Tuesday, July 14, 2009

A LITTLE BIT BEHIND THE SCENES AT MY JOB

Buying for a retail wine store is an interesting endeavor. You are constantly barraged by deal after deal, and brokers, importers and distributors are almost beating you up to take their product and put it on the floor, on display somewhere in the store where our customers can see how great the deal is.

Well, for the most part, that approach has been fairly simple up until this past April, when the Kentucky legislature added a sales tax on alcohol (we already had a tax at the wholesale level of 11%). The complication to this is the simple fact that, in our portion of the metropolitan Cincinnati area, our stores and our competitors have been able to maintain something of a price advantage over our Ohio rivals, one that has now been drastically diminished.

So now, when a supplier approaches me with a deal, it REALLY has to sing. A wine that is listed at a $9.99 retail, and is typically $10.99 in Ohio, should be at least $8.99 retail here. And we truthfully seek the price to be even lower than that, as I am sure our counterparts in Northern Kentucky do as well.

The problem is when the winery is trying to maintain a specific price point. It’s an image thing, they tell me. And yes, we have been something of a brand killer around here, trying to hold pricing to perhaps 1980s levels on a lot of brands. Ridiculous, some might say, but the ultimate winner in this price battle is the customer. And there is the big rub. The customer, one could argue, is the unspoken “fourth” tier in this three-tier system. In a lot of respects, the customer is the one really getting the shaft. And it is the retailer who is often made the bad guy. Believe me, if we could sell something 50% off of what the suggested retail is, and still make enough money to pay the employees and keep the lights on, we would do it in a heartbeat. Yet we contend with the exchange with the Euro, wholesaler and importer shipping costs, brand expansions, wholesaler overhead, excise taxes, state taxes, etc., etc. All this, and the suppliers still have the audacity to tell us at what price we can sell the brand.

Price has never been more important than it is now. Especially with this economy still stinking the way it does, we cannot afford to carry a product that does not meet the combative price criteria that this market needs. Hell, every market really needs more aggressive pricing. And these suppliers wonder why sales are down and why people are trading down, buying cheaper wines? Someone really needs to explain to the middle tier that the bubble really has burst, and that the runaway price escalating party is over and done.

3 comments:

Beth said...

Nice blog. Enjoyed going through you blog. Keep it up the good work. Cheers :) Beth www.colonialgifts.co.uk

Mike said...

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k2 said...

Thanks for the praise Beth. Appreciate all the encouragement I can get.