Preparing for the Perfect Storm in the Wine Industry
I moved to wine country from South Florida in 2002, yet I’m still very much aware of the official start of hurricane season each year. Although it technically runs from June 1st through November 30th, the majority of named storms tend to hit a little later in the season, beginning in September or so. And each year, as activity starts picking up in the Atlantic, I’m reminded of the many hours spent preparing for tropical storms or hurricanes, storms that in many (if not most) cases take last minute turns and hit other (hopefully less populated) areas. Preparing for a hurricane is a monumental task; shuttering your home, preparing your place of business, stocking up on supplies, and on and on. Not surprisingly, after a number of false alarms people often become complacent. And standing beneath beautiful blue skies, braving the Florida heat and humidity while waiting in line to fill the car with gas, it’s not difficult to understand why. But reality always prevails and history, in the form of storms such as Andrew or Katrina, reminds us just how real the possibility is.
What do hurricanes have to do with wine sales? That analogy, in some ways, reminds me of the many stops and starts we’ve endured in the wine industry over the last several years. When I first became involved in the industry in 2002, excitement was just starting to build around the potential of Internet marketing and direct to consumer sales. In fact, I believe that predictions at the time put DTC at somewhere between 5% and 10% of total wine sales by 2003. Since that time we’ve seen many companies try to navigate the myriad of regulations that each of us deal with on a daily basis. A few have succeeded. Many have not. Yet once again excitement is building around the direct channel. Is it time to start preparing for the hurricane or are we just in for more of the same? What is different about 2009?
In 1991, Geoffrey A. Moore wrote the book “Crossing the Chasm”. While it focused on the specifics of marketing high tech products to mainstream customers, I think the principle itself is very relevant to the market for wine online. Moore postured that a chasm exists between the early adopters of a product (the visionaries) and the early majority (the pragmatists). Moreover, he argued that these two groups have very different needs and expectations, meaning that you shouldn’t try to market to them in the same ways. Visionaries like being ahead of the curve and will seek out the new and exciting, whereas the early majority rely more on recommendations and word of mouth.
Who really buys wine online? It’s heavy. It’s expensive to ship. And it’s not always easy to get across state borders. Why would I go online, pay a premium for shipping, and wait a week or more for my wine when I can walk to the nearest Safeway, purchase a bottle, and open it that evening? Where do we stand in terms of the lifecycle for online wine sales and which group should we be marketing to? I believe it’s the innovators and early adopters. They’re the visionaries who enjoy being out in front and searching out superior products which are not broadly available. This is the group who will go on to become viral marketers and evangelists as we try to gain broad appeal. The current challenge for the industry as a whole is in pairing innovation with demand to successfully cross the chasm, finally landing in a marketplace where the mainstream can confidently place an order for a bottle of wine and know that 1) the product is exceptional (having been recommended by an early adopter), 2) the sale is entirely legal, and 3) the product will arrive in a reasonable amount of time and in perfect condition. So what is different this time around, and why should we believe that direct to consumer wine sales might finally be entering the mainstream? I think there are three signals:
- It’s been a gradual shift but since those early days we’ve seen many regulatory changes, most of which were precipitated by Granholm v. Heald. In 2002 direct sales by out of state wineries were banned in at least half of the US states including states such as New York and Florida. Today, wineries can access 36 states.
- Wine has gained the attention of some of the major Internet players. There may be nuances and regulatory hurdles, but the end game remains the same. Today’s landscape is attractive and they are ready to participate. The question now is not whether or not a top retailer will enter the market, but rather who will be first.
- New technologies make it easy for innovators and early adopters to influence the early majority, a key in crossing into the mainstream. Using innovations which unite wineries (complete with their product detail, order processing systems, compliance safeguards, and customer management capabilities) with new customers, sophisticated Marketing Agents can market wines and present customer recommendations and reviews to their own loyal customers.
Going back to hurricane season, the forecast has changed dramatically since 2002. It’s quite possible that what we’re experiencing right now truly is the calm before the storm. What can you do to prepare? To quote another book, “Purple Cow” by Seth Godin: you can “be remarkable”. Remarkable begins, obviously, with your product. But it extends far beyond that, to your branding, your content, and your customer service. Think of who you are, where you’ve been, and what it is that makes you stand out from the crowd. Put serious thought and effort into your product content. And don’t be afraid to hire marketing and/or copywriting help if need be. It just may be one of the savviest investments you can make right now.