The Big Idea CONNECTpreneur Spring Forum: Fireside Chat with David Trone of Total Wine & More

07 Apr The Big Idea CONNECTpreneur Spring Forum: Fireside Chat with David Trone of Total Wine & More

Earlier this week, I had the pleasure of attending The Big Idea CONNECTpreneur Spring Forum in Bethesda, Maryland. As usual, we were front and center to bring you a recap of the morning’s speakers. This season’s event was probably one of my all-time favorites, with an awesome fireside chat with David Trone, Co-Founder and Owner, Total Wine & More.

Trone’s background as an entrepreneur came from his upbringing on a farm, and a very low-tech farm, at that, which he noted was much different from the high-tech focused audience.

He learned two major things on the farm, where he worked 90-100 hours per week. One, you really learn to show up. If you show up everyday and outwork everyone else, you’d be successful. Two, you have to try things, get out there, make contacts and experiment. And, if you’re willing to try different ideas and get comfortable with failure, you’ll learn from that failure.

At the end of the day, Trone’s family farm ended up failing and going bankrupt. And, that was a searing lesson for him to focus on ROI. Following the closure of the farm, he went to business school at Wharton and went from there.

He ended up in the D.C, area because his wife loved it here. He bought his first store during his second semester at Wharton, a beer store called Total Beverage. And started with one good idea: Low prices.

His company Total Wine & More is now flourishing in more than twenty states in the U.S. One lesson he learned during the growth was: as entrepreneurs, you need to be risk averse when you are growing your business. At the end of the day, it’s a zero sum game – either you win or your competition wins.

“If you don’t keep getting better and better and more customer driven and focused, someone in the next room – Kroger, Costco, Amazon – will catch us and find a new way to drive our business.” – David Trone

Trone also added that you have to be relentlessly focused on innovation and change. You have to embrace change. Change has to be your friend and everyone is nervous in areas they aren’t comfortable. It’s important to get out of your comfort zone – get involved in marketing, IT, HR, challenge yourself and stretch yourself by being willing to take risks and take yourself into uncomfortable areas.

Here’s more from Trone’s Q&A with Tien Wong, Chairman of Tech 2000 and Lore Systems:

Wong: What have you learned from a regulatory perspective as you expand into more and more states?

Trone: You can’t go into all 50 states, there are just way too many regulations. We spend a lot of time in the government space. I had this idea that if I did a great job for my customer, I’d be in good shape. We’d make a profit and go on. What I didn’t realize is that competitors aren’t always happy just to fight a fair battle. If government inserts itself in business, you need to have the connections to represent and stand up for your viewpoints. But, what happened to us early on is that they passed a law in 1987 that outlawed advertising beer by price. Then they passed a state law that you can’t advertise your low prices. So, there you can see that by being hopefully neglectful, government struck back, and it wasn’t good for our business.

In 1991, I opened my first wine and spirits. And, at every turn there were new regulations set as I moved into different states. You become driven on growing your business, on customers and your people. And, that’s the key.

I always like to talk about the Three Cs: Customer, culture (people and how they take care of customer and how we can reinvest over and over in our people) and Competition (because it’s a zero sum game).

But at the end of the day, you have to make time to be involved in regulatory issues – both bad and good things can happen here. Some states are trying to drive job creation. And the jobs in America will be created by people like those in this room, by entrepreneurs.

You have to think about both short term and long term growth: When you start you better think short term, because you have to meet payroll on Friday. You need that to keep going.

But, you always have to be thinking about what’s best long term. One decision might be do I hire team member X or Y. Always hire the best or smartest, they will most likely cost more, but that’s ok because there is will be ROI in the long term. When we talk about training it’s the same thing – sending hundreds of people to California is expensive. But they get first class training; they learn the product better so they can help the customer better.

The key is to invest in people. It’s like investing in real estate, you want the A or B site – get the best real estate. It is also key to invest in technology – in retail it’s all in mobile. In order to be successful, we have to be fully omni-channel and let the customer choose how they want to buy and deliver.

My competitors at the end of the day are smart and driven – and will find a way to come eat my lunch if I’m not up early and over investing or hiring the best, trying new technology and accepting and encouraging failure. If we have failure we know we’ll get more doubles, triples, or homeruns. If we only play it safe we will get a lot of singles.

Wong: What are you doing to stay ahead and maintain the lead of competitors?

