Capitalising on the wine craze.

DENISE the Wine Shop started its operations in Malaysia in 1998. After starting a chain of over 16 stores, David Lim, its founder, branched out to Singapore in August 2006. Within a short span of six months, he established 10 outlets and by end 2007, he would have increased this to 17.

Fresh from a pre-medicine course at the University of Iowa, Lim dabbled first in the shipping industry, followed by a stint in the health food industry in Malaysia in the mid 1990s. After initial success in Kuala Lumpur and other major cities across Malaysia, he decided to grow his health business on a large scale in 1997. In January that year, he received the backing of his business partners to take the business regional.

He started projects in Indonesia, Thailand, and the Philippines. Just as his fledgling operations took off, the Asian economic crisis hit in June 1997 and in his words, "things just couldn't move" and the business was hit hard.

Undaunted, Lim wanted to diversify and looked for a business that would be the "next sunrise" industry and thus had growth potential. In 1998 he met his ex-sales manager who was raking in a five-figure monthly income from selling wine to his friends and relatives. This piqued Lim's interest. He hadn't thought that wine would be a lucrative product until then.

He studied the wine market in Malaysia and in late 1998, he started his own wine business and named it after Denise, the Greek goddess of wine. Coincidentally, his daughter is also named Denise.

The first Denise store was set up in SS2 Petaling Jaya, an upmarket suburb in Selangor. Since then, the chain has 16 stores spread across Malaysia and two bistros in Kuala Lumpur.

Lim's first foray outside Malaysia was the Singapore store in 2006. The chain's expansion in Singapore over the past year has been phenomenal. It has opened as many branches in Singapore in one year as it has opened in Malaysia over the last five years. It has 16 stores including a new one in Serangoon Gardens in November 2007.

Why is there this huge explosion of non-franchised outlets? Lim claims it is linked to the market's "readiness" to imbibe the lifestyle that promotes wine consumption. It is linked to Singapore's economic development stage and the affluence and lifestyles that come with it. He reckons Hong Kong and Singapore lead the region in terms of the highest per capita consumption of wine. That is largely driven by the cosmopolitan outlook of both cities and the strong influence exerted by the large expatriate community residing in both cities.

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There are a few differences between the offerings available at Denise and the range of wine at major supermarkets. Denise offers an extensive range of boutique wines from more than 50 wine makers from across the globe but it supports a lifestyle that suits its discerning clientele.

Lim assures customers that the wine arrives in the stores in excellent condition: "Quality counts. From the time it's purchased from the wineries, to the time that the wine leaves the store in Singapore, each bottle is packed and shipped in temperature-controlled containers. This ensures that the product ends up tasting as it should, as temperature variances in storage and transportation can affect its flavour."

He says this explains why his imports taste the same as samples tried in the vineyards: "Often, people tell me that the wines they buy off the shelf in supermarkets don't taste the same as the same labels they tried in the countries of origin. We try to ensure that the bottle tasted in cool climes of the Barossa Valley in Adelaide, tastes the same when opened in Singapore."

Besides the wide range of labels on offer, including several that only his chain brings in, Lim believes his real sales edge over his competitors is his knowledgeable staff.

Lim says they aren't the run-of-the-mill sales people or customer service staff. The sales staff at Denise undergo exacting wine education and sales training. Each has a genuine passion for wine and for going that extra mile to please customers.

He explains: "These passionate staff are exposed as much as they can to the labels we carry. Because, wine is a product that has a 'life' of its own unlike furniture or clothes, there is often a story behind the label, nuances to its make-up, and subtleties that identify one wine from another. Our staff learn to appreciate these and are able to advise customers on the characteristics of each bottle and help them select something that will suit their requirements to the letter."

He adds that the concept behind most of the stores remains the same--each is situated to service customers from a specific neighbourhood, so personalised service is established and appreciated as customers are recognised by name and their preferences.

Lim says that these differences are what makes his chain different from other vendors: "If it weren't for this unique selling proposition, I would rather simply, close all these outlets and distribute large volume selling wines through vending machines. I would have fewer overheads and larger margins!"

The typical consistent customer for Denise belongs to the middle to upper income group. These includes professionals, managers, business people, and entrepreneurs.

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Denise's tagline is "Seductive Wines, Indecent Prices". Most of their bottles are priced below S$60 but they also have premium first growth labels that could cost thousands of dollars. So the store isn't about cheap wines.

Lim says that the tax on a bottle of wine is about S$7: "If a large proportion of a wine's price is due to tax, the quality may be questionable. A smart buyer will know what he gets when he pays more for a higher priced wine." Going by that, most of the sub-$20 labels in supermarkets wouldn't be exceptional buys.

One of the biggest challenges that Lim faced in Singapore was finding the right location for his stores and the high rental rates. He was fortunate to have locked in the leases of most of his Singapore outlets at favourable rates before the recent upsurge in rents.

His other headache is the bugbear of the retail industry--recruiting the right staff. His main recruitment criteria are passion and attitude, which, in the current work climate, demands a very attractive compensation package.

"Each store manager undergoes extensive training including attending wine courses and visiting our suppliers' vineyards to gain first-hand experience of the wine-making process. All this puts serious pressure on the company finances," says Lim.

He is grateful that his backers have foresight and are able to see the long-term prospects of this business. Lim forecasts turnover from his Singapore outlets to clear seven figures by December 2007. This confidence is a factor behind his decision to stock over S$10 million of wine in the bonded warehouses.

To build up a loyal clientele, Denise has a membership scheme, which tracks buyers who purchase more than S$300. "Anyone will give a seller a first chance, the trick is to make the buyer come back again, and again. This repeat customer is what will make a business survive. In many cases, these customers make up only 20 per cent of your clients, but they can account for 80 per cent of your sales. So starting a club that accords them discounts, shares wine news, and other material, makes strong business sense," explains Lim.

This marketing strategy has paid dividends as half of his clientele are repeat customers. Lim has signed deals with the big players in the lifestyle industry, including Singapore Airlines, Shangri-La Hotel, Raffles Hotel, and several fine dining restaurants.

One exciting prospect is the pilot mini-store in Woodlands, the first in the HDB heartlands, which has received encouraging sales and support. That may lead to more outlets in other HDB towns in future.

Lim is also looking at adding some specialty offerings to his successful formula. Store number 17 is a concept store in Raffles Place with a coffee-franchise partner. This bold step in marrying two lifestyle fads may be the next big thing.