Wine may just be squashed grapes, but for Virtual Vineyards Inc., it's an online business growing at 20 percent a month.
Combining a knowledge of spirits and high technology, the company's founders went online four years ago with a shopping-cart model that taps inventories in real-time. Because wine of a particular vintage cannot be reordered, consumers gain access to actual supplies when bottles are ordered.
"This is not just a catalog on the web, we allocate wine to an order," said Cyrus Khoshnevisan, director of engineering for Virtual Vineyards in Palo Alto, Calif. "Once you sell out of a vintage of wine, it is gone, so we have to have a real-time inventory," he said.
This use of real-time inventory at an e-commerce site is fairly unique, according to International Data Corp. "It's more indicative of companies who are on the cutting edge," said Juliana Nelson, a senior analyst with IDC in Mountain View, Calif. A recent IDC report on the top 100 e-commerce vendors revealed that only two-thirds of these market leaders operate back-end systems that are integrated with a web front end, allowing such features as real-time inventory tracking.
In January of 1995, Virtual Vineyards started its e-commerce site with the purchase of a Sun/Solaris-based web server to internally host its web pages. The firm developed an ordering system based on Oracle Corp. database software and outsourced credit card verification to CyberCash Inc.
Legal issues involved in selling alcohol, including which states it can be shipped to, encouraged Virtual Vineyards to keep distribution in-house. "We facilitate the sale through legal channels so people can purchase wine," said Khoshnevisan. To ensure that the purchaser is of the legal age to buy alcohol, the company requires an adult signature as it is delivered by UPS, FedEx or other service.
In time, however, the popularity of the web site made outsourcing more appealing. "As more and more things are becoming available, we evaluate them as we outgrow our current systems," said Khoshnevisan. As Christmas season sales taxed the single T1 line coming into onsite web servers, Virtual Vineyards opted to co-located its web hosting with Frontier GlobalCenter of Sunnyvale, Calif.
"Originally, we were on a single T1 with a single point of sale, but that was not enough bandwidth," said Khoshnevisan. From a cost perspective, outsourcing web hosting meant additional reliability, performance and security at the same price as purchasing the additional bandwidth. In December, the Virtual Vineyards site handled 223,000 unique visitors, according to Media Metrix Inc.
Virtual Vineyards now spends between $5,000 and $10,000 a month to co-located its web services with Frontier GlobalCenter. "If we bought a fractional T3 for the bandwidth, it would cost the same amount but bring the headache of maintaining the network infrastructure," said Khoshnevisan.
Instead, Fronter GlobalCenter provides the 24-by-7 network management and operations. "We have a number of facilities around the country that are high-spec, hardened facilities with onsite network operations an onsite technicians working around the clock," said Matt Parnell, vice president of data product management for Frontier GlobalCenter, a Frontier Corp. company. Tied together on a fiber optic network, these sites provide OC-12, 622M bps bandwidth capacities to some of the largest web sites in the world, including Yahoo! and the Washington Post.
"Virtual Vineyards is sitting in these same buildings and get the same advantages as other customers," said Parnell. "Since this is our business, we build networks to a much higher level than any individual company could," he said. Monthly charges can range from $3,000 to tens of thousands, depending on the amount of bandwidth and space required.
As it grew in size, Virtual Vineyards also changed its credit authorization service supplier from CyberCash to PaymentNet Inc. "They have the client side software on our end and through SSL can do credit card captures and authorizations," said Khoshnevisan.
The switch to PaymentNet was made because they were viewed as an up and coming company with good customer service. E-commerce sites pay for authorized transactions according to the number that come through each month. After a one-time set-up fee of $250, monthly charges range from $49 for 250 transactions to $229 for 2,000 transactions.
As a customer places an order on the Virtual Vineyards web site, it is recorded into a transaction table. The order and credit card authorization is verified and processed by its customer service department. At that point, the order to sent to the company's warehouse for packing and shipping. Orders placed by 10 am are sent that day. Virtual Vineyards maintains an extranet with its distribution facilities, a subsidiary called Limestone International. Through SSL and passwords, data is securely exchanged and orders are filled.
Shipments are automatically monitored using the tracking ID assigned by UPS or FedEx. Upon verification of delivery, the system notifies customers via e-mail.
A combination of consultants and in-house HTML writers designed the web site, now in its third generation. The result was a template-driven site that is routinely updated using text editors. "One thing about web design is that it is never-ending," said Khoshnevisan.
For the fourth iteration of its web pages, Virtual Vineyards is considering using an outside agency for design. "Writing with Java script and new HTML takes a certain amount of knowledge that you can't have in just a few people," said Khoshnevisan. The new pages will include Java-based pages for the first time and debut before the Christmas holiday, he said.
To gain additional exposure on the web, Virtual Vineyards uses an affiliate promotion program. Partners can place an icon for virtualvin.com on their site and gain eight percent referral commissions on all sales from that location. The company has also purchased key words and placed advertisements with the search engine sites Yahoo! and Excite.
"We did take a look at people who say 'we promise on searches that you will show up first' but we did not find one that was reliable to our satisfaction," said Khoshnevisan.
At its locations in Napa, Palo Alto and Sunnyvale, Virtual Vineyards' Fast Ethernet LAN infrastructure is based on a Cisco Systems Inc. Catalyst 2916M-XL backbone switch. Cisco 2500-series routers connect the company's intranet server and LAN to its Sparc 5 and Sparc 10-populated web farms located at Frontier GlobalCenter sites. The firm uses a load balancer from Radware Ltd. to regulate traffic on its web farms.
To monitor performance on its web site, Virtual Vineyards subscribes to Keynote Systems Inc.'s web site response service, Keynote Perspetive. "We use Keynote to make sure we are competitive and as fast as we can be," said Khoshnevisan. Keynote Systems provides its customers with daily reports on how well their web sites are performing.