Wine Direct

March 31, 2008 | WineDirect Admin

A snapshot of online wine

As I keep a close eye on how wine enthusiasts connect, buy, sell, discuss and learn about wine online, I think it’s worth giving a brief classification of the main online actors of the wine world.

Media
This encompasses the online versions of the traditional wine press but also the newer voices of wine journalism: wine bloggers. Blogs like Alder Yarrow’s Vinography have become a premier destination for those seeking an alternate editorial voice on wine.

Retailers
By online wine retailers I mean companies that have a license to buy and sell wine. They find customers online and process transactions on their own online store. As even wine.com now has a brick-and-mortar facility, online retailers most often are click-and-mortar. The web is an extension of their real world store allowing them to capture new customers in new markets.

Wineries
They sell most of their wines to distributors, who in turn supply retailers; while the rest of their production is sold in the tasting room. This has largely been the norm until the rapid growth of the direct channel. As the web first came along, most wineries built their online presence to be a marketing vehicle – the web being but one piece of a larger communications arsenal. Today many wineries see their website as the extension of their tasting room: where the brand is promoted and wine is sold. Ecommerce is now the main engine of direct sales growth for many wineries.

These three groups have operated in the off-line world to satisfy the desires of the wine-consuming community in much the same way for many years. The emergence of the web has created new ways for them to engage with consumers and the web is rapidly changing how wine is marketed and sold. The dramatic growth of online wine sales has, to a great extent, been fueled by the emergence of new group of players: those that help bridge the offerings of the three above groups to better serve online wine enthusiasts.

Wine Marketers
Roughly, these are organizations that directly help sell wine while not holding any inventory themselves. They may or may not help process transactions or take orders, but they help bring to wine lovers the information they seek and also help shape their purchasing behavior (think of how much a service like wine-searcher.com can mean to passionate wine buyers…) Wine marketers provide a service, that, if useful, builds them an audience. In turn, it is this audience that wine marketers leverage to generate revenue.

These wine marketers often re-use the content generated by the media (or allow their users to post their own content: reviews) and provide product information from retailers and producers alongside clear paths to purchase. As buying patterns increasingly incorporate online behavior, the demand for good wine marketing services will continue to grow. The cost of becoming a noted media player, wine producer or even simply a wine retailer is quite high. That may be why so many new online wine marketing companies are being launched. Though the Google or Facebook of wine as yet to emerge, many are vying to claim that mantle. In any case, innovation and competition in the world of wine marketing services can only be good for wineries and retailers and will only further accelerate the growth of online wine sales.

Mar 31, 2008 at 1:23 PM

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March 31, 2008 | WineDirect Admin

Baseball and wine

The Major League baseball season has begun, and all is right with the world. I love baseball. I know it is no longer America’s favorite past time, but the game holds a special place for me. Baseball is about nostalgia. It is about being six years old, and sitting in the stadium with my Zade (grandpa), my Dad, Uncle and cousin and trying to take in all the stimuli overwhelming my senses. The deep green of the grass. The height of the pitcher’s mound, the smell of fresh cut grass. At a baseball game the hot dogs taste better, the beer is colder, the peanuts saltier, the cotton candy sweeter.

Yes, I love baseball, but what does that have to do with wine? Probably very little, but let me stretch the comparison. The reason I love baseball is that it is an intrical part of my upbringing. This is the same reason our European cousins give for their love of wine. They remember first sampling the grape at their parents table, and learning about the nuances of wine from their parents.

We all have read about the impact the millenials are having on wine consumption in our country. This demo is adopting wine at a much faster rate than any previous generation. I submit the reason is nostalgia. The millenials are the kids of Boomers. Boomers were the first generation to embrace wine as part of our culture. I remember as a 19 year old being invited to a friends apartment to have dinner with him and his girlfriend. She was making spaghetti. I asked my Dad what wine I should bring (the drinking age was 18 back then). He suggested a bottle of Riunite Lambrusco (because it was Italian).

Compare that to my millenial age kids. Our son drinks big cabs, our daughter Pinot Noirs. They learned about wine at our dinner table. Actually, many of their friends learned about wine at our dinner table. Wine has been part of their life for a long time, just as baseball as been part of mine.

As I said, baseball is back, and life is good.

Mar 31, 2008 at 1:21 PM

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March 26, 2008 | WineDirect Admin

A heartfelt thank you

A little over two years ago we decided to enter the blogosphere and launch our REthink Blog. It has both been a herculean effort and a labor of love and every person at Inertia has been a key contributor. This week we were nominated by you, our readers, as one of the finalists for the American Wine Blog Awards (thank you also for voting for us and the other bloggers here). Many thanks from myself and the entire Inertia family for your votes and your continued support and readership. YOU ROCK!

