In its nearly 25 years in business, Wine.com has grown to become a major force on the wine and spirits retail scene. Having built valuable relationships with wineries, wholesalers, and customers for more than two decades, Wine.com is a retail leader in the online space, with overall sales expected to top $250 million this year.
The tech-savvy San Francisco, California-based wine retailer uses its internet positioning to reach a wide swath of consumers. It regularly appears near the top of various wine-related online searches, and it’s earned a high Google quality score through its customer satisfaction ratings. “The more helpful you are to the customer, the more customers engage with your business, click on links and buy things, the higher your quality score,” explains CEO Rich Bergsund. “The better you are at doing business with the customer, the better chance you will be included in searches.”
Wine.com founder Michael Osborn adds that the company has become highly relevant due to its positive reviews and customer feedback. “We benefit from essentially being consummate about wine,” he says. For their continued excellence in leading the market’s largest online wine retailer, Mike Osborn and Rich Bergsund have been named 2022 Market Watch Leaders.
Today’s Wine.com launched in 1998 as eVineyard, a small firm based in Portland, Oregon. At its start the company had just two employees, Mike Osborn and his father, Jim. Mike had a background in engineering and software and systems integration, and he had experience writing device software for Hewlett Packard and Intel. “That’s how I got introduced to e-commerce software,” he says.
When it comes to technology, Osborn tries to stay ahead of the times. Osborn was a whiz kid who used money earned as a newspaper delivery boy in rural Oregon to buy the necessary books and computers to begin teaching himself how to write software when he was 12. He founded Expert Technology Corporation while in high school. He merged his company with CTR Business Solutions in Portland, Oregon and joined that larger business in 1992. When CTR was sold in the late ’90s, he looked for something new. “I wanted to deploy software,” Osborn says, adding that he helped CTR transition with their new ownership but ultimately left to search for new opportunities. “That was a good move and that’s how we seeded our business.”
Meanwhile, his dad, Jim, was planning to take an early retirement package as general manager of the Dow Jones subsidiary Medford Mail Tribune. “I told him I was leaving the software and integration business and that I was launching this startup,” Osborn recalls. “These were the early days of talking about eVineyard.”
Father and son began planning for the e-commerce wine site, working together for a few months before its official launch. “We got a warehouse in northeast Portland and started creating relationships with wholesalers and working with a design agency to create a website,” Osborn says. “We were licensed very late in December so that was part of the issue. It took a while to get some consumer and trade adoption. The first company hire was a couple of warehouse employees in late December of 1998 and early January of 1999. We didn’t fundraise until May of 1999. Then we started legitimately hiring. We had about 20-25 employees in 1999.”
The company has grown immensely since those early days. Wine.com averages 13,000 wine SKUs online today, which are available for sale to customers in 41 states and Washington, D.C. This amounts to nearly 50,000 vintage-specific wines annually being purchased, according to Osborn. Wine prices range from $8 a 750-ml. for Pepperwood Grove Merlot to $8,500 for 2001 Domaine Leroy Corton-Renardes Grand Cru. The average retail price for a 750-ml. bottle of wine on Wine.com is $32.
“It’s premium by the consumers’ choice,” Bergsund notes. “People can buy $10 wine at their local grocery store.” Bergsund joined the company in 2006. “When I joined Wine.com, the thing that struck me was the relationships Wine.com had within the beverage alcohol industry to develop three-tier e-commerce,” he adds.
In 2019, Wine.com began selling spirits and now offers an average of 2,000 spirits SKUs in California, New York, Florida, and New Jersey. Spirits represent about 5% of overall sales. Beverage alcohol sales are down this year, but still significantly higher than 2019. “The Covid-19 bump for us was more than 100%,” Osborn says. “We brought more new business in 2020 than the size of our business. We are still 60%-70% more than 2019.”
While it took six months after the initial Wine.com startup to get its Oregon facility licensed, the seeds of success had been planted. “We had a warehouse close to UPS and what was then the largest wine wholesaler (then-Columbia Distributing and now part of Republic National Distributing Co.). And other wholesales were also close,” Osborn says. He adds that the company aims to follow a similar model today, positioning its warehouses near wholesalers. “We moved our Bay Area warehouse from Berkeley to 20 miles south in San Leandro in August 2021,” he explains. “It’s a new 150,000-square-foot building with 23 dock doors. It’s closer in proximity to the two largest wholesalers in the state, right off Interstate 80. We picked a corridor that makes sense.”
