique layout and attempts to strip out the relevant information to populate a listing.  This is inherently problematic as every retailer site is different and site layouts get modified periodically.
2. Infrequent update frequency - Winesearcher on average updates a given retailer site "at least once a week."  Ideally it would be daily and it can be if the retailer makes a data feed available to Winesearcher to avoid the site scraping process (which is what Vinfolio does).
3. "Technology-challenged" retailers - Most retailers are small businesses (often rooted in a "bricks-and-mortar" operation) that are slow adopters of new technology that's needed to facilitate online sales.  Tasks like maintaining an accurate real-time inventory are not easy for them (as hard to believe as that may be for an inventory-driven business).
4. Listing of "sold out" wines - Many retailer sites complicate the accurate scraping of data by listing prices for sold out wine.  One search engine competitor of Winesearcher told me he believes that over half of the retailers' sites they scrape do this.
5. Brokered wine - Brokered wine is by definition wine that the retailer is marketing but does not own.  This is very problematic for the collector because there may be many retailers offering the same physical stock of wine from a single wholesaler.  A purchase request must first be confirmed with the supplier which often takes 1-2 business days and the wine may have been sold to someone else in the interim.

What you should expect

1.  "Garbage in, garbage out" - I'm exaggerating to make a point but given the 5 factors noted above, is it really a surprise that advertised wine is often not available when you call?
2. Hot wines - Newly reviewed wine with high scores tends to create a feeding frenzy among collectors looking to buy it.  Given the site update frequency and an "instant" surge in demand, you should expect to hear "sold out" or new higher prices for legitimate reasons.
3. Non-sponsors - Winesearcher charges retailers $3,150 per year for priority display of the retailer's listings in the free version of their site.  If a retailer is spending that much, their interest in maintaining daily, accurate price lists is probably higher than a non-sponsor.  Sponsor names are bolded and non-sponsors are not.  So if you encounter a non-sponsor, I would expect a higher probability of less accurate inventory information.

A recommended strategy for users

1. Subscribe to Winesearcher Pro - As pointed out in a prior post, this is a no-brainer.  Do it as the enhanced features provided are essential for dealing with the inherent data issues already noted.
2. Read price date stamps - Every price is date-stamped.  Older prices are more prone to problems.
3. Report problems - On every results page, Winesearcher has a feedback link for reporting issues with data.  They are very responsive.  For the sake of the community's use of the information, please take a minute to report problems.
4. Exclude merchants - The Pro version of Winesearcher enables you to exclude merchants from being displayed in the results of your searches.  So if you've concluded a particular merchant never has the wine when you inquire, or is unable to ship to you, just exclude them.
5. Developed preferred retailers - There is more to buying wine than the absolute lowest price.  Read another prior post: "Buying smartly from wine retailers."
6. Use Vinfolio's quote request service - If you're having a hard time tracking down a wine, let Vinfolio do it for you.  We accept quote requests on literally any wine.  If we locate it amongst our suppliers or customers who use our free VinCellar online cellar management software, we'll quote you a price with no obligation to proceed.

Ideas for improving Winesearcher and other search engines

1. Develop retailer rating system - The user community can police bad retailer practices.  Most price comparison engines in other sectors provide this capability.
2. Eliminate "sold out" prices - This data is not relevant to any user and contributes greatly to the effort required to actually locate a retailer with the wine to sell. It also skews the validity of the price data displayed as often the lowest prices are the ones where the wine is unavailable.
3. Identify brokered wine to users - Each price should have an attribute which identifies it as a price representing a brokered wine versus a wine that is owned by the retailer and available to sell immediately.  Note that "available to sell" could mean the wine is "in stock" or still on "pre-arrival."  The retailer should have an invoice confirmation from its supplier for wine that is available to sell immediately.  E.g., Vinfolio often sells wine on "pre-arrival" as we start selling it as soon as we've purchased it.
4. Display quantity available - For any retailer providing a data feed to Winesearcher, providing quantity available information is easy to do.  The quantity is obviously accurate only at the time of submission but it still provides an indication of the maximum quantity likely to be available.  While it won't be possible to capture this information from all retailers, those that provide it are likely to get a higher degree of patronage from Winesearcher users.  This should motivate others to work towards making it available.
5. Enable greater filtering of results - Why not let the user filter on the date of the price listing, a new "quantity available" field, or on whether the wine is brokered or available to sell immediately?