Mar 26, 2008 at 1:26 PM

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March 25, 2008 | WineDirect Admin

Tips for increased email conversion

Many online marketers struggle to continuously increase their email conversion rate. In order to make sure your time and effort are well spent, focus your conversion efforts on products that will produce higher average orders and products your customers buy, and buy repeatedly. If the average percent conversion is 1% you want to be sure that your email marketing techniques offers your customers what they want. We’ve provided some ideas to get you started below. There are many ways to increase your conversion rate. Here are some suggestions

Segment your list to offer something specific to your customers’ needs
1. Offer Cabernet to Cab lovers only
2. Offer to club members only
3. Offer to X State only
Provide incentives to purchase
1. Shipping included in price
2. % off Shipping
3. % off Wine
4. No Tax
Let the world know what you have accomplished
1. Awards you have received should be highlighted
2. When you get a great score, flaunt it
Be proactive when sending
1. Don’t wait until the last minute to write your email. Think through your offer to avoid making simple mistakes.
2. Use the best practice examples that Inertia has provided:
  1. Keep it short and sweet
  2. Have call outs to specific wines and link them to the product
  3. Tell them where you want them to go and show them how to get there
Always provide several links from your email to your site

The merchandising of your online store - for example product merchandising and streamlining of the purchase path - can be measured through promotional results. Google Analytics can be used for a more in depth analysis of how customers are getting through checkout, and where they may be dropping off. At the end of any campaign, the number of orders placed and the average dollar per order will provide you the information necessary to determine the effectiveness of your promotion and provide guidance for your future campaigns.

Mar 25, 2008 at 1:28 PM

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March 21, 2008 | WineDirect Admin

Shipping = Marketing

Shipping is one of the key friction points for people buying wine online (another blog I’ll talk about the others). As an online marketer in the wine industry, I love shipping. It is the magical lever that I can increase sales, increase customer acquisition, and avoid channel conflict.

The problem is that many wineries look at shipping as:

A cost to pass onto a consumer
A profit center
A cost that needs to reconcile exactly for accounting (the worst expression of shipping)

I recommend highly you look at shipping as a marketing vehicle rather than an operational necessity. One of the best examples of an online company that used shipping as a marketing lever is zappos.com. You can read a great write up here. What they did wonderfully was focused on the customer and to help make it better, they gave up 25% of their revenue to allow for free shipping. Instead of spending expensive marketing, the marketing budget was reallocated for shipping.

Now why is this relevant to wine? Again, shipping is one of the main barriers to wine purchasing. It is expensive, cumbersome, and logistically painful (adult signature, compliance, etc). So how can a winery use shipping as a marketing expense:

First - the website price wineries generally present is a higher SRP than exists in the retail world so that we avoid channel conflict. To stimulate sales and yet not anger your retailer partners/competitors is to reduce your shipping cost so that the total purchase price is competitive with the regular channel. You help mitigate the frustration with “under-pricing your retailers” since your SRP is equal or higher than the channel. In reality you have created a competitive advantage that can not be matched by resellers of your product and still yield the same margins.
Second - look at your business regionally. Generally you will find that the majority of DTC business is West Coast based. To help stimulate East Coast business analyze your shipping cost and do a weighted average. A great example is a winery we work with recently analyzed their business and found that 80% of their business was West of the Rockies and 20% was East of the rockies. They raised their West Coast pricing by $1.50/package and lowered their East Coast business by $10 and aggressively promoted the great pricing for East Coast customers on their web site. Within a three months they had grown East Coast sales boy 100% and suffered no loss in profit thanks to working with a weighted average.
Third - look at shipping as a customer acquisition cost. How much is a customer worth to you? $10, $30, $50, $200? Give shipping away or make it a flat price. Mywinesdirect.com (and other wine retailers) have had incredible success with this model. I am sure you have seen the Wine.com ads with $0.01 shipping promotions. In reality a winery has more room to leverage shipping since the margins are so much hirer for you than wine retailers.
Fourth - Use shipping to up-sell. “Shipping included on a case or more” is incredibly effective to get someone buying 7 bottles to upgrade to 12.

There are so many more ways to change shipping from an operational tool to a marketing tool - be creative, do your financial analysis, and measure the results. Look at how other great online retailers leverage shipping (Amazon for example is great with “threshold helpers” and Amazon Prime, their subscription service that gets you reduced shipping). But whatever your decision, shipping is your friend and can help move your online sales significantly if used correctly.

Mar 21, 2008 at 1:35 PM

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March 19, 2008 | Matthew Mann

Siesta Village: No Sleepy Case

The recently decided federal district court case of Siesta Village Market v. Perry set too important of a precedent not to be appealed. Despite the name it is not a sleepy little case. It set a precedent by applying the Granholm decision on direct wine shipments to the retailer context. Beyond that, the requested remedy by the wholesalers on cross-appeal touches a much larger constitutional issues about the proper role of the branches of government.