Proximity to large wine wholesalers facilitates daily deliveries from Wine.com’s seven warehouses located in California, New York, Florida, Texas, Massachusetts, New Jersey, and Ohio. “Today we predominantly use FedEx, but FedEx and UPS have distribution centers close enough for late cutoffs,” Mike says. “During holiday time, we want as much time as possible to pack orders and get out daily deliveries.”
Business gained momentum in 1999, as eVineyard also opened licensed warehouses in New York and Florida. In 2000, licensed warehouses were added in Massachusetts and New Jersey. “We entered the market as a retailer and put the retail license in industrial parks or commercial areas,” Osborn says. “We didn’t need neon signs or to greet customers in the store. The states knew we would take orders and ship them as permitted.”
In 1999, eVineyard offered 2,500 wines for sale. “We thought that was a big assortment compared to other retailers,” Osborn says, noting that the company’s average selling price for a 750-ml. bottle of wine in 1999 was about $23. “From day one, it has always been premium tier,” he adds.
Seizing opportunity in April 2001, eVineyard acquired the assets of Napa Valley-based Wine.com, including its domain name and intellectual property. “We did that to keep the software out of someone else’s hands,” Osborn notes. “We didn’t need a competitor. Since they went bankrupt, we called it eVineyard for another year and then changed our name to Wine.com. We’ve made a number of subtle changes to the trademark over the two decades, going from three to just two colors and updating the font with a bolder look.”
Napa Valley Meets Silicon Valley
Obsorn, Bergsund, and their team have combined the worlds of computer software and wine sales to provide customers with wine culture content and wines to purchase online for delivery. If customers can’t be home to sign for their order, it can be delivered to one of Wine.com’s near 20,000 partner stores. Another way the company focuses on customer service is storing vital information. “We don’t just throw away the old information when the new vintage comes out,” Osborn says. “We keep it. Our customers hope we still have it because they might want to refer to a winemaker’s 25-year-old note. That content leads forward.”
Wine.com’s website allows customers to filter and sort wines by variables, including price, professional ratings, style, geographic designations, and vintages. “Many customers are curious and interested in trying something new,” Bergsund says. “Having the story behind the wine creates an emotional connection and brings the bottle to life. Sometimes it’s a video of the winemaker, winery images, and mapping of the winery location.”
Wine.com provides content to help customers make purchasing decisions. “The notion of paying $32 for a bottle is about three times what the average retail price is for a bottle of wine throughout the country,” Bergsund says. “You need to have a reason to do that and feel like it’s going to be a good bottle. Scores from reputable publications help and so does filtering and sorting tools.”
Wine.com typically has a couple of virtual tastings a month hosted by Osborn’s wife, Gwendolyn. The virtual tastings are kept on the website for easy access and tasting videos are linked to the wines so shoppers can find them quickly. The website has a plethora of information, including wine guides, articles, and tips for wine and food pairings.
The union of wine and technology is also represented in Wine.com’s work force. Of the company’s approximate 400 employees, about 30 comprise the company’s crucial in-house software team. “The software team is responsible for front-end website development and back-end systems that keep the warehouses humming along,” Bergsund says. “We are Napa Valley meets Silicon Valley. We are between both cities and try to bring different forces together to create something new for the wine world. We’re not just doing something that someone else has done.”
The company’s wine sales have historically been split equally between imports and domestics, but there has been a recent shift toward imports. “For as long as I can remember, we’ve been 50%-50% between domestic and imported wines. Just this past year it swung to 55%-45% with more imports than domestics,” Osborn says. “That has a lot to do with offering the world.”
The shift also has to do with value hunting. “I’ve seen consumers who talk about going to Wine.com for wines under $25 and rated at 91 points or higher,” Osborn says. “Guess what pops out? A lot more imported wines from Cotes de Rhône and Italy. It’s hard to get a $25 Napa Valley Cabernet Sauvignon that’s rated 91 points. If customers are on the path of discovery and learning new regions and new varieties, it’s going to lead them to imports. We excel at it.”
Standing tall at the crossroads of wine and technology, Wine.com helps demystify the oft complicated wine world. “We’re trying to use technology to do new things that are helpful to consumers and the industry,” Bergsund says. “We want to introduce new consumers to the category and to new wines.”
Wine.com’s internal mantra is to be a gateway, not a gatekeeper. “We don’t need our wholesalers making decisions in advance of us,” Osborn says. “We are that conduit. We are speaking for the hundreds of thousands of customers who want this discovery.”