nimbletoad blog

I want to thank Alder Yarrow, Founder of Hydrant and creator of Vincellar, for his response to my previous post on Web Applications.  He summed up a few points about the web application, Vincellar, much more succinctly than I could.  He wrote,

“[Vincellar] would never have generated the revenues required to justify the investment made in its creation and redesign… Vincellar was merely a value add service…”

The financial decision to build a web application whether it be a stand alone service, or “merely a value add service” needs to be weighed against the  potential benefits it will bring to both the company and its clients.  For Vinfolio the financial decision to redesign Vincellar was to be offset by the added revenue generated by the marketplace.  Vincellar did not directly cause Vinfolio’s financial troubles, but it possible that it is endemic of the financial spend that led to the company’s downfall.

Wild hypothesis.  Vincellar turned Vinfolio upside down.  When a new client signed up for Vincellar the primary service they received was a great place to store and keep track of their wines (for free).  The value add to a new client was that they could also sell and buy wines in the marketplace.  While I do not want to conjecture how much Vinfolio paid for the redesign and daily management of the Vincellar application, it is clear that a significant amount of money was spent on this service.

Vinfolio’s core clients are active wine buyers, collectors and investors.  They routinely buy and sell wine.  Vincellar’s redesign was intended to expand this customer base, bring in new buyers and sellers.  They problem was that not only did the core clients slow their purchasing, most of the new clients saw the primary benefit of the Vincellar system as a place to keep track of their wines.

In contrast, CellarTracker’s primary purpose is a place for users to keep track of their wines and tasting notes; the ability to sell wines was recently added as a “value add.”  I greatly admire Eric Levine’s work with CellarTracker.  Out of his love for wine and his desire to build a cellar management program for himself, he has defined online cellar management.  Eric has spent thousands of hours on this web application, hours which he may or may not every financially recoup.  CellarTracker is his baby and seeing it grow and mature is Eric’s main reward. This fact in-itself ensures CellarTracker’s continued existence.

To companies – “Value Add” web services are a great way to build leads and expand a customer base.  However, the “Value Add” should not become a service in itself.  Otherwise there is a risk that the free value add will become the primary business to the new client base.  If Vincellar  is on one extreme, a mortgage calculator on a realtor’s site is another.  The mortgage calculator is handy, will never overshadow the realtor’s house listing, but will not generate that many new clients.  My advice, find somewhere in the middle.

Disclosure – We are currently working on a cellar management solution called Vinecat.  We have been working on it for the last couple of years.  Like Eric’s CellarTracker it is a labor of love.  I currently use it to keep track of my wine cellar and love its simplicity.  We think the general public would also like to use this system.  As cellar solutions such a CellarTracker and Vincellar get more complex, we feel there is a growing need for a simpler solution.  When will it be released?  We don’t know. Will it make money? Maybe.

VinFolio’s recent financial troubles bring up some legitimate concerns for Web Application pricing models.  Too often web applications are built without consideration for sustainable revenue or long term impact on the user community.  Many companies such as Vinfolio built web applications as lead generation devices.  This method is wrong and too often ends badly when the generated leads fail to provide the anticipated revenue.

Like many web applications, VinFolio does not charge customers to sign up and use their cellar management tool,  VinCellar.  Customers can use this application to keep track of the wines in their wine cellar, receive real time cellar price evaluations, and interact with the VinCellar wine community.  Why does VinFolio offer all this functionality free of charge?  VinCellar is VinFolio’s lead generation device for wine storage and their wine auction marketplace.  VinFolio pays its bills and payroll through commission on wine sales.

Sounds like a win win.  VinFolio gets a steady flow of wines to sell and wine collectors get a great application to manage their cellars free of charge.

Not so fast.  What happens if wines stop selling? What is the price of free?  Now that Vinfolio is circling the financial drain, the future of VinCellar is in jeopardy.

VinCellar clients have invested many hours inputting wines into this system and adding tasting notes.

