Capital retailing: the success of the two-store Steve's operation, in Madison, WI, is proof of how an independent retailer with personality and strong customer service can thrive amid discounters, superstores and gourmet emporia like Brennan's and Whole Foods.

Like many long-time customers of Steve's Wine Market in Madison, WI, Eric Farnsworth has been able to track the maturation of the retailer alongside his own maturation as a consumer. "I used to go there when it was a little hole in the wall and the hippy guy who drove a Harley was the wine guy," recalled Farnsworth, 54, a partner in Madison's biggest law firm, DeWitt Ross & Stevens. "But Joe got more serious about being cutting edge, to distinguish himself from Brennan's and the supermarkets" as local food retailers developed their wine business, Farnsworth said of the store's owner, Joe Varese. These days, when the law firm asks Farnsworth to assemble the wine offerings for its annual retreat, it's a no-brainer that he will huddle with the knowledgeable staff at Steve's. "I consider it to be the premier wine store" in the area, he avows.

Lots of knowledgeable wine consumers--and some who aren't so knowledgeable--have reached the same conclusion about Steve's Liquor Stores over the years. The two-store operation--there is the main University Avenue store that Farnsworth shops and a second store on the far west side of town--is intriguing for a number of reasons. For one, its success shows how, particularly in the current environment of broad consumer interest in better brands, an independent operator with personality and strong customer service can thrive amid a sea of tough competition among discounters, superstores and gourmet emporia like Brennan's and Whole Foods. For another, the company is managed via a structure that empowers the manager of each store--who has been given a partnership stake in that operation--to run it as a separate unit in terms of selection, ambiance and customer service. As a result, each store is finely attuned to its contrasting demographic base, though it still enjoys some of the fruits of being part of a larger organization.

Not least, the retailer has turned a close relationship with some of Wisconsin's artisanal cheese makers and meat producers into a commanding presence in food, riding a consumer wave that creates further opportunities to shine on the customer-service side of the business. The overall result is a thriving operation that seems to do right by its customers and by the smaller, independent wineries and breweries that the stores work hard to cultivate. "Brands are made in stores like this," declared Randy Wautlet, manager of the larger, original store, Steve's Wine Market, on University Avenue.

Not Traditional Chain

It is probably inaccurate to refer to that business as a small retail "chain." In a statement on the stores' web site, Varese is blunt about his approach. "Be advised," he warns, "while our stores have a shared philosophy and mission, we are not a 'chain' in the traditional sense. Each store has its unique vision developed by a talented but largely autonomous staff. We feel you get more this way."

The older, University store, on Madison's near west side, attracts a very different demographic than the Mineral Point store further west, in an area still sprouting cornstalks when it was built barely a decade ago. The University store's customers tend to be more settled, with lots of doctors, lawyers and legislators, while the Mineral Point clientele is younger, less sophisticated, more diverse.

Thus, University, boasting more seasoned oenophiles among its customers, offers a deep selection of primarily non-domestic wines. Not entirely by chance, that's a neat fit with Wautlet's own predilection for European wines--he'll visit the Continent three times this year--and his emphatically held view that subtler European wines match up better with fine food than bold domestics, a key emphasis of the University store.

By contrast, Mineral Point attracts a younger, more transient clientele.

Far from being arcane differences, those are picked up by local shoppers. Dave Stark, president of Stark Company Realtors and a regular customer of the University store, rates its selection as particularly deep in French, Australian and German wines, while Mineral Point, which he occasionally visits, is probably stronger in California wines. Like Farnsworth, Stark's own maturation has paralleled the stores. (He first stopped in a dozen years ago when he decided to splurge on a good bottle of wine to celebrate his fortieth birthday; today, he's graduated to having an extensive wine cellar at home, about half of it selected by Wautlet. Stark feels no other retailers in Madison match the standard set by Steve's.)

Then there's the matter of South American wines, a passion for Karen Eigenberger, manager of the Mineral Point Steve's. She feels that invariably sunny weather, an influx of money and a willingness to experiment with clonal selections and irrigation techniques is making that continent a juggernaut whose target is nothing less than classic Bordeaux. That belief is amply reflected in displays on the store floor.

Each Store a Separate Identity

The same crisply defined identity "holds true from beer to spirits," Wautlet observed. Thus, if University does a rich business in cognacs, count on Mineral Point to blow through pallets of Captain Morgan's Rum. Mineral Point does not make as much of a fetish of food as University--where customers may have to wait an hour during the holiday rush to get a consultation on what wines pair up best with their planned Christmas dinner--but it does offer a good selection of Wisconsin cheeses and, unlike University, has a stand-up humidor to serve patrons of nearby golf courses. Meanwhile, while University gets good grades for its beer selection, it is Mineral Point that draws most of the raves in online chat rooms, where beer geeks are constantly extolling the virtues of "Jan the Beer Baroness," whose earlier stint at a local organic market gave her a knack for the arcane that, in Eigenberger's view, has proved invaluable in managing a specialty beer section.

