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There’s a New Game in Town

Underground Cellar, the new wine start-up founded by technology entrepreneur Jeffrey Shaw, has reconstructed an innovative solution to a problem plaguing the $1.4-Billion direct-to-consumer wine industry: deep-discount websites.  Underground Cellar’s solution is expected to save wineries millions of dollars by steering them away from the deep-discount players like Lot18, Wine.Woot, Wines Til Sold Out, Invino, and WineAccess. Underground Cellar has received big backing despite having 26-year-old Shaw at the helm; quietly raising their seed financing round in May of 2013 and building out an impressive team including naming Jeff Keller as their VP Business Development, who hails from WineAccess, one of Underground Cellar’s key competitors with online wine sales estimated at $25 Million dollars annually. For several years now wineries have looked to these “flash” sites to sell their excess and overstocked wine, but at a huge cost — bastardization of their winery’s brand, reputation, and pricing structure.  The profits for wineries resulting from these flash sales are extremely inconsistent, and do not provide reliable revenue streams sustainable over the long-term. Industry consulting firm VinTank estimates that flash sales now generate in excess of $100-million annually for wineries looking to float through a financial pinch. Shaw realized there is a better way for these wineries to quickly sell their wine without sacrificing their brand and future pricing structure: all they had to do was ditch the discounts and replace them with upgrades. “Instead of discounting wine, we reward buyers with opportunities to be upgraded for free to high-priced wines from their favorite winery’s inventory: often hard-to-get bottles like library wines or bottles from the winemaker’s private stash.  Buyers can increase their upgrade potential through ‘influence points’ which are earned by participating in winery offers, engaging in meaningful discussions, and participating in other site activities,” explained Shaw. Underground Cellar also has the first of its kind storage solution—“CloudCellar” – where buyers can purchase as little as a single bottle of wine from a winery, and store it for as long as they want for free, at Underground Cellar’s perfectly maintained humidity and temperature-controlled wine cellar in Napa Valley. Customers can mix-and-match bottles from different wineries over time, and when they are ready to take delivery they simply log onto the website and select which bottles they want delivered; 6 bottles arrive anywhere in the US for only $5; and 12-bottles are shipped for free. Underground Cellar even boasts being able to deliver wine chilled and ready to drink (nearly anywhere in the US) through a special arrangement with FedEx and Copper Peak Logistics. September 12th marks the public launch of Underground Cellar’s online wine deals marketplace available at their www.UndergroundCellar.com website, launching in tandem with a grand “Mystery Wine Night” event that same evening at the historic General’s Residence at Fort Mason from 6-9pm. Event details and tickets are available at www.MysteryWineNight.com

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4 Comments (+add yours?)

  1. Stefano
    Sep 09, 2013 @ 14:15:54

    Interesting read. Time will tell if they succeed in their intent. I for one am a very happy customer of WTSO… The idea of a cloud cellar is interesting though – but I do not understand how they can offer it for free with no time limit and charging a nominal fee (if that) for delivery. We’ll see…

    Reply

    • Red Wine Diva
      Sep 09, 2013 @ 14:23:10

      I am getting ready to try out the system and see what I think. I have ordered wine online through Cameron Hughes and Naked Wines, but never through WTSO or Lot 18, etc. Like you, I like the Cloud Storage Option. Time will tell. Thanks for dropping by!

      Reply

  2. the winegetter
    Sep 10, 2013 @ 16:33:34

    Very interesting read. We will see how it works. To me, the discount websites are a testimony to how overpriced a lot of the US wine market is. I am mostly unwilling to pay the regular prices for wines here, so I am not sure this would be working for me. Might be worth a try though! Thanks for sharing, this was total news to me…

    Reply

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