 Have other ideas?  Post a comment.

 

Today's Wall Street Journal (WSJ) had a front page story on wine counterfeiting titled "U.S. investigates counterfeiting of rare wines" (WSJ online subscription required).  When I arrived at the office today, I had a voice mail from Robert Frank, the writer of The Wealth Report blog at the WSJ (which is billed as covering "the lives and culture of the wealthy").  He wanted to discuss how wine buyers could avoid fakes.  My comments are incorporated into his blog post today titled "Oenophiles see double."

In the discussion with Robert, I noted that buying wine sourced directly from the chateau (which is called "ex-chateau") or from individuals who bought it upon release is the ideal defense against fakes, as the "chain of provenance" is fully known (including storage conditions). 

Quantifying the value of buying ex-chateau 

I realized when making this point that I potentially had a method for quantifying the market pricing premium for authenticity. The other day when reviewing the price list of a very reputable British wine wholesaler (Farr Vintners) specializing in Bordeaux, I noticed that they listed certain Bordeaux wines with a notation that the wine was "ex-chateau."  If they happened to also offer the same wine, vintage, and bottle size without the ex-chateau designation (and in otherwise excellent condition), then an analysis of the price differences might reveal at least this firm's educated view of the price premium for authenticity (as storage conditions of non ex-chateau wine from Farr is typically impeccable).

The outcome 

In examining Farr's full Bordeaux price list, there were 18 examples that met the criteria which spanned the 1986-1998 vintage time frame including wines from Latour, Mouton-Rothschild, Haut Brion, and Pichon Lalande as well as less expensive Bordeaux such as Lafon Rochet.  The chart below displays the results with a trend line based on a linear regression approach.  A few observations:

1. The trend is for an increased premium for older wines which makes sense as the risk of fakes intuitively is greater the older the wine.
2. Only 1 of the 18 examples had no price premium (and this was for the cheapest wine).
3. Absolute price levels were less correlated with price premiums than vintage in this limited data set.  E.g., the five most expensive wines (priced at $2,000 to $5,000 a case), had 3 examples in the 9-10% premium range but also one at 5.6% and one at 2.8%.
4. The overall median premium in this sample was 5.7%.

One way of interpreting the authenticity premium is as a measure of the potential liability that an auction house or other seller of fine wine exposes itself when selling such wine.  If one extrapolated the trend line to 1947 (as an example of a great wine year), the premium (or potential liability of selling non ex-chateau wine) rises to 32.2%.  That's about the total gross margin percentage between buyer's premiums and seller's commissions that a major auction house would earn when selling a wine of that vintage.

Bottom line: Pay attention to provenance and be prepared to pay more for when it's solid -- it's worth it.

Five tips for gaining an edge when buying wine from retailers:

1. Identify your preferred wine retailers – Who offers what you like to buy?  Are prices consistently fair or do you feel the need to check them on Winesearcher.com every time?  See prior post on Criteria for selecting a good wine retailer.
2. Concentrate your purchases – There are two primary reasons to do this.  Whether formally or informally, most retailers will offer higher spending customers access to hard-to-find or highly allocated wines before others as a reward for their past purchases.  Second, if you’re shipping wine, it’s far more efficient to do so in case quantities which are easier to hit if you buy from fewer sources.
3. Retailer’s email offers – If you want a wine listed in an offer, act quickly.  In all likelihood, thousands of others got the same email at the same time.  Better wines tend to be sought after and available in limited quantities.
4. Discover new inventory before email offers are sent – The secret is using RSS (really simply syndication) technology, something which Vinfolio offers but few others do.  RSS “feeds” provide real-time notification of inventory additions grouped into either predefined wine categories or matched to totally personalized criteria tailored to your particular wine interests. You decide which feeds to subscribe to (or create) and can unsubscribe any time. You also can combine feeds from multiple sources into your "reader" which provides further convenience in grouping related content from different sources. Learn more by visiting our RSS page.
5. Use Vinfolio’s “quote requests” – If we don’t have a wine in inventory, find the wine in the “Other results” tab within our wine store and click on the “Get quote” button.  Our buying team will seek out the wine and provide a price quote if found or we’ll monitor availability and notify you automatically if we come across it in the future.  There’s no obligation to proceed if a quote is provided.  Requests for 6+ bottles or valued at $250 or more are give priority.