Strong personalities like those are the rule at Mineral Point because Eigenberger feels her store has less time to leave an imprint on her less-settled consumers. "We only have one opportunity with a lot of people, so we've got to put our best foot forward. We need to educate them--many are in their 20s and 30s and aren't used to anything more than grocery store brands. We see a lot of different people, so what I tried to instill in this store is to put a personality in front of people's faces," she said. Whether it's Jan with beer or French-born Dominique with the store's European wines, the staff has been able to foster the personal relationships that keep customers coming back, even after their orbit may have widened beyond western Madison. Seeing those strong personalities as a key draw, the store even has featured them in billboard ads. "Bright, saucy and robust--and that's just our staff," says one of them.

Accentuating those differences doesn't take any special effort because the managing partners of each store remain very much their own people. "Karen doesn't necessarily like the same wines as Randy, so they're different in style preferences and have different customer bases," Varese said. Or as Eigenberger puts it: "I don't think it will ever be important for us to have the same selection because it's not the same customers, but the general feel is definitely the same." And that "feel" is perhaps best defined as the ambience of informal expertise--kind of like what one hopes to find in a good independent bookstore.

Interestingly, Varese doesn't claim to have started with this "kind of the same but not really" ethos as his original plan. "I had a vision of several Steve's stores where you'd walk in and you'd always know where the Beefeater Gin is," he said. "I was disabused of that idea after I walked into two or three Wal-Mart stores." Rather than aiming for the convenience that comes from cookie-cutter predictability, Varese decided instead to revel in the stores' differences, on the assumption that customers would appreciate the idiosyncracy in an increasingly corporatized retail environment. (And customer service would be the trump card--if the store doesn't carry the item, simply offer to get it.) The decision "goes with the freedom to choose things they want to go with," Varese said of his two managers. "If you're selling on price, homogenization really works well. But Karen, Randy and I all agree that our approach is, 'Within this price category, what are the best wines we can offer?'" So what about the idea of opening a third store, with its own personality? Varese says he'd do it "in a heartbeat" and with the same philosophy--but only at the right location. So far, he hasn't found that location.

Find a Niche

That has allowed Steve's to find a niche--or rather, two niches--in a city with lots of other choices for beverage alcohol. For broader selection but not the same degree of staff expertise, there's Riley's. The company doesn't try to compete on price with discounter Woodmans, which earned a silver medal among liquor and wine stores in Madison Magazine's "Best of Madison" I compilation for 2005. (Steve's captured the gold medal and Barrique's Market the bronze.)

Indeed, what Varese views as his most significant rival isn't a wine store at all, but Whole Foods. "They have a weak selection and high prices but a fabulous image and wonderful demographic mix," he conceded. Even Steve's loyal customer Farnsworth, the attorney, acknowledges that Whole Foods, which is on his shopping itinerary for other products, can be a tempting lure. "At Whole Foods, I always wander into the wine department--they may have a small pinot from Oregon," he said. "But it's pretty rare that Randy doesn't have it at Steve's." (In the Madison Magazine rankings, Whole Foods and Brennan's tied for bronze in the category of neighborhood markets.)

Store Layout

Thanks to an upgrade a few years ago, the store melds its traditional warmth with a more upscale feeling thanks to redwood racking and Italian tiling on the floor. Aisles are fairly wide, but a sit-down area that accommodated customer consultations gave way to more shelves some time back. Hand-fashioned food bins offer a homey touch. Overall, the managers fashion themselves as European-style merchants, a result in part of Wautlet's and Varese's frequent travels to the Continent. Customers in quest of rare or unusual items are encouraged to "root around" in the store basement, Wautlet said; "they feel they're getting away with something."

Domestic wines are organized on certain "streets" adjacent to one another, and then there are separate streets of Burgundy, Bordeaux, German wines, Italian wines. Spirits have their own area and beers are merchandised almost entirely in the cooler. In keeping with the retailer's independent stance, almost all of the case stacks boast hand-written signs, often boasting individual staffers' recommendations. The store makes minimal use of manufacturers' signage.

The overall wine selection is "rather intense," as Wautlet acknowledges--as many as 3,000 different wines, though he's thinking of pruning it back somewhat. Last summer, the store boasted 250 burgundies, a passion of Wautlet's. He's not afraid to make big bets, either. "Randy is willing to take a chance and buy big if he thinks a good vintage is coming," said Farnsworth, the local attorney.

Always, the emphasis is on "family" wines, as opposed to those deriving from large corporately managed wineries, whether in Europe or California. "With probably 20% of all the wines we carry, I've been to the property, met the person and had some contact with them," Wautlet said. That puts him in intimate touch with the vintners' history and philosophy, enough to be able to "put a face behind the bottle I'm selling," he said. "Customers always love stories and reasons to buy." Indeed, Wautlet sees a prime objective of his travel as accumulating the "stories" that make wine a pleasure to sell among Madison's educated demographic.

