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August 4, 2008 | Direct-To-Trade | WineDirect Admin

Direct-To-Trade is about Access

You may have heard this already: Inertia is pioneering the enablement of wine producers to reach trade buyers directly, in an easy, efficient and fully compliant online fashion. As we ramp up our efforts to empower more wineries to sell more wine Direct-To-Trade, I want to take a closer look at the big-picture question of why direct trade sales must inexorably grow.

By now, the message is clear: the American system of wine economics is rapidly mutating. Not only have consumer habits made wine a much more popular consumer good and increased demand and supply, ongoing regulatory changes have made the marketing and distribution of wine a much more creative and competitive sport.

Innovation arises when things stop working. In our industry, innovation needs to answer many a winery’s dilemma: “I can’t find a distributor who’ll carry my wine; how can I get it to market?”. Whatever the answer may be, it also needs to answer the challenges facing wine buyers: “How can I buy this rare gem if none of my distributors carry it?”

The situation is familiar:

  • There are more and more wine products hitting the market (both foreign and domestic).
  • There are fewer and fewer distributors as they rapidly consolidate.
  • Warehouses are full of inventory that is slow to move.
  • Margins are rapidly being eroded by rising fuel costs.
  • Traditional distribution systems have less incentive to build brands.

The American 3-tier system has been tremendously successful and continues to be. Yet it is currently not capable of efficiently absorbing all the new-comers to the market. A small number of brands represents a huge portion of what is actually consumed today and it is the 3-tier system that makes this possible. But how can smaller, high-end, boutique brands catch the attention of giants? How can a 10,000-case winery, making stellar wine (though not yet blessed with a sacred 94point rating), possibly catch the attention of large, bottom-line focused, distributors? Fortunately, many still do for the benefit of the consumer; but not all.

As Angela remarked in her recent post: there is distribution and then there is effective distribution. This is my central argument: going direct is about filling the gaps of the 3-tier system. Wine producers need to ask of their distributor: “are you the most effective way to get my wine to market?”. Most often, the answer is a resounding “Yes!” , but in certain situations or for certain brands, the 3-tier system will not work.

Here is a short list of situations many wineries will recognize:

  • I have a restaurant in Florida who wants my wine, but I can’t get a distributor to carry me because it’s not enough volume.
  • My distributor in New-York does not service up-state, how can I get my wine to a buyer in Rochester?
  • I have a retailer who really wants my Syrah, but my distributor only carries my Cabernet and Merlot.

All these recognizable barriers to sell are about one thing: Access

State access: getting to certain states
Geographic access: reaching all areas of a state
Product access: getting all your products in a state
Buyer Access:making your products easily accessible to all potential buyers

So how can innovation help solve some of these issues? A minority of producers is currently selling directly to trade, but technology hasn’t been fully leveraged yet and the scope of current direct trade sales is still geographically narrow. While I will not go in the details of our ‘secret sauce’, Inertia’s DTT program enables bonded wineries to transact sales to these 12 states:

Arizona
California
Connecticut
District of Columbia
Florida
Illinois
Ohio
Oregon
New-York
Vermont
Washington
Wyoming

As Corey commented, these sates represents a huge swath of American wine consumption. If any one of the above states, or portions thereof, have been closed-off to you, or if your distribution in any of those states isn’t as effiective as it should be, then you should take a hard analytical look at the opportunities and implications of DTT.

Inertia’s DTT program will allow wineries to transact sales from trade buyers in any of the above states (or a sub-set for 17/20s and importers). Inertia’s DTT program allows you to pick what you want to sell, where you want to sell it and whom you wish to sell it to, in a fully-streamlined way, all on-line. DTT also implies minimal over-head that frees up staff resources (that would otherwise be spent on order management, invoicing, collections, etc.) to do what is most important: selling.

Access is the first and most obvious reason for going Direct. This is why DTT can be an incremental distribution channel, supplementing the 3-tier system if and where it is not efficient.

Upcoming posts will shed more light on the other two compelling reasons for going Direct-to-Trade: Control and Sales.
Stay tuned.

 

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