No matter how bad the economy gets, people will keep drinking. That’s what helps make Winery Exchange Inc., the company Peter Byck co-founded in 1999 with two partners, recession-proof.
“People aren’t going out to restaurants as much, but they still want that nice bottle of wine or some premium vodka they’ll just drink it at home,” says Byck, the company’s president and CEO. “That saves them money, but they still get to enjoy that luxury item. We’re kind of recession-resistant.”
The company has proved that, growing from $4.2 million in 2002 sales to $44 million in 2007, and Byck expects sales for 2008 to top $60 million.
Smart Business spoke with Byck about how you can determine if a new direction is worth your time and why you have to make a decision when something isn’t gaining traction.
Q. How have you dealt with the company’s exponential growth?
We’re a management team that can adapt. We started as a (business-to-business) with four businesses. One was trading bulk wine and grapes online back in the exchange day. We also sold supplies online. We did private-label wine, and we had strategic information for the wine business.
We constantly evaluate what’s happening, so we quickly cut off the things that didn’t work which was the trading of the bulk wine and grapes and the selling of the supplies. They were B-to-B models, and the wine industry is too relationship-driven.
But then we focused on the private-label wine and the strategic information, and we’ve really been focused on that ever since. We’ve expanded; we constantly adapt.
Q. How do you determine which ideas to pursue?
We’re open to all ideas, because I can’t think of everything. You have to evaluate ideas based on what the economics are and how it fits with the overall business model. We’ve created a core engine at this company, which is the ability to rapidly develop these private-label programs from all over the world.
If the idea can augment the engine and we can get a good return for the engine that we’ve built, that’s going to be something we look at closely. It comes down to, ‘Do we get a good ROI from what these ideas are?’
Q. How do you determine whether a new idea is working?
To me, it’s looking at how the customer is behaving. Is (the idea) getting a lot of traction? We’ve got some good ideas that haven’t worked. But we keep at it for a while, and you make that call when you’re not getting traction with the customers, when you’re not getting the growth and you’re not getting the buy-in.
Then, the economics aren’t there if it isn’t working. You are not getting a good return on your investment. If you’re investing a lot and you are not getting the traction, that’s a pretty good indicator that it’s not going to work. We would invest in things where you’re not getting a short-term return but you can see the traction with the customer then you keep at it with the idea that you will get future returns.
Obviously, if it’s screaming right out of the gate, then it is pretty easy. Or if you are getting very little traction from customers, then it’s easier. It’s the ones in the middle that are hard.
Q. How do you decide whether to stick with an idea if it’s performing in the middle?
For example, we’ve moved into beer. It wasn’t really totally profitable out of the gate. We actually struggled at first, but there was definitely continued demand from customers for the products.
Also, we were making progress on making it more efficient, a little step at a time. We still have a ways to go, but you can see the growth, the acceptance from the customers, and there is very little competition in that segment. So we’ve gotten enough good indication that we are continuing to work away at it.
Q. How do you communicate your direction to employees?
I develop a strategy for the year, and I keep going back to the strategy we developed and hit on the points of the strategy and update everyone on where we’re going. Then, I openly share the financials with how we’re doing and what the targets are and how we’re going against that.
A few years ago, our strategy was we wanted to diversify revenue streams more. So, at every company meeting, I would get up and reiterate, ‘Here’s our diversification strategy, this is how we’re going to do it, and here’s how we’re progressing against it.’ Then, you have to champion people who are executing against that single out certain employees who are exceeding expectations and really driving toward the strategy.
HOW TO REACH: Winery Exchange Inc., (877) 946-3793 or www.wineryexchange.com