Though it may strike some as contradictory, Steve's emphasis on customer service is cited as a reason that the University store does not have a formal loyalty program (though Mineral Point has a wine club). Wautlet feels the frequent contact with customers through tastings, culinary events and other, informal methods does a better job in fostering loyalty, and in fact the store is trying to wean customers away from a 15% discount club.

Truth is, Wautlet and Eigenberger seem to do pretty well. Certainly, their regular customers attest to that. "If someone wants to buy me a gift," said Farnsworth, the attorney, "I tell them to go to Steve's and ask (the staff) what Eric likes."

RELATED ARTICLE: Steve's origins.

Steve's started modestly enough, the idea of a railroad man, Steve Varese, who, in the mid-1950s, decided to start his own business with his wife on the site of their home, which had been rezoned from residential to commercial. At that time, "the only thing they could afford without stake money was a liquor store, which only required a few bottles here, a few bottlers there," recalled Joe Varese, his son. In case things didn't work out, Steve Varese held onto his railroad job for five more years, while his wife worked 12-hour shifts to get the business over the top. By the time son Joe came back to the business in the mid-1980s, his childhood home had been entirely converted to retail; seven years later, with both the business and the city thriving, the family was able to erect a larger building on the site. Meanwhile, the retailer followed the flow of development in Madison westward, opening Steve's Liquor and More on the far west side in 1970, then moving it to a new building erected at Junction Road and Mineral Point Road, across from a traffic-drawing Target mall, in 1995.

Along the way, the stores established their current management structure. Wautlet, who'd worked on the wait taff at upscale French restaurants like Whiteways in LaCrosse, joined the company about a dozen years ago when the operation lost its top manager just before the crucial holiday season. "He got me through the crisis, and we bonded in a special way," Varese recalled. "It's very hard to imagine being where we are now without Randy."

Not long after, Karen Eigenberger, who worked for a wholesaler that served the company, signed on. She struck Varese right away as being, like Wautlet, a self-starter. When Varese's brother had had enough of running the Mineral Point store, Varese sat down with Eigenberger and Wautlet and worked out an ownership structure that gives each of them a partnership stake in the store they run, which is set up as a separate operational and legal entity from the other. That setup has been crucial both in motivating the managers to think like owners, which they are, and to position their store to best serve its unique set of customers. Varese's children are in their 20s now and the question of whether they might at some point develop an interest in the business remains "uncharted territory,' he said. Though he leaves the day-to-day operation of the stores to Wautlet and Eigenberger, Varese said he remains active in the business.

RELATED ARTICLE: Staff turnover? Zero.

Given the emphasis on continuity and customer service, Steve's success story is as much a management story as anything else. Varese happily admits that he lucked out with Wautlet and Eigenberger. But the two managers have likewise done well with their own hires, finding engaging staffers willing to educate themselves on their specialties and stay the course for the long haul.

Wautlet, whose own background was in restaurants, has found that that's a fertile sector from which to hire wine salespeople. All four full-timers at the University store come from that milieu. A good waitperson, he notes, possesses the same ability to "read" their customer as a good wine salesperson should. They are good at making eye contact. They have the gift of gab. They're happy to let people wander around the store, but quick to intervene the moment they detect that the customer can use some help.

And turnover? "Zero," Wautlet responded. He said the keys to retaining motivated employees are to give them discrete responsibility--in this case, a part of the store they can take ownership of--and to continue to let them go on educational excursions to buttress their knowledge of their segment. Pay them well, and offer benefits; at Steve's that includes health insurance and may soon include dental coverage, too. There is no time clock and no sick policy; if you're sick, you simply stay home until you feel better.

Part-timers often are drawn from the ranks of customers, though that's by no means Steve's policy. "We've found people who drop in and say, 'Can I have a part-time job?'" Wautlet said. "We don't try to recruit customers as employees but the fact that we have exciting people draws exciting people"

At Mineral Point, Eigenberger likewise has maintained an impressive degree of stability among her staff, which numbers three full-timers and four part-timers. "We keep them happy by keeping them interested," she said. "They love the fact that we're selling great wine and spirits and beer, and that we have a fun atmosphere."

RELATED ARTICLE: Gourmet food & cheese.

The store's success with cheeses and other gourmet foods has encouraged it to undertake a significant expansion of its food offerings, with the expanded section to be managed by a former cheese buyer at Whole Foods. The store prides itself on its selection of fine Wisconsin cheeses--no mean feat considering that "the sad fact is that the really good Wisconsin cheese leaves Wisconsin without anyone ever knowing it," Wautlet lamented. By now, the store has regular customers who come just for the food, knowing that Steve's may be the sole source in Madison of award-winning cheeses from producers like Cart Valley and Pleasant Ridge.

In the new food area, some of the hand-fashioned fixtures doubtless will have to give way to service dell cases, manned by a staffer cutting cheeses to order and wrapping them in parchment. Obviously, food/wine pairings will be stressed. Wautlet notes that the emphasis on food is a further incentive toward honesty and rigor in recommending wines. "We get complimented a lot for not trying to sell the most expensive wine in the store," said Wautlet. Often, though, the most expensive wine would prove a poor match for a particular cheese or meat item.