Today, I’m delighted to bring you an interview with Angélique de Lencquesaing, co-founder and deputy CEO of iDealwine. You’re bound to know this leading website for selling wine online. It’s the platform where you can buy and sell your wine at auction. In this episode, we cover many topics: how iDealwine was created, how to invest in wine, what developments are coming next for iDealwine, and more. In other words, we hope you enjoy this episode and we wish you a great listen!

Can you tell us about yourself and your co-founders? How did you come to create iDealwine?

I met Cyrille Jomand, who is iDealwine’s chairman today, and Lionel Cuenca, deputy CEO like me, at Euronext: the Paris stock exchange. It’s the body that runs the stock market, in the late 1990s. It was the early days of the internet back then, and the three of us were working on promoting a segment of the exchange called “the new markets”, which was home to growth companies. All the new projects, the start-ups of the time looking for funding, were there. The three of us were itching to leave the exchange to set up, in turn, a kind of exchange with a different underlying asset from shares: bottles of wine. That struck us as an infinitely more pleasant and flavourful thing. It was on the strength of that stock-market background that we wanted to create a wine exchange, which today lets enthusiasts buy and resell the wines in their cellar in an extremely secure way.

How did the move from a more comfortable situation to creating a start-up go, back then?

It wasn’t comfortable at all. At the time, the internet was in its infancy: there were very, very few websites. I’m not even talking about wine-selling sites but websites in general. In 2000, across all products combined, there were around 1,000 e-commerce sites in France. Today, in the wine sector alone, there are more than 400. It was a new frontier: something not at all comfortable. It was a world where setting up a business was complicated, all the more so since we had very little money to create the company. So it took a lot of creativity, inventiveness and tenacity to hold on through the very difficult early years.

How did the development of your website go?

It wasn’t fast at all, in fact, compared to what we had hoped. We built the entire architecture of the site, but it took us 13 months to launch it. We released a first site that was already very complete and very much inspired by the stock-market world. You had not only a transactional aspect that let buyers place bids in auctions, but also a wine price index that we created entirely, starting from the principle that a person who finds a bottle in their cellar has absolutely no idea what it’s worth. At the time, there was no online guide to find out the value of a bottle, and even less so of an old bottle. Our initial idea was to create this index from all the auction results we could collect at Drouot. The iDealwine index continues to be updated every week through an algorithm we put in place. To support all of that, we set up tools heavily inspired by the stock-market world, such as cellar valuation (by entering the wines it contains), indices, and alert systems (to be notified when a wine appears in an auction). None of these tools existed before. So everything had to be developed, hence the 13 months of building the site, the long timelines and the significant costs.

Beyond the website, how did you go about finding your first users?

We started from the idea that we had to begin by winning over very knowledgeable enthusiasts. That is, someone who knows a bit more than we do and who will inform us, advise us and tell us about their latest discoveries. We started from that idea, that we first had to win these people over. So we formed partnerships with the Revue du vin de France, for example, drawing on the wine index we produced. For more than 18 years, we’ve appeared every month to comment on how the wine index is evolving in the Revue du vin de France. At the same time, we did major work on search ranking through SEO tools. At the time, Google was in its infancy and being early is rewarded. That doesn’t mean we don’t fight to keep our positions, but we benefit from a legitimacy that lets us attract a growing number of enthusiasts. We also used word of mouth, but we built a presence at trade fairs all over the world too. In France of course, but we’re also present in England and Asia. More recently, in partnership with one of our former interns, we built a bridge with the physical world. We opened a wine bar: 228 litres in Paris. The bar is fully connected to iDealwine because it’s supplied through our network. It also lets us meet our customers, run master classes, and showcase the estates we hold dear. It’s a wonderful experience that could be the first in a series.

Let’s go back to the early days of the adventure. How did you experience the dot-com bubble?

The impact was immediate and devastating. The dot-com bubble burst in April 2000 and iDealwine was created in May 2000. Needless to say, it was impossible to raise funds at that time. We believed in it, so we had to build the project without that funding. On a much more modest scale, we turned to a “friends and family” round that financed us. We did other fundraising rounds with iDealwine’s first customers. All of this led to fairly significant dilution of the founders. We had to hold on. The early years were really complicated. The fact of not having traditional investment funds in our capital meant we couldn’t run any deficit. iDealwine never had the luxury of spending phenomenal sums on marketing or on actions that would have built the company’s profile. We had to move forward in tiny steps and be creative. That’s what meant that, as early as 2005, iDealwine broke even, and we’ve almost never strayed from that principle because we couldn’t afford to lose money.

Has it stayed in your culture, being as creative as possible?

Absolutely. Today it’s certainly a permanent brainstorming session to find the best way to optimise our resources. We keep a very close watch on all the tools. We were among the very first sites to launch into keyword bidding. When we saw social networks emerging, we opened a blog, and Facebook, Twitter and Instagram accounts. We’re convinced our digital presence needs to be embodied. The world of wine is a world of sharing, and social media tools are an incredible way to give a soul to what we do. Today, the whole iDealwine team is put forward to show enthusiasts that, behind their screen, there’s a team of very young, passionate people who are learning about wine. We share our discoveries all the time.

