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 U.S. 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.
Sept. 12 marked the public launch of Underground Cellar’s online wine deals marketplace available at their www.UndergroundCellar.com website.