Sendwine.com is an online retailer of gifts of wine by the bottle. In mid-1999, it faced challenges concerning its growth strategy. Its president and founder, Mike Lannon, had made the company a challenging player in an increasingly crowded environment. With the company's success comes the problem of how the company should use up the various venture capital money it had gathered. The company is deciding whether to develop its niche position in wine gift-giving or expand into other gift-giving categories under a new name "Send.com"?
Thomas R. Eisenmann; Charmaine Ess; Ann O'Hara
Harvard Business Review (800211-PDF-ENG)
December 03, 1999
Case questions answered:
- Imagine you are a venture capitalist in July 1999 and you have been asked to invest in a $30 million “B” round for Sendwine.com. Would you invest? What criteria would you use to assess this opportunity? How is Sendwine positioned against those criteria?
- Would you seek to diversify into additional gift categories in time for the 1999 holiday season?
- What would you recommend as a marketing plan for Sendwine.com for the 1999 holiday season? How should they reach their target consumer base? How much would you spend? (Assume Sendwine can raise additional capital if needed)
- What challenges does Lannon face in building the Sendwine organization? How should he respond to issues of recruitment, acculturation, and communication?
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Sendwine.com Case Answers
Overview – Sendwine.com
In 1995, an unemployed but successful businessman who is named Mike Lannon recognized a tremendous business opportunity that would enable consumers to send wine as presents. However, Mike Lannon faced a problem regarding fluctuations in state laws across the country, which prohibited the shipment of alcohol. In fact, most of these laws date back to the prohibition era, when nearly all states had strict rules that only permitted liquor to be sold by licensed retailers within that state. Thus, Mike Lannon began comprehensive market research and came up with a business plan for Sendwine.com.
Therefore, Mike Lannon decided to find out an approach that would allow a gift of wine to be delivered as fast as many other gifts. Nonetheless, the optimal option for Mike Lannon to avoid any legal restrictions was to create a network of retailers nationwide that shared his interest to avoid any legal constraints.
In 1997, Mike Lannon started a new company called The Wine Line. Moreover, in its beginning stages, the company received orders by phone, and the orders were sent by a network of wine and liquor markets across the United States.
Consequently, the order would be faxed to the nearest retailer for the gift recipient. Hence, the retailer would pick and package the gift and then deliver the gift by courier service. Once the first stage was accomplished, the retailer would earn compensation for courier costs, the retail price of wine, and tax fees.
In 1998, Mike Lannon decided to expand his business but into the online market. Thus, Mike Lannon received $500,000 from investors and then converted The Wine Line into Sendwine.com, used the money to support marketing, operations, and website development, and bought the rights for Sendwine.com.
Furthermore, Mike Lannon purchased the URL (send.com) for further expansion, which will give him a chance to evolve into another gift-sending category website in the future. Sendwine.com’s sales over the 1998 holiday season assisted Mike Lannon in earning over $10 million dollars from venture capitalist firms. Unsurprisingly, financiers were intrigued by Mike’s successful wine gift service.
There are many obstacles to overcome to remain successful and increase profits. Therefore, earning consumers’ trust was the primary goal for sendwine.com.
In Sendwine’s situation, the client may not see the gift at all since it is delivered to the receiver immediately after the purchase. Thus, Sendwine.com had to face issues that are related to quality and credibility.
In fact, Mike Lannon felt that these issues would be pacified by effectively performing their website design and content along with perfect marketing strategies.
When sendwine.com launched, the website was extremely straightforward, only presenting the gift options and then check-out information. Mike Lannon found out the website was insufficient and decided to solve this issue along with the lack of content on Sendwine’s website. Sendwine’s consumers wanted more content and more selection opportunities.
Another issue that faced Sendwine was brand awareness. Mike Lannon tended to grow but not too quickly. Mike Lannon wanted to build greater brand awareness and increase Sendwine’s credibility and market share.
Analysis & Evaluation
Threats to Sendwine.com
Many customers began to feel comfortable with purchasing online, and Sendwine.com observed their profits increase each year. However, e-commerce sales were predicted to reach…
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