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Rocky road'? Swings and roundabouts'? How about roller coaster ride'? Yes, ladies and gentlemen, I invite you to pick your own cliche to describe the past 18 months in the brave new world of e-commerce. Whatever it has been, it has certainly not been boring. There has undoubtedly been a separating of the wheat from the chaff in the last year or so. That is not to say that all the Internet wine businesses that have disappeared were fundamentally flawed, but there is certainly a new reality abroad. A period of soul searching has led to the painful realisation that e-commerce is not a whole new ball game; it is just a different pitch for the same old sport. It is governed by the same rules and built on the same fundamentals by which bricks and mortar businesses stand or fall. Those businesses that have survived - even prospered - have learnt and adapted. In his recently published book, Dot.con: The Greatest Story Ever Sold (The Penguin Press, 18.99), author John Cassidy relates the story of the 1999 flotation of Priceline.com, an Internet company that allowed visitors to name their own price for airline tickets. Blinded by the white heat of Internet fever, investors scrambled for stocks and first-day trading closed at $68 per share, valuing the company at over $10 billion. This was a company that had lost $114 million in the previous year, yet the share price valuation was greater than United, Continental and Northwest Airlines combined. This was Internet madness at its most rampant. Cassidy presents an overly cynical view, however. He must have been smarting when, by a cruel twist of fate, Amazon.com issued a trading statement within days of his book's publication. Amazon is one of Cassidy's prime targets, with a downbeat analysis of its weaknesses luxuriating over several pages; yet for the first time in its history, Amazon stunned the critics by turning in an actual, real, bottom-line profit. For years, Amazon's founder, Jeff Bezos, repeated his mantra that once a critical mass of volume had been achieved, profits would follow. With 12,000 orders per hour in the run-up to Christmas, he seems to be proving that getting the right mix of product, price, presentation and service can make Internet commerce work, even on a massive, multinational scale. Amazon's global aspirations are far removed from wine e-tailing in the UK, of course. But that wasn't always so: a couple of years ago, companies like Wineplanet and ChateauOnline hinted at that kind of ambition. Since then, the ground has shifted: Wineplanet is no more, while ChateauOnline is a substantially changed operation. Other would-be volume players like Bringmywine and Madaboutwine have disappeared too (or in the latter case, is a pale, rather odd shadow of its former self: the lights are on, but no one's home). Seconds out The story of last year was the failure of Australian-based giant Wineplanet. The UK branch of Wineplanet was acquired by Virginwines.com in a deal that gave Virgin Wines inventory, customer data and a certain amount of goodwill. I spoke to Rowan Gormley, CEO of Virgin Wines, who is quite bullish in the afterglow of strong festive sales: We finished the year with sales of 10 million, shipping just under two million bottles. This was almost exactly what we had forecast at the beginning of 2001, so I suppose we're a bit of a novelty - a dot.com that actually delivers on its forecasts.' Gormley is happy with Virgin Wines' progress, and predicts less competition from the sector as a whole over the next 12 months: In 2002 we will see the end of the shake-out of the weaker players,' he says. Those companies who aimed high but couldn't deliver have more or less disappeared, and those few that are hanging on will be swallowed this year, if the price is right. Then we will be left with four serious players - Tesco.com, ourselves, and two of the four of five companies in the chasing pack.' Tesco is indeed an interesting case. This is a retailer that has seemed infallible over the past couple of years. Its online shop, Tesco.com, has been a massive success too, often quoted as a model for the sector, with almost unheard of refinements - such as giving customers the ability to specify a delivery time within a two-hour slot. With such a powerful brand behind it, Tesco stepped up the pressure on the wine e-tailers in autumn 2001 by launching its wine warehouse' concept, greatly expanding the range of wines and drinks available, and offering a small discount against store prices. It has also begun to market the site more aggressively. ChateauOnline.co.uk, the Paris-based, pan-European online merchant, went through a substantial re-organisation, closing all facilities outside France and halving its staff under new CEO Tom Lot (E-watch, Harpers, 2 November 2001). Lot has just announced that he is leaving the company, but insists this is a personal decision: My mission is over, given the turnaround we have made,' he says. After France, which accounts for 50% of sales, the UK and Germany are the most important markets for ChateauOnline, which has just launched a new, three-pronged approach to selling wine aimed at amateurs' (in the best French sense of the word), connoisseurs' and collectors'. With e10 million of wine sold last year, ChateauOnline has also been strengthened by the decision of a giant European competitor, the Carrefour supermarket group, to drop its online wine activity. Booth's has just picked up the Best Supermarket' award from Which? Wine Guide 2002. Its online arm, everywine.co.uk, is sharing in the company's sense of quiet confidence at the moment. Director Chris Dee says: Business is very good. November and December volumes were up ten times on last year, and we have re-deployed some key staff from Booth's wine team into everywine.' Many seeds that were sown are starting to bear fruit, like revenue-sharing deals with The Daily Telegraph and American Express. Dee sees persistence and brand-building as the keys to success and won't be drawn into deep discounting, stating that, Everywine is determined to sell wine profitably.' He also notes that Everywine's ambition to offer 20,000 lines is becoming easier, because the supply chain is now taking e-commerce operators much more seriously than it did a year ago. Doubt must be cast over the future of tasteforwine.co.uk by the recent departure of the managing director and buying director from parent company The Destination Wine Company (Sainsbury's and Oddbins' joint venture). Meanwhile, Oddbins.co.uk has just been revamped and relaunched to great effect. The new, funky-looking and smoothly implemented site looks like giving the others a run for their money, but we must wait to see if the recent sale of Oddbins to Castel Frres has any effect on its future. Majestic.co.uk, on the other hand, has had a very solid year of stability and consolidation. The efficiency of Majestic online has been recognised with one of the industry's top awards for excellence, the @chievement 2001 award. Manager Richard Weaver has stated that: Internet sales represent 2.0% of our total; 2.3% for November/December.' Given that Majestic has 98 stores in the UK, a 2% share suggests the online arm is performing at twice the average level of bricks and mortar stores in the group. Weaver adds: We achieved this within the framework of a sustainable and profitable business. In fact, our online development and operating costs have actually decreased during 2001.' A few months ago Majestic acquired Les Celliers de Calais, operator of four French warehouses. Although I can't give any details, it is safe to say that a major objective this year will be to marry online ordering and cross-channel shopping,' explains Weaver.