Trone: We operate on three pillars:

  1. Great Prices – Eventually all prices are going to be transparent. You’ll pull up something on your smart phone and it will have all competitors pricing, as well as ours. We welcome that. Because we’ll win in that position. But price isn’t enough.
  2. Top Notch Selection – We continue to curate our selection better and better. Then we have to figure out how a different way to curate it digitally. Meaning, we have to present our products differently than that our competitors and that’s where big data and CRM come in. In order to do this effectively, you need to think long term – CRTV: Customer Right Time Value.. If we lose money on a transaction with a customer this year, it might not matter. If we create a bond with our customer it could transcend time.
  3. Stellar Customer Service – Our people are well trained and experienced. They talk about Tequila, they talk about beer, they talk about Bordeaux. All of our stores now have education rooms where they can learn and meet experts live virtually.

The biggest thing we need to change is how we sell. Right now, there are only 14 states you can ship alcohol to. Knowing the laws intricately in every state is a competitive advantage and we’re trying to shape the laws to make things more competitive. We need to drive more business intrastate – since interstate isn’t an option. This is where technology will rule.

We started with beer, wine, spirit and now we have cigars. We are number #2 in the U.S. for bricks for cigars. We’re looking for products that are connected to our line. We have to be thoughtful about sticking with our knitting. I’ve seen so many retailers become enamored by the newest, shiny object in the room, but at the end of the day you have to ask yourself, is that going to make us money? Is that going to make jobs?

We have a lot of opportunity to bring in great foods. If we’re going to have a wine from Sicily, why don’t we have containers of food from Sicily there, too? We’ll keep looking for good areas to expand, but be careful and thoughtful.

Wong: So, you’ve done something really amazing, You’ve built a $2.5 billion business with limited or no outside capital, correct?

My parents’ failure instilled a conservative mentality in me for my business. We didn’t take any money until 1999. We’ve had debt, but we have never taken outside money. At the end of the day, that’s a choice you have to make. We found that while it may be hard to do, you will do better financially if you can control 100% of the stock.

We have explored the public option and we’ve had JP Morgan, Goldman look at us, but really all an IPO does for you is give you a whole bunch of cash. And in thinking about my values, that is not a road that I want to go down. What’s more important is who we are, how we think about our family, friends, and community. Yes, its better to have more money than not, but what’s better for my children? To give them a bunch of cash? Sometimes that doesn’t turn out to be the types of values we need and want to have. I’d rather have the next generation of our team all realize we’re building something that can stand on its own, which will help them get better jobs and better pay and that’s what really is important.

I resigned as CEO last year and that was hard for me – but you take stock in what you want to leave behind. So, I made the decision to move into public service. As a result, I brought in a new CEO and leader, and a board of all outside directors that includes CEO’s of other independent companies such as Cabelas, and Williams Sonoma.

My focus now is on diversity and change; I want to zero in on what our country is doing with medical research , the criminal justice system and education.

I ran in a primary election and spent $13 million of my own money. I didn’t want to owe anyone. The next time around, I’ll explore the fundraising path. We need to be team America, not team Democrat or Republican.

Wong: So what do you have your eye on now?

Trone: County executive in Montgomery County. We’re not creating the jobs here or making the investment. I’m an education guy. I serve on a ton of boards, I love education and that’s the source of America’s strength. We need to be over investing in our children because that’s all of our futures. And that’s what all of us really care about at the end of the day.

Wong: Did running for office make you more motivated?

Trone: I don’t think it has changed anything on the business side, but it has made me more optimistic. You meet so many great folks, so many good people. We put in the time in business and it’s the same with government.

What is your greatest failure?

Trone: My biggest failure has been being too aggressive and too pushy where we drove some people over the edge and then they retaliate. We made this mistake early on. We were driving our brands in Pennsylvania – and as a result of driving those brands so aggressively and effectively, we damaged the hometown brand. By favoring one supplier so crazily over another, that supplier used government against my business and then refused to sell to us. Then you have to build a relationship with someone who is working against you. We have to work with everybody.

If we don’t surround ourselves with the best people we aren’t going to win. We need to create win-win situations and make the pie bigger.

Stay tuned for part two of the CONNECTpreneur Spring Fourm recap where will dive into the company showcase and entrepreneur panel.




Kate Nesbitt
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