The Footsteps of Giants: How to Prepare for the Entrance of Total Wine in Your Local Market

March 23, 2018 In Latest News

The addition of a Total Wine & More store is intimidating to any local liquor retail market. As a national chain, Total Wine & More offers a huge selection of wines, beers, liquors and more at highly competitive prices.

For more background, Total Wine & More is a chain that started in Maryland in 1991. It currently has at least 175 stores around the country, and, at the end of 2017, pulled in an annual revenue of nearly 2.7 billion. In the last year, they’ve opened stores in Texas and California, and they’ve recently expanded into Wisconsin and New York as well, both historically independent markets with no big-box players. In Wisconsin, for instance, in under 12 months they have grown from having absolutely no presence to running one of the highest grossing stores in the state.

As the chain continues to grow and expand its reach into areas previously dominated by independent liquor stores, the local markets it enters will change. A large liquor retailer like Total Wine & More cuts into the market share, disrupting the established rhythm of sales and affecting pricing. Without preparation, these changes force independent retailers to reactively drop prices.

Because Total Wine & More moves more product more quickly, it operates with more flexible profit margins. The stores can sell a product for close to wholesale cost because they move much more of it when looking at their 175 stores as a whole. Offering these low prices on higher margin products doesn’t have nearly the effect on the chain as it would on a small retailer. When a small store has to reactively drop prices to compete, the losses on margins could end up running them out of business.

How can independent liquor retailers compete with Total Wine?

Independent retailers do have an edge: their customers. If a local liquor store competes proactively, using their unique knowledge of local customers, the entrance of Total Wine & More can be more of a blip than a blast.

It all starts with insights: looking at local market trends compared to your store’s sales and evaluating which items drive larger baskets and lower margins.

But how can consumer insights arm a liquor store against the entrance of Total Wine & More into their local market? They give you a broad range of information that, when mined, you can use to optimize your store to attract new customers and keep them coming back. When you build your inventory, promotions and store layout around the studied behaviors of frequent customers, the personalized experience will make them support your local, independent store rather than the impersonal chain store.

This data comes from new in-store technologies, like 3×3 Insights DataBar. Adjacent to your POS system, this tool records a breadth of information. From revenues and profits to basket compositions and sizes, you begin to see what drives sales and brings customers back.

Let’s dive into six ways you can use technology to proactively compete when Total Wine & More enters your local market.

Deepen Customer Insights.

Customer insights go beyond knowing the names of regulars and watching what they buy. Using connected technology, you can see a fuller picture of who your customers are. Look at the demographics that frequent your store and how they shop. See what products are purchased by “regulars” and which products drive first-time sales. Look into what items customers tend to buy in conjunction with others, evaluating the basket composition to create smart and effective promotions.

Chain stores like Total Wine & More are structured on a national basis, meaning they can’t offer a personalized experience for customers. Promotions are dictated from a broader basis, and won’t necessarily correspond to what locals are purchasing.

Understand Trends.

Optimally, to take advantage of a trend, you have to catch it right before it breaks. Without data, there is little to no rhyme or reason to any trends. But by evaluating customer data in your local market as well as in wider markets, you can catch trends as they begin to bloom. Maybe data will show that sales in your store of pinot noir have started to grow while the local market sales in that category are still stagnant. Seeing and capitalizing on this trend in your area will put you at the forefront of the trend, while the less flexible chain stores fumble to catch up.

Personalize Promotions.

As a chain store, Total Wine & More serves millions, of customers all across the nation. Their prices and promotions are dictated by a central office and don’t necessarily reflect what people are buying. This leaves the advantage with independent retailers. By studying the habits and behaviors of your customers, like what items compose the most valuable baskets and which items have higher price elasticity, you can develop personalized promotions that cater to your profits. These promotions can be structured to shrink margins and move inventory while pleasing customers and creating incremental sales.

Optimize Price and Inventory.

As we mentioned before, it is difficult to keep pricing competitive when a huge chain moves into the market. Difficult, but not impossible. Customer data can help you optimize your inventory and set prices that move product most effectively. Test the pricing of different items to see which items could help you regain profit margins, and which items drive incremental sales. For example, if you see that Total Wine & More promotes a wine variety for a lower, more competitive price, you could evaluate how that wine sells in your store to understand how you can compete without losing money. Maybe in your store, customers who buy that brand or type of wine also purchase 5 other items. You could then discount the wine and raise the price of the adjacent items slightly to make up for margin losses.

Compete Locally.

Another way to compete? Find and sell products that Total Wine & More can’t. Partner with local breweries, distilleries and wineries to promote local products. As most chain stores operate on a national scale, they miss the nuances of the local market. If you can offer products from neighboring institutions, you can attract new customers to your store. Data can then show you which of these local products drive bigger baskets, informing where to place and showcase them within your store.

Stay Connected.

Use all the tools available to you to stay in front of your customers. With rich social platforms that add a voice to your business and rewarding email newsletters to highlight new products and promotions, you can solidify a place in your customers’ lives. Another disadvantage to the national base of large stores like Total Wine & More is an inability to customize their personal marketing in the same way that a local business can. You can create a voice and personality based on your customers that helps complete the purchasing cycle.

While Total Wine & More has the advantage of low prices and small margins, your local liquor store can put up a strong and successful fight. Use data-gathering technology to understand the marketplace on a deeper and more personal level than the national chain. By optimizing through personalization, you can set yourself apart from the market and see profitable success no matter who moves in.