|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…show more content…
Not only were the competitors able to price their products lower than the Nelsons they were able to offer discounts that the Nelson’s could not afford to offer; thus making them more attractive to the consumer. Lastly, the competitors were able to advertise on a level that was not financially feasible for the Nelsons. Because of their advertising abilities, the competitors were able to create more awareness of their wine selection that the Nelsons which subsequently pulled customers away from the Nelson’s wine store.
The Nelson’s wine store was operating a loss. They began their business with a $7,000 personal savings investment and a $15,000 which they had not been able to begin repayment during their nine months of operations. After the performance of a financial analysis, it was concluded that the Nelsons were losing on average $802 per month with estimated average monthly sales of $1,888 and estimated average monthly expenses of $1,580. At these levels, not only could the Nelsons not make a profit, they could not breakeven. In order to breakeven, the Nelsons would need to generate sales of $5,642 offering no salary to Bruce or $9,214 offering a salary to Bruce.
Which income generating venture should the Nelson’s pursue: the wine shop or fulltime employment at the dealership?