For those of you who haven't been living in a discount warehouse seclusion bubble for the last ten years, it comes as no surprise that Wal-Mart is strategizing how to make-up for ground lost to Costco over wine sales. Costco is and has been the largest wine retailer in the United States for some time. This is the result of a number of factors, but one that ranks high on the list is that Costco's wine buyer, David Andrew, has good taste in wine.
Wal-Mart got blind-sided by Costco like Bill Gates got blind-sided by Google, and in its first noticeable effort to do something about it, the corporate behemoth has announced that Sam's Club will start selling private-label red wines. The focus will initially be on Australian Shiraz and Spanish Rioja.
There has been some public outcry regarding the expansion, even by executives at Wal-Mart, who are fearful that a private-label wine will simply be construed as low-quality and cheap. However, Sam's Club initiated a test run last year and sold through its private-label supply relatively fast. Costco has also achieved some success with its involvement with private-label wines, selling a Pinot Noir under its Kirkland brand name. This phenomenon is nothing new to European markets, particularly in the U.K., that have been selling private label wines for decades without a social stigma of cheapness associated with them.
While Wal-Mart is optimistic about the move, it still does little to address the widespread view that Costco simply has a better wine selection. While Costco isn't the type of wine merchant that has staff who will riff with customers about wine, the public has taken it to heart over the last several years that you can go into the warehouse shooting blind and still pick-up a bottle that will at worst be pretty good. Sam's Club will have to find a way to overcome this perception of reliability and trust if it's truly going to move in on Costco's market share.