Vinfolio is not in the business of providing cellar management.  The web app was a fancy lead generation front. VinFolio gave the service away in the hopes of profiting from the sale of the user’s wines.  The problem is that the commission did not pay the rent.

VinCellar is a case of different primary benefits between the site owners and its users.

Users:
Primary – Keeping track of their wine cellars
Secondary – Interacting with the Wine Collector Community
Convenience – An easy way to sell wine

VinFolio:
Primary – Selling users wines through the marketplace and auctions
Secondary – Storing user’s wines for a fee

Unlike other sites such as Ebay and Amazon where the users and site owner share common primary goals, VinFolio’s goals were not aligned with its users.

At Nimbletoad, we firmly believe that a site’s goals should be aligned with the users of that site.  Web Applications  should derive their sustainability from the user community.  This can come either from subscription revenue as in the case of BaseCamp or Freshbooks, or from advertising such as Facebook and Myspace.

We are hard at work building out Vinecat, an online wine cellar manager. Our goal was to allow anyone to have easy access to their wine cellar no matter where they were. However, we might have set our sights a little too low.

Leave it to the French to kick it up a notch. Why stop at cellar data? It looks like they have figured out a way to give you access to your actual wine. Anytime… Anyplace… All that you need is WIFI and an open USB port.

….Now my humping dog USB key is officially lame.

The founders of Nimbletoad voted today to make available to independent wine retailers a free version of their new cellar management program, vinecat. The founders hope this program will help stores compete against those with greater financial and political leverage.

It becomes harder each year for the independent wine retailer to stay competitive. For nearly 20 years the founders of Nimbletoad have sided with the Davids as they fight the Goliaths.

First, it was allocations of sought after wines. Political ties and buying leverage quenched that. Since 1999 Costco has been the largest seller of first growth Bordeaux in the United States. As a wine buyer, one of the founders looked to other lesser known regions to help his store maintain a competitive advantage.

Next came the onslaught of private label wines, with Trader Joe’s Two Buck Chuck leading the charge. Private label wines offered the chain stores better margins and label exclusivity. In response, the founders formed a company to help smaller wine stores develop private label programs. Through these programs, stores were able to offer better wines at higher margins without the threat of being undercut by the chains.

Today, technology is taking its toll. Companies like Vinfolio are using both capital and intellectual networks to close the doors on competition. The result are closed social circles where clients inventory their wines, sell their wines [not all companies offer this service] and buy their wines; all within a closed loop.

In response to the latest threat to the corner wine shop, the founders of Nimbletoad plan to make a free version of vinecat available to independent retailers. Soon, the corner bottle shop will be able to offer a complete cellar management solution to their customers.

If you operate an independent wine shop, send an email to info@nimbletoad.com. We would like to hear your thoughts and put you on the list for this competitive equalizer.

How do you know you are independent?

• Your board of directors are not Silicon Valley washouts (I mean luminaries)
• Your idea of venture capital is gas money to Tahoe
• You’re not related to the mayor
• Your advisory board consists of your spouse

We are in the process of fleshing out a web app for wine collectors to store their cellar information online simply, safely, and securely. While there are many other online cellar management solutions out there such as cellartracker, Nimbletoad’s solution promises to be the simplest and most intuitive.

The problem that we see with many online wine database solutions is that they try to box the user into a set of rules and standards. For example, cellartracker makes their user search through the entire database for existing entries before adding a bottle to their collection. While this process ensures standardization, it takes a lot of time.

Standardization is great for community involvement and marketing purposes, but it does little to help serious collectors enter their wines quickly and then retrieve the bottles from their cellar easily.

The blueprint for Nimbletoad’s cellar solution comes directly from the trenches of San Francisco where an offline version was used to track the multi-million dollar cellars of the city’s most serious wine collectors. During the founder’s ten year stint as wine buyer for one of San Francisco’s largest wine stores, the most important aspect of a cellar database was quick, easy entry and lighting fast retrieval.

Nimbletoad’s cellar solution vinecat will be akin to a professional photographer’s camera bag. Little padding and lots of utility.