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June 6, 2007 | Direct-To-Trade | WineDirect Admin

Creating a Blue Ocean

By now, if you’re a reader of this blog, you’re familiar with Inertia’s groundbreaking Direct-to-Trade program. A program whereby we are creating a sales channel on behalf of our winery clients to allow them to access on and off premise trade accounts that is complementary to the three-tier system.

The premise of this initiative is to enable wineries (often small production vintners) to have access to markets that may otherwise be impractical or impossible for them to tap through the traditional three-tier system. In many cases, we’re partnering with distributors, who, by all accounts, understand the model and see it as a valuable tool for winery brand development.

It ends up being a win-win for everybody involved, because in addition to creating hand-crafted, special wines a winery has to ultimately find a buyer for the wine.

Oftentimes selling to a consumer via direct sales via the tasting room, online commerce or a wine club is sufficient for a winery needs.

Oftentimes it’s not enough, or not inline with winery growth goals.

Separately, industry trade magazine Wine Business Monthly annually looks at the number of TTB bonded wineries and non-bonded “virtual” wineries and indicates that the number of wineries nationally has topped 5000. This number has more than doubled in the last seven years. It should be noted that the majority of these wineries are producing fine wines, with a super-premium price tag and limited production.

Conceptually, these two facts are clear underneath the concept of the Direct-to-Trade program—wineries want access to market which was previously difficult to obtain and the proliferation of super-premium and luxury wines is continuing to create a need for access. If you throw in the fact that consumption in these price categories is one of the fastest growing segments in the industry, and it’s not hard to see that a perfect storm of colliding circumstance is brewing for winery success, which we are leading.

But, what’s not always clear is execution underneath this simple concept.

I like to think of it in terms of a popular business paradigm called a “Blue Ocean.”

A “Blue Ocean Strategy,” born out of a series of articles on innovation in the Harvard Business Review, can be summed as follows (citation from Wikipedia):

The “ocean” refers to the market or industry. “Blue oceans” are untapped and uncontested markets, which provide little or no competition for anyone who would dive in, since the markets are not crowded. A “red ocean”, on the other hand, refers to a saturated market where there is fierce competition, already crowded with people (companies) providing the same type of services or producing the same kind of goods.

Their idea is to do something different from everyone else; producing something that no one has yet seen, thereby creating a “blue ocean”. An essential concept is that the innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market.

The authors actually cite Yellowtail in their book as an example of how a brand took an increased quality-to-price ratio in an underserved price segment to create a “Blue Ocean” of business.

Another example is Netflix. When started in 1999, nobody really thought much about DVD’s by mail. Nowadays Blockbuster is shuttering its windows trying to compete.

Our Direct-to-Trade program, in my humble opinion, offers the same “game-changing” possibilities.

My challenge for our winery customers is to think of your selling in much the same way. Using our Direct-to-Trade program, where can you create a “Blue Ocean” of opportunity?

Secondarily, it doesn’t have to be about a geographical market and sub-set of targets i.e. fine wine shop retailers in the Jacksonville/Orlando area for example.

Instead of just thinking about destinations for an eventual buyer, like an Italian restaurant in a given market, it may also be helpful to think about market segments.

If this isn’t somebody else’s term, I’m going to make it my own—think about “Macro Specificity.” That is, think specifically about the big picture. Think in terms of audience, not necessarily buyer. Think in terms of creating a market where one doesn’t currently exist.

For example, take an industry and a movement in any community like the arts scene.

I’ve been to numerous gallery openings, art shows, “Broadway” on the road shows and cultural mix & mingles in which wine was served by a licensed caterer to throngs of thirsty revelers. But, the rub is, all of the wines are non-descript grocery store wines. Obviously, this is sophisticated audience who demands and/or appreciates a finer bottle of wine.

Direct-to-Trade is open in Ohio. Columbus, Ohio is about as culturally literate as you’re likely going to find in the Midwest, save for Chicago.

Think about how you can tap into arts, culture and community. You would be the first winery to associate yourself with a cultural movement in a geographical area. After you’ve created a “Blue Ocean” you ultimately might be swimming in the green.

Author Note: Check Amazon.com for a book called, “Invitation to the Party: Building Bridges to the Arts, Culture and Community” for more information about marketing to this audience.
 

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