Have all these elements helped build iDealwine and make you a reference compared with more traditional marketplaces like Amazon?

We carry values that are the foundation of what we wanted to build in our team today. We seek perfection: we want the enthusiast who comes to iDealwine to have an experience of discovery, whatever their level of wine knowledge. We want them to learn, as we learn, and to discover unsuspected gems available nowhere else. You can find wines from under 10 euros to wines over 10,000 euros. We offer a haute-couture service that we want to be very artisanal. The enthusiast has a truly special experience, the opposite of the global marketplaces.

Let’s focus on the wine price index. How did you build it?

We started from all the auction results we could collect, since public wine auctions require the auction houses to publish the sale results. We did a big archiving job to recover all the results since 1992, which let us build a long history for Bordeaux wines mostly. A little Burgundy and Rhône wine to round it out. Gradually, we enriched the database with other regions. We created an algorithm so that, every week, the index is recalculated (every Friday evening) to take the latest results into account. At the end of the year, for wines that haven’t been sold during the year, because they’re rare or old, we apply the variation within the appellation, in the same vintage, over the year. On the most recent wines or on the great Bordeaux wines, there’s more movement. Every Friday the index changes, notably through iDealwine’s sales, whose international subsidiary “wine auction” is the leading auction operator in France. In 2018, the report from the auction regulator confirmed our position as the leading player, since we accounted for 31% of wine auction sales. All that volume feeds the pricing database, and we record the sale results of the main French auction houses. In the end, all of this lets an enthusiast who pulls a bottle out of their cellar know its rating, find out what it sold for, and form an idea of its value.

What trend do you observe in the wine price index?

It’s a very clear upward trend on the great wines. You have to draw distinctions between the different regions. Every year we publish an auction barometer. The latest one, on 2018, has just been published. It’s a document in which we trace the share of the different regions: Bordeaux remains the dominant region, even though it has dropped below the 50% mark (45% of trades), Burgundy has progressed a great deal (31% of the value of wines sold in France), and the Rhône Valley is really emerging (up from 8 to 11%). Beyond these three historic regions (around 80% of trades), all the other regions are fascinating. Within each of them, flagship estates pull the region upward and are sought after worldwide. We follow them very closely, and this barometer lets us identify wines where the bidding is atypical. We name them and trace them. We play a role in identifying the latest trends. In 2018, 143,000 bottles were sold on iDealwine, making for a tremendous body of analysis from which we extract the essence to identify tomorrow’s trends.

Given the global demand for great French wines that keeps growing: China (75 million wine consumers, and perhaps many more tomorrow) and other countries that keep emerging (Vietnam, South Korea). So we have reservoirs of demand that keep growing, and France remains a benchmark. For the wine enthusiast building their cellar, yes, wine is an excellent investment. You do, however, have to meet several conditions to make a successful investment. First, it’s not an investment for newcomers: you really have to take an interest in the subject. You have to seek out wines you want to keep in your cellar and dream of tasting one day. Second point, you have to choose wines in vintages with good ageing potential. You always know when you buy a wine, but you never know when you’ll resell it. Then, the breakdown we see today is a good representation of what’s important to have in your cellar: Bordeaux (with an excellent global image), Burgundy (more complicated because of the difficulty in sourcing wines, even if the Côte de Nuits is prohibitively expensive), and the Rhône. The other regions are truly an El Dorado. You can find plenty to fill a cellar with wines that are just waiting to appreciate today. On the other hand, you have to accept that wine is a medium-term investment (8 to 15 years).

Do you have any idea of the capital gain it’s possible to make?

No, it’s too unpredictable. We calculate indices: the WineDex indices. We’ve calculated them since 2007 and they’ve risen by more than 100%. But past performance is no guarantee of future performance. Wine prices have risen a great deal at the estate level. It’s a question that’s really hard to answer. On the other hand, I think keeping wines that interest us in our cellar, being on the lookout for new estates and still little-known producers, is worthwhile. At worst, if the profit doesn’t materialise, you can always drink the wine.

To invest in wine, I go to iDealwine, I buy, I store, and I go back to iDealwine to sell?

Absolutely. First, enthusiasts send us the list of wines they want to sell, for which we provide the rating. If the person agrees, they have two options: offer the wines in an auction. Our logistics team can come and collect the cellar. Sometimes we also have enthusiasts who are in a hurry to receive the money: we can then offer an outright buyout that allows immediate settlement. The wines arrive at our premises. They’re photographed, appraised and authenticated. They then go to our warehouse in Champagne and are put up for sale in auctions (8 to 10 days of bidding, with 3 to 4 auctions a month). The wines sold are shipped by us, and the seller is paid within the month from the proceeds of the sale, less our commission (13% before tax, negotiable depending on the size of the cellar).

What do you do with the bottles that aren’t sold?