This post was inspired by a post on Vinography titled “Is that e-mail wine offer a good deal?”

In their wine column in The Wall Street Journal today titled “A ‘Delicious’ Quest”(WSJ subscription required), Dorothy Gaiter and John Brecher wrote about their highest rated wines in 2006 – i.e., those earning a “delicious” rating. A 10-step plan to discovering such wines yourself is also offered.

15 of 2,000 wines tasted rated “delicious”

Uhhh…that’s a pretty low ratio (3/4’s of 1% to be exact or 1 of every 133 wines tried). Then I read that the list is “longer than usual.” It’s also worth noting that the list only has 6 wines under $100. While they suggest there are “hundreds of delicious wines out there”, why didn’t they come up with more? To find 200 delicious wines using their success ratio, one would need to taste almost 27,000 wines (200/0.0075).

While one could settle for “very good” (their next highest rating), if there is a better wine to be had, most wine collectors want it. Moreover, the time and cost of going through 133 bottles to find the holy grail is not something even the hard core collector will do (as much fun as it might be to try). So how do you simplify your search?

“Knowledge makes everything simpler” – Law 4 of The Laws of Simplicity by John Maeda

Gathering knowledge, both personally from tasting experiences and by calibrating one’s taste preferences with those of known wine critics, will help you zero in on wine worth trying in the search for “delicious” head-turners.

But I agree with Gaiter and Brecher’s first and last step of their 10-step plan which is to “Find a good wine merchant” to provide advice and guidance. I know that Vinfolio has almost 2,000 wines available and I can guarantee that far more than 15 of them would justify top rankings. We actually assign every customer their own wine specialist to provide advice over the phone or via email (read The Vinfolio Advantage).

Bottom line: Whether you buy from us or from other retailers, Gaiter and Brecher’s recommendation to utilize good wine merchants for guidance will shorten your search.

If you want a chance at buying new up-and-coming California wines before Robert Parker or the Wine Spectator give them a high score and they become scarce or unavailable even at much higher prices, then read the (free) weekly Wilder Side of California from Vinfolio's own Doug Wilder.

Robert Parker's latest Wine Advocate (issue #168) was just released and there are a few notable items to mention:

1. The 2003 Scarecrow Cabernet achieved a Parker score of 98 (only 8 wines had a 98 or higher including Colgin, Araujo, Abreu and Shafer Hillside Select). Scarecrow is now unavailable. However, Doug first wrote about the 2003 Scarecrow in issue 49 of the Wilder Side of California published on April 28, 2006, rating it a 97. Vinfolio offered the wine for sale then (as it does with all wine Doug rates).


2. The 2004 Kapcsandy Family Winery State Lane Vineyard ($90 on Vinfolio's site) just got upgraded by Parker to a 95 from an initial score of 91-93. Doug published his review of this wine in issue 78 of the Wilder Side of California on November 17, 2006. He rated it a 96 despite knowing of the earlier lower score of Parker. Being a critic is about having an opinion and Doug has one.

I admit I'm biased so here's a third-party comment from a fan, "In praise of Doug Wilder," just posted on the Mark Squires Wine Bulletin Board. What are you waiting for? You can sign up just for Doug's free weekly email or simply register with Vinfolio to get both his email and our other wine offers.

Bottom line: Being a wine collector is about experimenting with new wine recommended by trusted parties, whether it be Doug or your local retailer. There's no need to wait for the "big" critics to provide their endorsement.

P.S. Also read Doug's blog, Free Run Juice, for additional commentary on wines worth noting.

While most wine collectors know about Winesearcher.com, the popular wine price comparison engine, many seem to overlook the fact that it presents partial or complete search results depending on whether you are an unpaid visitor or a paid subscriber to their "Pro Version" ($29.95/year).

Here are some statements from different parts of Winesearcher's site which paint a clearer picture (italics added):

• "Free searches are often restricted to wines from merchants who sponsor us."
• "If a wine can be located among our sponsors, we do not show other retailers' wines."
• "The subscription Pro Version provides full price comparisons between all price lists."
• Using all data, "we have found that the average price of the cheapest supplier is half of the most expensive."

So just to be clear, when even one sponsor has a listing for a wine, the only price listings you will be viewing in the free version for a given search are those of sponsors. Despite this, 97% of site traffic visits the free version and there are only 8,500 subscribers to the Pro Version (worldwide). If most of their 8,034 wine stores were sponsors, it might not be an issue but my best guess is that Winesearcher has only a few hundred sponsors.