In its ruling, the court said the state can’t discriminate against out-of-state retailers by granting direct shipment privileges only to in-state Texas retailers, much the same way state’s couldn’t discriminate between in-state and out-of-state wineries. A victory for the Specialty Wine Retailers Association you would think, so why are they now appealing? Well, in the same ruling, the judge upheld Texas’ right to require out-of-state retailers to purchase the wine from Texas wholesalers. This makes the victory somewhat pyrrhic for retailers who would be required to buy any wine they ship into the state from Texas wholesalers.

Affecting the status of direct wine shipments but also reaching well beyond that threshhold issue is the cross-appeal by Texas wholesalers. They argue that even if the judge’s ruling in applying Granholm was correct, the judge applied the incorrect remedy by not prohibiting ALL direct shipments by retailers, both inside and outside of Texas. Needless to say such a ruling would be extremely beneficial to the wholesalers and I understand why they would desire such an outcome. But from a legal standpoint I find it a suspect remedy to suggest.

I should state I have not yet read the cross-appeal so I cannot speak to the legal theory on which it is founded. Still, it would seem to me to request the court strike down the entire statute granting retailer direct shipment rights would be the equivalent of judicial legislation. The Texas state legislature affirmatively decided that it was acceptable public policy to allow in-state retailers to ship wine directly to Texas consumers. They have the constitutional authority to make such a decision. That they did not include out-of-state retailers in the equation is where the constitutional flaw of the statute exists, not the underlying concept that the legislature could make such a public policy decision in the first place. By striking down the statute in its entirety the court would effectively be saying that it, not the legislature, has the right to determine what is in the public interest for the state of Texas. The proper remedy is to correct the constitutional flaw and apply the law in such a way as to not violate the Commerce Clause. In this case that would mean to apply it to both in-state and out-of-state retailers. If the Texas legislature decides such shipments are not in the public interest of its citizens, it can make that decision. For the court do so is a usurpation of the legislative perogative. There is indeed much at stake in the not-so-sleepy case called Siesta Village.

Mar 19, 2008 at 1:37 PM

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March 18, 2008 | WineDirect Admin

A Relationship to Last a Lifetime

Wineries with tasting rooms have a unique opportunity to establish a life-long relationship with their customer. As a self-proclaimed wine geek, I have had the opportunity to embark on the journeys that go from road trip to tasting room to club member to finally sharing the experience with friends as I open the bottle and “tell the story”. The first impression can linger to a long term relationship for future visits, direct sales and better yet, gift memberships and referrals to family and friends. I decided to join the ranks of sharing the experience by working some weekends at a well known winery in the Napa Valley. In this short time, guests have come in that are members that haven’t been to the winery in awhile and each time they come to the Napa Valley they make a point to stop in and visit. Within my first two weeks, there have been guests celebrating special occassions. John and Shari made their first trip to Napa and were on their honeymoon. This was their first stop and I was their first host ever to the valley. There was Jennifer celebrating her 21st birthday and oodles of anniversaries and of course the “girl’s weekend” celebrating good times and great wine. The tasting room experience can be a point of ”high touch” that the customers will remember for many years to come. When visiting popular wine regions after a day or weekend’s worth of tasting, only the true highlights or “high-touches” will be remembered. These customers come from many places and have many friends who are probably drinking wine; be the one they remember as it will reflect in LOYAL club membership. After meeting with individuals, listening to their stories and sharing the winery experience, it dawned on me, there should be signed bottles in the tasting room by the winemaker or owner for those that are celebrating their moment. What a “high-touch”! Guests can have a personalized piece of Napa to take home. A signed bottle will usually stand out and will become part of their home long after the wine is gone. When they think of wine or another trip, they will continue to be reminded of the great experience you shared with them.Cheers!

Mar 18, 2008 at 1:41 PM

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March 17, 2008 | WineDirect Admin

Diversify your sales channels

The Federal Reserves rate-setting committee is meeting once again this week and is expected to lower its key interest rate to a projected 2.5%. The rate now stands at 3% and just six short months ago it was at 5.25%. All this is in response to a frail U.S. economy and the deteriorating condition of global financial markets.
The wine industry is not immune to economic woes and as this wave of uncertainty rolls upon us we all need to prepare for what lies ahead, and how do we do this? We look into the past, and industry trends seem to suggest one thing that we’re all going to be happy to hear; per-capita consumption of alcohol has a propensity to increase during economic recessions. Although this is not wine industry specific, as wine’s share of overall alcohol consumption increases it becomes more relevant. Wine industry specific trends include:

- Disposable income tends to be spent at home during economic downturns. This may mean that while restaurant wine sales may see a lag, off premise sales could increase, channel volume may see some dramatic changes.

