This paper focuses on analysis of Virtual Vineyards (VV)'s online successful experiences.

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Executive Summary

This paper focuses on analysis of Virtual Vineyards (VV)’s online successful experiences. The paper is well structured in three major parts. In the first part, the paper firstly outlines competitive advantages. Meanwhile, the organizational structure and culture of VV are addressed. In addition, the paper shows the key factors that VV should take into consideration in marketing. In the second part, the customer interface of VV and channel factors affected VV will be discussed in detail. The final part gives some recommendations for VV’s operation in the future, and evaluation of its successful performance.

1.Corporate Perspectives

1.1.Competitive Advantages

Virtual Vineyards -- is a pioneering direct marketer of wines on the Internet. The Internet has dramatically changed the commercial wine industry's traditional three-tier system of distribution: winery to wholesaler to retailer to consumer. In terms of e-tailing, Virtual Vineyards has achieved competitive advantages as below:

1.1.1.Better customer relationship

EC enables the learning about customers due to its ability to record every event in which a customer asks for information about a product, buys one, requests customer service, etc. Through these interactions, the needs of the customer are identified and will feed future marketing efforts. The most popular option is email used by customers to communicate with the firm and other customers. Through electronic mail and other mechanisms, Virtual Vineyards is able to establish a better and more inter-active relationship with its customer base at low cost.

1.1.2.Advanced technology

According to Olson, the founder of Virtual Vineyards, the core competency of Virtual Vineyards is the technology. There is a staff of 15 in Virtual Vineyards; however, they are technical staffs with advanced Internet technical skills. These skills would include Active Server Pages development, Java, JavaScript, Enterprise Java Beans, Dynamic HTML, Flash, database web-enablement, Internet security or Internet systems architecture. In addition, Virtual Vineyards used the standard encryption software, SSL (Secure Socket Layer) and highly sophisticated encryption technology to assure customers that credit card purchases via the Internet are secure. Virtual Vineyards made efforts in getting into the retail business by taking fully advantages of advanced technology.

1.1.3.Online brand building

Virtual Vineyard provided detailed, rational information about its offerings to build up brand awareness. Its web site serves as a signal to current and prospective customer by motivating customers with an information/image-rich communications message.

1.1.4.First-mover

Virtual Vineyard was the first mover that entered a niche market for specialty labels and quality wines. Companies play in niche markets in which buyers and sellers are small and geographically dispersed, can use the Internet to reach a much bigger customer base [Wellner, 2000]. The niche market holds 20% in total market share. For Virtual Vineyards, premium wines--scarce and hard-to-find vintages that sell well when customers are given a wealth of information--are a commodity tailor-made to be sold on the Internet. VV's position of market dominance meant it could charge higher prices for wines.

1.1.5.Good content

Content is the design, text and graphical information that forms a web page. Good content is the key to attracting customers to a web site and retaining their interest or achieving repeat visits. Virtual vineyards can help consumers make better-informed decisions by providing better-organized information. In addition, Virtual Vineyards showed sufficient knowledge to each wine and its tasting chart. Also, the site answered every questions related to wines through e-mails. Almost all of the content was written by Granoff. His accessible but informal evaluations of individual wines were regarded as a primary source of its strength. Virtual Vineyard offered detailed information on each wine, so the buyer feels able to select without having to taste.

1.1.6.Upper value chain

From Value Chain to Value Network  “Value Soup!” Peters, L 1998: “1to1 but Who to Whom”

Supplier Value Creation  

Value Chain of the Firm

Customer Value Creation

Operating like an interstate wine broker, Virtual Vineyards has established a complete value network that links supplier to customers as the above table shows. In addition, as a new electronic market, Virtual Vineyards permit suppliers and buyers to interact, discover and transact for products. The one of dominant forces why Virtual Vineyards has done successfully is delivering upper-value to end-users, wine purchasers. Its Web site is not only selling premium wines--scarce and hard-to-find vintages that can deliver upper value to customers. What it offers, in addition to convenience and low prices, is information, the expertise supplied by Peter Granoff, an authority in his field. Virtual Vineyards provides enhanced value to customers by providing the winery descriptions, which demonstrate his knowledge of the industry and the operations of specific producers. A novice wine consumer can learn from Granoff and ask questions. A monthly wine program promotes loyalty. VV provides an experience online that is very different from buying wine in the neighborhood store.

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1.2.Market Conditions

Two significant opportunities can be predictable at the Internet Company in the wine market. First, U.S. wine market is slowly but steadily growing and this trend is expected to continue. From the case, it is said that its annual growth rate is 5% or 6%. There should be a potential to provide wines with upper value to customers. Second, the Internet commerce is surprisingly expanding; therefore the size of the future market will be also expected to be huge.  All these determinant market conditions can be helpful for Virtual Vineyards to start up its business.

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