Rethinking wine apps as a business model

The Cork’d article got me thinking about wine apps as a business model. On the plus side, it helped detail out several different wine apps, their various core competencies, and their business models. Many are quite different from one another. However, the case also got me thinking more about wine apps as a business model. Throughout this class, and in this case, I have heard the names of many different wine websites and apps that have fallen in and out of favor over the past twenty years. Now, the majority of these apps are defunct or greatly repurposed – apparently now including Cork’d.

My core question is: why does this market remain so fragmented, with few longstanding players? Why hasn’t a major player succeeded in capturing a critical mass? Here are three hypotheses I have.

 1. Critical mass. The power of these apps is in the social network or platform nature of their service. Yet, none of them have reached a “tipping point” and become the “Facebook” of wine apps. In part, I imagine that the number of serious wine consumers (i.e those that would track and share their wine purchases on an app) is relatively small (tens of millions at most in the US). Vivino claims to have a community of 28 million users, but only had 5.6 million active within the past two months.
 The customer base is also rotating – some people get serious about wine for a few months or years, then might drop it as a hobby. Social networks, and networks involving core re-useable services, like Uber, have a much larger user base that is more consistent year-to-year, so it is easier for them to build and sustain critical mass.
 Plus, it’s unclear who the customers are. Cork’d (at the time of the case) derives most of their revenue from the $999 winery subscription. Both sides of their platform are important, but it’s unclear that they can get critical mass. In addition, wineries can easily join multiple platforms, diluting the power of any one wine app. Vivino makes money through e-commerce and promotions, so its customers are arguably distributors, not users (though both are important and feed off each other). This level of complexity makes it unlikely that any one app will build and sustain critical mass.
 2. Diversity of product needs. Critical mass aside, let’s assume you could capture the entire “serious wine consumers” demographic. Within this demographic, there are a wide range of needs. Some clearly care more about the “cellar management” functionality that companies like VinCellar have offered. Others care more about discovering new wines and getting recommendations from experts, perhaps closer to CellarTracker, as described in the case. Even others care more about actual procurement of wine – something Amazon may soon be best poised to deliver.
 Given this diversity of product needs, it would be exceedingly difficult for one app to focus on all of these competencies at once. Smaller apps will always be able to carve out a niche of core users from a company that tries to pursue all of them, suggesting that wine apps will remain fragmented, with relatively small user bases.
 3. Lack of consumer problems. Ultimately, wine is low stakes, and there aren’t many end user problems to begin with. Sure, wine can be complicated and opinions and brands matter, and connecting with others and learning more can help better enjoy wine. But at the end of the day most people are willing to simply guess on an $8 (or even a $28) purchase, and the consequences of choosing wrong are not all that great. Buying wine – while sometimes intimidating – is not a difficult process. Most people grocery shop, and most grocery stores have wine, and picking up a bottle is easy. It’s hard to simplify the process any further. Perhaps the consumer doesn’t have as many choices as he or she could be having, and maybe they get occasionally overwhelmed when there are too many brands at a store, but on balance most wine consumers can easily buy wine that they enjoy. Putting an app in the middle of that process is unlikely to improve the buying experience in a way they will consistently pay for.
 

In the end, I’ve liked trying out Vivino over the course of this class, and I plan to continue using it as a wine app. I like that I can learn a bit more about what I’m drinking and compare my notes/ratings to that of others. However, having more people on the network will not improve my experience at this point, and I would not pay money for the service. Therefore the brunt of the money would have to come from wineries or advertisers, and this is already a crowded and competitive market. Any app that wants to succeed long term at scale will need to create a service that wineries and/or distributors can’t live without. But this almost certainly involves attracting and retaining a very large user base, which I personally don’t see happening in a sustainable way.