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Virtual Vineyards' New CEO Savors Opportunity to Sell Wine, Food Online

A sure sign that e-commerce is maturing was the recent announcement that Michael Parker had left his post as president and chief operating officer of specialty food chain Trader Joe's Company, Pasadena, CA, to take over as president and CEO of online wine seller Virtual Vineyards, Palo Alto, CA. Though Virtual Vineyards (www.virtualvin.com) doesn't make its sales numbers public, the business must show promise because it lured Parker from a retailer with more 100 stores nationwide and more $1 billion in annual revenue.

The top spot at Virtual Vineyards brings Parker a new set of challenges, including the opportunity to brush up his direct marketing and lobbying skills in various states where the online sale of alcoholic beverages is drawing political fire.

For instance, New York State Attorney General Dennis Vacco earlier this year set up a sting operation in which minors were filmed accepting deliveries of alcohol resulting from orders placed online without having to show proof of age.

Parker spoke with DM News recently about his plans for Virtual Vineyards and his feelings about the various states where online wine selling raises regulatory hackles.

DM News: Where aren't you currently shipping?

Michael Parker: Florida, Georgia, essentially the Deep South. It's all about money.

DM News: Will you expand on that?

M.P.: The regulations governing alcoholic beverages are archaic. The alcoholic beverage business is one of the few where monopolies are allowed in wholesale tiers. And most of it is to protect vested interests. These people [distributors] don't want to compete, but what they do is rattle the saber of protecting our children and keeping alcohol controlled when in fact what they're doing is protecting a monopoly. I don't know of any time when that happened [minors ordering alcohol online] other than [Vacco's] sting operation. When we're young, our needs tend to be a little more immediate [than placing an order and waiting for the shipment to arrive].

DM News: Are you lobbying in the South?

M.P.: We are very active with a couple of coalitions. But quite frankly, I'm not concerned about certain markets because wine consumption in those markets is awfully small.

DM News: Do you think the Web poses a threat to traditional distribution channels?

M.P.: No more than direct marketing poses a threat to brick and mortar. They coexist because there are deficiencies in both. Are [Web merchants] ever going to overtake brick and mortar? No. Are we ever going to overtake direct [selling]? Probably no. But I think there are going to be marriages and mergers, and there will be a nice blending.

DM News: Why did Virtual Vineyards choose now to go outside the organization and hire you?

M.P: The business has been growing at a two- to three-fold rate per year. And they were at a point where they needed to expand the assortment [of merchandise]. They have the technical expertise on the Web, and they have a great wine person. What they were looking for was a foodie, I guess — a person with the retail background to integrate with the technical and the wine experience.

DM News: What made you leave retail for the Web?

M.P.: I don't think I did actually. I really feel that this is the next major breakthrough in retailing. In a sense, and not a negative one, the Internet is dumbing down. We started with highly sophisticated users five years ago and are now moving toward more common users like myself, who happen to be interested in good food and good wine.

[On the Internet,] we can make it much easier for customers to have a pleasant experience by not making them drive home in the rain. We can fulfill in a way that makes their life easier, like having a case of wine arrive at their house once a month or a package of gourmet food arrive at their house once a month. For the customer, it's one less thing they have to do.

DM News: What is Virtual Vineyards' average order size and how much repeat business does you get?

M.P.: Our average order size is around $90. About 40 percent of our business is repeat, but that number is deceiving because our growth rate is so high.

DM News: What types of prospecting do you plan?

M.P.: I don't want to prospect until we get our content a little broader. We want to expand our appeal. We want it to be more recognizable [in terms of brand], more consumable with snack-type things that get consumed when you open them.

DM News: When you do expand your marketing efforts, will you rent e-mail lists, postal lists, or both?

M.P.: Yes we'll probably rent lists but not necessarily e-mail lists, which we've found aren't terribly productive. I think we're more interested in targeting the market based on income, education and reading preferences. For example, Sunset magazine here in California, or Gourmet magazine or Leisure and Travel. They have a fairly broad audience, most of whom have computers.

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