Specialists and independents Independent operators have continued to perform pretty well through the downturn. Focused on fine wines or specialist areas, they have benefited from niche markets and lower exposure to debt. Berry Bros and Rudd, for instance, seems to go from strength to strength. bbr.com was named Website of the Year' in the 2001 International Wine Challenge, and the uncluttered site hides a deep mine of information behind a minimalist veneer. Boss Martin Brown seems very happy with progress so far: We sold 2.5 million of wine last year, with an average order worth 240 (ex-VAT).' Echoing both Dee at Everywine and Weaver at Majestic, Brown adds, We no longer do specific Internet promotions. The same prices and special offers apply for personal, Internet or telephone shoppers.' This rationalisation of thinking emerges as a definite pattern when talking to those with clicks and mortar' operations: the website is just another branch, so it should operate on the same terms. The Great Grog Company of Edinburgh exemplifies this new understanding. Since the start, founder Richard Meadows has viewed greatgrog.co.uk as a peripheral though important strand of his business. Online accounts for 10% of our turnover,' he says. However, old-fashioned mail order is growing at about the same rate: I think it is down to an acceptance of direct selling as a whole.' David Pearce runs Winevault.co.uk, specialising in Australian premium wines. Basically a one-man business, he is heavily reliant on the Web as a shop window and is more sensitive than most to fluctuations in the sector. He is delighted with 2001: I would estimate trade was up 300% overall.' How was this achieved? We put a lot of hard work into the website, with a total redesign and the addition of lots of editorial content. More importantly, we launched our "import to order" service: we will, quite literally, import the wines our customers request from Australia, going direct to the winery if need be. We consolidate orders and import by the container-load, so customers can source the most desirable wines.' Such service could only really be offered by a small operator. Establishing a USP is a common theme among successful small e-businesses. George Wroblewski of Smithfieldwines.co.uk states that his business grew 60% in 2001, specialising in organic and vegetarian wines among a broader range. For the future, he expects a shift of focus from large, national companies to local suppliers that have a face and a voice' behind them. Offering a low- or no-cost solution, corkexpress.co.uk (see Harpers, 5 October 2001) is having success attracting smaller businesses to use its winesoft' selling platform on a revenue-sharing basis. This offers almost no exposure to risk, and is an attractive option in these times of uncertainty.

Business to business Nine months ago, the e-zone' at the London Trade Fair was abuzz with talk of online exchanges - B2B companies supplying bulk or bottled product at the click of a mouse button. Things in the B2B world have been pretty quiet since then, with no signs of a wholesale switch from more traditional supply routes. But many of the players are still refining their services and offering some interesting new thinking. A case in point is Liv-ex.com, launched in summer 2000 and specialising in fine wine trading. Director James Miles says the company has signed up 60 members, who between them account for 65% of the UK trade. Clearly only a fraction of that trade is done online, but Miles thinks his penetration of the old-school market shows a thirst for good technology. And he feels that Liv-ex has weathered a storm in the past year or so: There has been a massive shake-out in our sector. When we started there were at least eight other start-ups looking to set up exchanges; now there are a couple of us left in the fine wine sector.' Fully integrated web-based transactions are still a goal of many in the supply chain. Dennis Whitely, managing director of wholesaler Boutinot, sees e-commerce as playing a vital role in the future of its business. The company's e-commerce package, Drinkserve.com, already includes Internet ordering, statements via e-mail and payment by direct debit. Whitely says: Uptake for the package is growing all the time, as customers experience the benefits of ordering via the Net.' He also sees the service as strategic in developing international sales for the business.

Conclusion At a time when many indicators show the roller coaster ride might just be on the way up, I will let James Miles of Liv-ex sum up the mood of the whole sector: 2002 will see perceptions and expectations towards doing business online return to some sort of normalcy. Sentiment has gone from euphoric boom to cataclysmic doom, all in the space of 18 months. The potential of e-commerce might have been sensationally overhyped in its infancy, but there is no denying its growing importance in all of our lives.'

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