I have been buying Wine online for a couple of years now. Sometimes it has been a great experience and sometimes a

crappy one. But what it shows is how fragile customer loyalty is and the things that can damage it and a brand.

I got hooked initially on Graysonline – about two years ago. The thing that Grays did, in Australia, anyway, was to create an expectation in the minds of this shopper that with respect to wine, anyway, bargains were possible. A friend, who is a wine buff, and was a professional chef, in a past life, really focused me on that, when he encouraged me to buy Chablis from Greys. He told me that he had a bidding technique that worked for him and he was able to get really good Chablis, which I love, at under $12 a bottle! When you consider that some of the Sauvignon Blanc that is made in Australia and New Zealand and is utter crap, sells for a good deal more than that, it had to be a bargain.

So for the last 18 months I have been snaffling up Chablis, and paying somewhere in the region of $12 – 15 per bottle for a pretty damn good drop of wine. Alas, it seems that Grays have run out…. and by the way, the particular Chablis that they had on auction is imported by Grays rather than being sold on behalf of a third party.

With the prospect of not having any Chablis in the house at Christmas, I decided to look for some alternate options.

That led me to Cracka Wines, a more recent addition to online marketing in Australia. Cracka sets itself up as an aggressive price differentiator in the way that it markets itself. I bought a case of Chablis from them, and the product, delivery service were all fine. The problem is that as soon as you have made a purchase from them, they start spamming you with discount coupons and product announcements. Now the notion of a discount coupon can be pretty compelling if the rest of the value proposition is great. And by that I mean that you have to be on a line ball in terms of price before you begin the game that Cracka is playing. Discount coupons as a business model is pretty thin on its own…. You can give me 10% off my next case, but if I can buy the same product from Dan Murphy for 20% cheaper without having to go through the effort of finding the email with the discount code in it, you can bet I am going to do it.

So yesterday when I went down to the cellar and grabbed a few bottles of French Burgundy, Chablis and Rose to put in the pantry for easy access, I noted that I was running riskily low on stocks and therefore should get an order in place…. When I logged on to my email later in the day, I saw yet another piece of spam from Cracka, this time a note from the CEO telling me that he hadn’t seen me shopping recently, and was there anything wrong…. It had in it a couple of options that I was invited to click – the reasons that I may not have shopped. These included the following riveting pieces of hypothetical feedback:  “Nothing tickles my fancy right now”;  “I’m waiting on the auction of
a personal favourite”;  “I’m all stocked up at the moment”; “Wine? I’m too busy to think about wine!”; “Eagerly waiting for payday”…

The lack of any real creativity, combined with the fact that instead of intelligently asking me some questions that I might actually want to answer, made me think: “These people don’t actually understand marketing in a Web 2.0 and beyond world. They’re all about discount coupons and push.” So I decided to look analytically at what my options were. And so I spent some time price comparing Cracka with Dan Murphy and as a result ordered some inexpensive French Chablis and Rose that is so much cheaper than the same product almost exactly (Same brand, same variety, same grape, but 2 years difference on vintage) as to make it a no-brainer.

Here is the price comparison:

2008 Simonnet-Febvre Petit Chablis: Cracka Price: $26.99 discounted to $21.99. With a further 10% discount (if I could find the coupon) this would bring a bottle down to $19.79.

Meanwhile at Dan Murphy they show the same recommended retail – $26.99, but I can pick up a 2010 for $16.15 per bottle. And at Dan Murphy there are no shipping costs.

So it stacks up that for a dozen bottles from Cracka I paid $279.88 for a case of 12 on the first and only time I purchased wine from them. Today my purchase of 2 cases of 6 will end up costing me $237.48. That is a whopping $42 difference in cost!

I can imagine that if I were buying one of my favourite wines, Chateau Talbot, that there might be a significant difference in vintages, but much less likely with an inexpensive Chablis….

What is really happening here?

This should not be the way that this particular scenario plays out, surely? Dan Murphy is a big player in bricks and mortar retail. You would think that in spite of their buying power, the overhead of their bricks and mortar assets would make it tough for them to compete with a virtual store front that presumable has very little overhead. It would be running its purchasing on 30-60 days credit, so when it pays its bills, its already got the money in the bank thanks to Visa. It wouldn’t own a warehouse, because it doesn’t need to. In fact its only overhead would be its web development costs and its third party marketing. The conclusion has to be that Cracka is trying to gouge as much profit as it can while it can. The problem with that concept is that you can’t imagine Cracka becoming such an explicit threat to any of the big players that it will be able to greenmail one of the majors into buying it.

Meanwhile Dan Murphy is going to keep on getting bigger, and I will be watching to see when Grays gets in some inexpensive Chablis again!

There is one other aspect of this that should be ringing alarm bells for those people at Cracka in particular: Once you lose a customer through churn, where the customer discovers that you are only a retailer, and retailers are only as good as the sum total of the brands they carry, the prices they charge and the service they provide.

On line the mix that leads to customer loyalty is a lot more tenuous than in the bricks and mortar world where there are shop assistants to help you and the potential exists for a more enriched relationship between seller and buyer. Online price is where retail brands first create a relationship and then build on it. And trust becomes the mortar that binds together the experience and the relationship. Maybe I am not the right demographic for Cracka. But I think the greater possibility is that the company has a bunch of young marketing graduates working for it, doing what they learned at university, without a true understanding of the rationale that drives customers. And think about it. What is the big demographic of customers for buying wine? Should be pretty easy to answer…. it has to be people over the age of 65. They have discretionary spending capability; they have time on their hands; and there are just so many of them anyway – and growing. What companies who are online need to start doing, is to employ people who are over the age of 60 to communicate with the people of their own age….