Marketplaces and the Shifting Landscape for Online Wine Sales
What’s your strategy for growth in DTC over the next five years?
Over the past year, and particularly in the fourth quarter, quite a few new channels have become available to wineries, providing exposure and an opportunity to drive new customers back to your brand. This is a real positive for our industry. It’s the evidence we’ve been waiting for that people are finally becoming accustomed to shopping for wine online. Ecommerce is still a tiny piece of the total wine market (I’ve seen estimates ranging anywhere from 1% to 3.5%), but that will soon change. These new channels will help to increase DTC’s share of the pie.
The good news and I think the motivation for some of these new wine entrants is twofold: 1) the California ABC’s industry advisory issued in October of 2011, and 2) the fact that many existing online wine brands have experienced healthy growth over the past few years (Wine.com, K&L, and J.J. Buckley for example).
Benefits of selling through these new channels
The benefits are numerous, but include factors such as:
New Customer Acquisition and Sales Opportunities
With new doors opening comes opportunity - the opportunity to get wine into the hands (or should I say mouths) of more and more people every day.
Presentation and Content Dissemination
Many of these new channels offer the opportunity to provide rich content and information about your winery, your winemaker, and your wines. As an example, Amazon Wine provides extensive product content, with an equally impressive set of filters.
The new customers and sales resulting from these additional channels provides access to aggregate data which will help in decision making, forecasting, merchandising, and marketing. Imagine what you can do with a new cross-channel view into demographics, purchase histories, and even customer reviews.
The time is now to strategize and prepare
How will you go about establishing a profitable presence in these new high growth marketing channels? You will need to organize your Direct-to-Consumer business in a way that ensures successful execution amid a rapidly changing landscape for wine online. Who will be responsible for management and how will feedback and insights be made available to the rest of your staff? To drive profitable growth of your DTC business, you’ll need to ensure a superior experience for your customers across the board.
Evaluating different channels and ensuring they fit within your overall DTC strategy
The opportunities today are numerous and include new marketplaces, third party wine clubs, flash sites, social commerce platforms, shopping engines, and online retailers. With limited resources, it will be increasingly important to carefully evaluate and select new partners with several criteria in mind.
The Regulatory Model
- Do sales flow through your license (i.e. the Amazon model) or through the online marketer (i.e. the Wine.com model)?
- Who controls the sale? If the third party is unlicensed do you have an opportunity to approve or reject the sale?
- Who controls pricing? If the third party is not licensed, retail pricing should be controlled by the licensee.
- How is fulfillment handled?
- What is the cost of shipping to the consumer (or alternatively, what is the landed cost of your wine?) This is important because as we all know, shipping incentives help drive volume.
- If shipping incentives are used, are you responsible for the cost of those incentives? If yes, you will need to factor those costs into your financial model.
- What are the associated fees? Are there any hidden fees you will need to factor in?
- What are the partner’s discount policies? Are your wines sold at or near full SRP or are you being asked to heavily discount?
- What is the partner’s marketing plan? In light of that marketing and/or customer service contribution would you consider their marketing fees to be “reasonable”?
- Do you have an opportunity to interact with the audience in any way - through email, online forums, or social media, for example?
- Has the marketer built an audience of repeat buyers or are they simply bargain hunters?
- How extensive is your access to customer data? With unlicensed marketing partners, you need access to information for compliance reporting. This in turn provides valuable insight into purchasing patterns. Some but not all partners will go a step further and allow you to market to that customer, whether through collateral inserts, direct mail, or even through use of the email address.
- How great is the marketer’s reach in terms of online visitors, subscribers, or buyers?
- Has the partner figured out logistics? Do they offer consolidated shipping or are purchases from separate brands shipped in separate packages (requiring the customer to be home to sign for each?)
- Does the marketing partner complement your brand? What are their customer or user demographics?
- Who handles customer care and what are your observations about the customer experience?
- Will your wines be placed in the company of complimentary brands or does the partner offer a lot of private label wine?
- How is your brand represented on the site or within the offering?
Are there opportunities to leverage the eCommerce, order management and fulfillment processes you have in place today? Can you easily synch inventory, orders, and tracking information for easy management within your existing processes?
I’m excited by the new opportunities available to wineries. Expanding your online reach offers a chance to create a meaningful relationship with customers and allow them to more easily learn about your products, whether through your website or through that of a partner. The Internet is front and center in the battle for consumer mindshare and its power of influence is tremendous.