|Case 3: The Devil’s Own Wine Shoppe | |Business Strategy: Spring 2013—April 8, 2013 | |Tamara M. Yancy |
Case Analysis: The Devil’s Own Wine Shoppe
The article, “The Devil’s Own Wine Shoppe” revolves around the wine store owned by Bruce Nelson and his wife, Mary Lee. Being a business owner has been a life-long dream of Bruce. They opened the wine store in August 1974 with initial capital of $22,000 and an initial outlay of $17,258. In addition to owning the wine store, Bruce works fulltime as a car salesman while Mary Lee divides her time between working at the wine store and running the household. Bruce and Mary Lee have been placed in a position where they must decide if they should close the wine store, Bruce quit his fulltime job and devote his time completely to the wine store, hire additional help so that Mary Lee no longer has to work at the wine store, or continue as they are—Bruce dividing his time between the dealership and wine store and Mary Lee dividing her time between the wine store and home. The decision is contingent on Bruce and Mary Lee being able to transform the financial position of the wine store at it is currently operating at a loss.
The wine store was positioned in Pensacola, FL in the Pensacola Standard Metropolitan Statistical Area (SMSA) which offered the store a viable economy with growing incoming levels because of the manufacturing, governmental, and oil drilling/refining industries operating in the area as well as will the high tourism potential relating to the beaches of the Gulf of Mexico. The area also provided a population of 245,000 in the SMSA. The Nelson’s positioned their wine store in an established shopping plaza that provided the potential for high visibility due to it be positioned in the core/center of Pensacola’s population and at the busiest intersection in the city. The shopping plaza was adjacent to an office building that housed various professional and service organizations thus providing the Nelson’s with potentially readily assessable target market. Although the shopping was positioned in a visible area, it was outdated and did not portray the image of prosperity; therefore, could potentially have a negative impact on the target market the Nelson’s hoped to attract with their offering of high-quality, exclusive wines. The outdated appearance of the shopping plaza and the increased number of more attractive/updated shopping malls/plazas being built in the area was causing high business turnover in the shopping plaza and causing a reduction in customer traffic to the shopping plaza and subsequently the wine store.
During the time that the Nelson’s opened the wine shop, Pensacola along with the nation, were experiencing the impacts of an economic recession. The recession had caused businesses to close, loose revenue, decreased consumer buying power, and increased unemployment. During a recessions, consumers are more selective of their spending therefore the probability of consumers spending their funds on exclusive wine was lessened. The reduction in consumer spending was not only affecting the Nelson’s bottom-line; it was negatively impacting the bottom-line of neighboring businesses in the shopping plaza. Even in the midst of a recession, the businesses of Pensacola were optimistic that tourism would help them to stay afloat as the area was abundant in geographical and climatic amenities.
On top of the economic recession, the Nelson’s faced competition from grocery stores, drugstores, and liquor/package stores. The competitors were able to sale larger volumes of the domestic less expensive wine at a lower price than the Nelson’s; therefore, giving them a pricing competitive advantage over the wine store. The...
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