There may be huge lessons for big supermarket retailers of wines and spirits in how one of the little guys - Village Wines in Nashville - is using the Internet to blitz its competition and capture the loyalty of local consumers.
Owner Hoyt Hill says he can only fantasize about having the resources that a grocery chain could muster behind Internet-based marketing of its alcoholic-beverages operations, which he highly recommends for any such supermarket-based department. Kroger and other grocery retailers in Tennessee can't sell wine and spirits by law.
But the way that Village Wines has built momentum on the Net over the last several months, the 900-square-foot store would pose formidable competition for just about anyone. The 47-year-old former restaurateur bought the store in central Nashville in March , and since then he has parlayed an e-mailed newsletter, his Web site and a very aggressive approach to the Internet into monthly sales that are averaging about 50% higher than they were under the previous owner.
"There's only so much volume that I can generate from a physical space this small," says Hill. "So I would attribute most of the increased volumes that I'm experiencing to what I've been able to do on the Internet."
Ironically perhaps, a big part of Village Wines' success on the Net seems to stem from the state law that prohibits the store from selling alcoholic beverages outside Tennessee. So while many small merchants sniff around cyberspace for a chance to escape the strictures of their geographic markets and sell regionally, nationally and even abroad, Hill simply can't do that.
Neither, because of the same law, can he perform e-commerce. Instead, he has developed a tremendous focus on using on-line marketing and communications to squeeze every last ounce of attention out of his local clientele in urbane neighborhoods just a couple blocks from the city's famed Music Row.
Hill's most potent tool is the e-mail newsletter that he distributes about every 10 days. He writes it himself, and in the general version he includes overall new-product information, reminders about store events such as November's  wine-tasting benefit for the local Ronald McDonald House, and even restaurant reviews - such as those that he just penned about four places in Charleston, S.C., that he visited this fall. Customers could sign up by filling out a form that they found on Hill's counter, and the missives grew popular very quickly: Village had nearly 800 subscribers within the first couple of months, and now that list has grown to about 1,500 people.
"The great thing about e-mail newsletters, compared with snail mail, is that - other than my $29-a-month fee for my [Internet-service provider] - it's basically free," Hill says. "I could never afford to send out a newsletter to all these people every 10 days if I were having to pay for postage."
While the general newsletter itself keeps customers informed and engaged, the real commerce builders are the segmented newsletters that Village transmits to many of those subscribers who have indicated interest in specific types or brands of wine. Thus, for example, a couple of months ago Hill let a pre-indicated group of subscribers know that he was expecting a shipment of two cases of a hard-to-come-by California cabernet sauvignon by Opus One that retails for $149 a bottle. Respondents raised their hands for both cases' worth before the wine even got to Village Wines. "It's great for cash flow," Hill says.
One of Hill's e-mail newsletter recipients happened to be an executive of EdgeNet, a local company that had created software called Bondware for creating chat and other "community-building" applications for Web sites. So EdgeNet helped Hill with the next big move in his heady expansion into cyberspace: a high-performance Web site.
On the frequently updated site, Village Wines features a potpourri of content and features that range as widely as the oenophile's world. They recently have included, for example, a notice about a particular brand of 1996 Bordeaux that Village Wine expected in late November, several articles by New York Times wine columnist Frank Prial, a Wall Street Journal story about what wine to drink with Thanksgiving dinner and a Thanksgiving-turkey recipe contest sponsored by Epicurious.com.
The site also includes dozens of links to wine-related sites such as the Web site of the famous Puligny Montrachet winery in France, discussion groups and a poll asking respondents how they plan to celebrate New Year's Eve. "What we've done is made this Web site the local hub for wine conversation," Hill says.
Next on the agenda: broadening chat applications; making more use of animation applications that, for example, can make wine-brand logos pop in and out of the site; and trying to make more use of the site in his physical store by taking customers who physically visit Village Wines to the Web site via Hill's in-store PC. "I haven't even grazed the surface of what's possible," he says.
Out of his few thousand customers a week, Hill says, "at least 50" say something about the Web site, his e-mail newsletters or both. That kind of feedback has helped convince him that Village Wines has no need to do any other kind of advertising or marketing.
"If I buy an advertisement in a local newspaper that has a circulation of 600,000 people, I'd guess 590,000 of those people are never going to set foot in this store ever because they live closer to another store.
"But every single person I send an e-mail to or who goes to my Web site has a specific, serious interest in my business - because they had to have come in here to sign up for it."