Generally, 100% of a cellar isn’t sold at the first auction, but we put them up for sale again. In most cases, an entire cellar is sold over 2 or 3 sales. There can be a small remainder. After 3 sales, we offer to take stock with the seller. We lower the starting price a little, or even propose a starting price of one euro, and we often sell them well above that. A digital auction is quite formidable for that. You can see contests that take enthusiasts to high levels.

Do you have a memory of an auction that really took off?

In recent years, we’ve been struck by the phenomenon of natural wines, and in particular in the Jura. We saw a tiny estate, Domaine Overnoy, which has a very limited production (in particular of vin jaune). French enthusiasts were trying to acquire these wines, the Americans arrived, the Asians came into play. There were Chinese and Japanese buyers who fought to get these wines. A vin jaune from Domaine Overnoy topped 1,700 euros last year. To find out more about the surge in prices at Domaine Overnoy, you can read this article, written by Angélique!

Do you have estates that sell their wines directly on iDealwine?

It’s open to estates, but it’s mainly individuals who sell their wines. We offer this option to estates so they can organise sales of specific vintages. Curiously, many estates prefer to organise such sales abroad rather than on a French platform. However, mindsets are evolving, all the more so since iDealwine’s audience is global, with bidders from 60 countries.

That’s exactly what I wanted to move on to. How did your international development go?

The fact that the site is bilingual brought ever more enthusiasts to our platform. In the late 2000s, Hong Kong abolished import taxes on the great wines. So Hong Kong became the entry hub for great wines into Asia. We saw certain wines, Château Lafite first and foremost, that were extremely sought after by Asian enthusiasts. We even had calls to customer service from enthusiasts looking for certain bottles at any price. So we developed our presence at trade fairs in Hong Kong. Ultimately, we built a real relationship with enthusiasts in Hong Kong, which led us to open an office there. Our presence is now much more structured in Asia, and not just in Hong Kong. For Europe, it was easier to manage from France. Being present at trade fairs let us build our profile. Today, we’re starting to think about new markets, including the United States. Even though it’s a mature market, we see a significant opportunity. In this case, the Americans are looking for fairly rare wines.

Beyond the great wines, are you seeing the craze for natural wines abroad?

Absolutely. Of course, the French are very interested in these wines. The phenomenon largely came from abroad. The natural wines of the Jura are a big success in the United States. The craze was a surprise. There’s also strong demand in Asia.

Can you now tell us a bit more about 228 litres?

From iDealwine’s beginnings, we wanted to maintain the strongest and most direct relationship possible with enthusiasts. We didn’t have a physical venue until now. We were at trade fairs and we ran master classes in our offices. It came from a chance meeting with Pierre Renaud, a former intern who worked with us for almost a year and whose dream was to open a wine bar. We told ourselves it was the opportunity to create a place where enthusiasts could find iDealwine’s wines. Indeed, you’ll find wines from our 500 partners there. So 228 litres offers a very sharp and very complete wine selection, close to what you can find online at iDealwine. Each week, we showcase an estate at the bar. Soon, enthusiasts will be able to pick up the parcel they ordered at 228 litres. And besides, the bar also acts as a wine merchant. There’s a very strong link between 228 litres and iDealwine. We run master classes there. There’s a real connection. iDealwine has long been associated with expensive wines sold at auction. It’s true that the average price of a bottle sold at iDealwine is fairly high. Last year it was 122 euros per bottle. This wine bar lets us reconnect with a much younger clientele who discover wines under 10 euros at iDealwine. However, the business model of selling wine online doesn’t allow us to sell only inexpensive wines. Indeed, the cost of handling a bottle (storage, packaging, delivery) is the same whatever the price of the bottle.

Since the interview, we went to visit 228 litres. Check out our article on this wine bar.

How do you select these estates?

We have a buying team that goes to trade fairs and professional tastings. It also travels regularly to the estates. We meet the producers and bring our favourites into our network. We also take the opportunity to build a relationship with these producers. We publish their profile on our blog, for example. We talk with them very regularly and they’re very responsive to that closeness. It has to be said that many producers are still reluctant to sell online. So we develop genuine closeness with them. Estates, small or large, can no longer ignore this tool that is the internet.

You have flourishing international development, you have the first steps of a physical wine bar. What’s left for you to do?

Lots of things. We’ve developed an app that lets you have our entire wine index on your phone. We develop it daily. We have a major project on authenticating and securing transactions. So we have a big project in the blockchain field. We’ll tell you a bit more at the end of the first half of 2019.

If you had to recommend a book about wine, which would it be?

I have a whole library of books about wine, I’d be incapable of recommending just one. There are many angles for deepening your knowledge of wine, not to mention the guides and the many magazines.

If you had to recommend a single wine, which would it be?

It would be excruciating for me to have to imagine taking only a single bottle of wine. I’m a real softie when it comes to wine and I have new favourites every week, or even every day.

That’s already the end of the interview! Thank you so much for listening. To thank you for it, we have a little gift for you!