Bottom line: Given the price of a good bottle of wine relative to the reasonable $29.95 annual fee, subscribing to Winesearcher Pro is as close to a no-brainer as it gets for any wine collector.

(Disclosure: Vinfolio is a sponsor of Winesearcher.)

Definitions

• “Futures” is a term generally reserved for newly released wine offered for sale now but for future delivery. The term is most commonly associated with Bordeaux futures which have a delivery timeline of 18 months to 2 years after initially being offered on the market.
• “Pre-arrival” is a term used to describe wine offered for sale prior to its arrival at your retailer. Pre-arrivals are analogous to futures in respect to future delivery but may or may not be a new release. The delivery timeline for pre-arrivals also tends to be much shorter – perhaps a week or two when coming directly from a winery or distributor, or as much as six months if being imported from Europe.

Two primary reasons to buy futures and pre-arrivals

1. Secure your supply. Often, there are only finite amounts available of highly scored or sought-after wine. “First come, first served” applies.
2. Obtain better pricing now. There will almost always be opportunities to buy a particular wine again but prices tend to rise as supply dwindles and secondary market sources (including individual collectors) are tapped for more. Many Bordeaux chateaux produce large quantities of wine and artificially limit supply in early futures offerings to manage pricing. Ultimately, the need to sell forces the additional supply onto the market and keeps prices down later. In the past 10 years, I’ve been able to buy virtually any Bordeaux wine later when in stock (or on short-term pre-arrival) at the same or even lower prices than originally offered.

In addition, for Bordeaux and some other futures, you can generally specify your preferred bottle size (including large formats) because you're purchasing the wine while it's still in barrel. Finally, for any new release purchase, you gain the comfort of knowing you have minimized any handling/provenance risk.

Risk factors

1. Advance payment – You're required to pay to secure your order because the retailer has to pay his supplier. Contrary to what some collectors believe, there's no long-term “float” benefiting the retailer.
2. Retailer stability – As with any business where you're in a creditor position until your purchased goods are received, you should deal with reputable, financially stable retailers. This is a more significant issue with the longer timeframes involved in futures.
3. Forgetting what you bought – Active wine collectors often buy from multiple retailers and quickly have an administrative problem tracking what they bought from where. Disorganized or unethical retailers may neglect to remind you that they owe you wine. Vinfolio's free online VinCellar cellar management software helps you track pre-arrivals from any source.

Note that Vinfolio guarantees that wine purchased from us will be delivered as originally sold, even if our supplier defaults (rare but it could happen) and we have to repurchase it from elsewhere at a higher price. Read our 125% pre-arrival guarantee below which I believe is unique in the wine industry:

Vinfolio's 125% pre-arrival guarantee

It may occur that a supplier of a Vinfolio pre-arrival or futures purchase does not deliver the quantity or bottle sizes originally sold by Vinfolio to Customer. Should this occur, Vinfolio guarantees that it will attempt to repurchase the wine from another source, including at its own greater cost. If within three months, Vinfolio cannot find the wine from another source, Vinfolio will refund the purchase price plus 25% which shall complete its obligation to Customer. If, however, Customer wishes to cancel the order prior to the foregoing three-month period without waiting for a replacement to be found, the refund will be for the original amount paid (i.e., without any premium added or cancellation fee applied).

 

As outlined in my prior post on Top 10 wine collecting mistakes, the majority of common mistakes are associated with buying wine. Vinfolio buys large quantities of fine wine, both from commercial suppliers and from private individuals, and all of it is inspected and either accepted or rejected upon arrival according to our Inspection Guidelines.

Individual wine collectors may apply these same guidelines in several ways:

• For auction house purchases, evaluate whether to bid based on the condition information disclosed compared to our acceptance criteria.
• For any purchase, examine bottles upon arrival for signs of concern and raise issues immediately with the retailer or auction house for resolution.

As pointed out in the guidelines, our decision to reject a wine simply means there is an increased risk of it being inferior and is not a definitive judgment of quality. However, it’s our best assessment without opening the bottle and tasting it. You may decide some reasons we reject wine don’t bother you as they may be more cosmetic (e.g., torn labels) but such reasons negatively impact value should you ever decide to sell the wine.