- Trading down. While we may not see an overall decrease of wine consumption we may see sales of high price point wines decrease while the “value wines” may find sales spikes

Aside from tracking historical trends and planning accordingly now would be a good time to re-access your sales channels. We all know the economic benefits of selling Direct-to-Consumer, are you allocating proper resources to the Direct-to-Trade channel?

Mar 17, 2008 at 1:45 PM

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March 17, 2008 | WineDirect Admin

Seeing the trees in the forest

It is odd, I know. Most businesses, books, and inspirational posters encourage us to think big, see the forest through the trees, and go for the gold. I am all for this mindset, but sometimes you need to focus on the details and the plan before you can even attempt to achieve the bigger picture.

I recently took on a new role at Inertia and my team is tasked with trying to build a channel that has never really existed before, Direct to Trade. The opportunity is obvious and the vision well crafted, but the execution of some lofty goals remains a challenge. I’m approaching it in a very methodical way that echoes the notion that you should “Plan your work and work your plan.” Only the extremely lucky actually achieve a huge goal without a plan and without executing against that plan. And even if these lucky souls achieve the goal one time, it probably isn’t sustainable. I learned this lesson the hard way.

One July a few years ago, I climbed Mt Whitney (14,500 feet) with some friends over a 24 hour period. I didn’t really prepare for the climb and instead relied on the fact that I’m athletic, have strong will power, and could simply muscle it through. Seems stupid, but it worked. Over a 24 hour period, we climbed in the hot sun, splashed in the lake on the way up, and ascended the summit in time to watch the sunrise. I wouldn’t say it was a cake walk, but I would say that it was a manageable challenge and we succeeded in achieving our goal.

Now, let’s fast forward to the following Memorial Weekend when the same friends and I signed up to climb Mt Ranier (same elevation). My friends followed their preparation plan for the climb - weekend hikes with 40 pound backpacks, regular exercise, and some light weight lifting. And you ask, what did the ever-crafty (read: cocky) Andrea do to prepare for climb #2? Not a whole lot during that 10 month period. I created a work out plan, but I never executed the plan. Not too smart. It turns out that I ended up on the side of a very scary mountain in a snowstorm wearing crampons and using an icepick to help me stick to the mountain as we climbed in 5 foot deep snow towards the summit. I have never been more miserable in my life and I cursed my failed strategy to muscle through it. We made it to base camp and unfortunately (or fortunately, depending on who you ask) an avalanche alert prevented us from summiting the final 1000 feet. To be honest, I’m not sure if I would have made that final stretch.

The lesson learned on that special climb stays with me today. Without question I see the forest through the trees, but I definitely pay attention to those trees. You never know how many there are and how much of a barrier they can be. And so, my strategy has shifted. Every time I attempt to climb a mountain, I make a plan and execute against that plan. So far, so good. And even better, the success is generally repeatable when you follow a plan that works.

Nothing new here, just sharing my thoughts as I prepare to climb a different kind of mountain. Oh yes, and just in case you want a visual representation of this blog entry, the cheesy poster….cheers.

Mar 17, 2008 at 1:43 PM

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March 11, 2008 | WineDirect Admin

Projecting revenue for your wine club

This is something that can both positively and negatively affect your business. There are 4 things that you must think about when projecting your clubs revenue or better yet, truly understanding the value of your club. Most wineries fall into a trap of thinking their wine club revenue is simply the number of members times the cost of the shipment. If that is all you are looking at, then you are simply letting money fall through your hands. Here are the keys to focus on:

View your club shipment as a sample program and focus on getting your club members to repurchase what you just gave them an opportunity to taste.
Know your average decline rate for your club runs and keep it under 10%. Well run wine clubs have a decline rate of under 10 percent. If you find that you are running a higher percentage than that, then you have some cleaning to do. Implement a de-activation plan for those club members that are simply sitting on your list and never purchased, let alone received your last club shipments. If you don’t do this, we guarantee you will have a difficult time planning for your year’s financials.
Have a repurchase plan and execute on it 2 weeks after your shipment has been sent. This will remind your members to purchase the wonderful wine they just consumed. More often than not wineries condition their clients to simply wait for the wine their shipped and every once in a while consume it. Successful wine clubs condition their club members to consume the shipment they receive so that they know how many bottles/cases they should repurchase.
Know the % of club members that are repurchasing and continue to find ways to increase their order. By watching this percentage you will see what your club members like and don’t like. (Very valuable information)

When you put all of this together you get:

((# of club members – 10% decline rate) x package price) + (# of club members x 20%) x Ave purchase price)) = Total Club Value

CLUB ACTIVE NUMBER x CLUB REPURCHASE = Total Club Value

Mar 11, 2008 at 1:47 PM

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