With 2020 in the rear-view, we are looking ahead to the transformed business conditions and consumer changes in 2021 and beyond. At the top of the year, Silicon Valley Bank (SVB) revealed their State of the US Wine Industry Report, followed by two videocast presentations, reflecting on the past year and sharing predictions for the industry’s future. Here are our key takeaways.
1. Consumer’s demand for ecommerce was explosive in 2020
We’ve said it before, but we want to say it again for the people in the back. Starting in March, ecommerce penetration saw 10 years of growth within 3 months. This momentum was shared by WineDirect clients, who, in April and May 2020, experienced an increase of 340% YoY in ecommerce sales. Wineries and wine enthusiasts may crave a return to ‘normalcy,’ but it is certain that online sales will see a permanent positive gain. Online shopping trends that may have seemed idealistic before have been accelerated from last year’s events.
“Online selling is, without question, the change agent that will deliver the greatest transformation to wine sales over the next decade.”
– SVB, State of the US Wine Report
After soaking this information in, it may be time for a website checkup. Is your website ready to engage appropriately and effectively with visitors that may have never shopped for wine online before? Is the online shopping process crystal clear, with compliance and shipping implications in understandable terms for the shopper? We recommend setting time aside to complete a checkup across your website and the rest of your digital presence, so that you are ready to reap the full benefits of this ecommerce boom.
2. Investment in ecommerce & digital presence is non-negotiable
There is no doubt that ecommerce and digital does require investment, both upfront and ongoing. That being said, these markets must be leveraged as they are where your customers, both new and existing, are living. Without proper investment, ecommerce and digital presence, or lack thereof, could actually become a wedge between wineries from their consumers. On the other hand, see investment pay off in dividends when deployed effectively.
This can also look like investment in labor, by hiring a digital professional to champion data efforts. Wineries sit on banks of historical data that has been collected over the years in the tasting room, from online sales and club members. WineDirect’s end-to-end solutions capture powerful data such as email conversion rates, transactional patterns and CRM insights. However, collecting it is not enough. A key part of success is mining and utilizing this data. However, we learn that almost 50% of wineries reveal that they don’t have anyone looking at it.
“Consumers are changing in permanent ways that require your reaction.”
- SVB, State of the US Wine Report
Finally, invest in your ecommerce as its very own business, not as an ‘extension’ of your tasting room. The panelists advised to factor shipping, handling, and overhead costs associated with ecommerce into your pricing. Save yourself unnecessary return or redirection shipping costs by fine tuning your messaging to clearly communicate the intricacies of the online wine shopping journey.
3. Offer appointment-style tastings or take your tasting room ‘on the road’
Sales associates are hospitality champions who can capture individuals’ attention to mesmerize them with a winery’s story. But, in a traditional tasting bar situation, are these associates effectively asking for the sale? Are they closing the sale? Being thrust into appointment style, seated tastings proved effective to elevate hospitality experiences, offering deeper personalization and customization, all more reliable ways for a solid start to a long term relationship with the customer. An additional benefit from appointment style tastings is the visitor data that is collected through your reservation system, like our partner, Tock.
By taking your tasting room on the road through virtual tastings, your winery can answer to many of the opportunities for growth listed by the report. Through Zoom (or your preferred virtual tasting platform), you are freed from the dependence on locality, and instead can get exposure to new consumers that live elsewhere and build your brand by evolving the concept of experience away from the winery. The cash register no longer lives in a physical location, so why ask your consumers to make the trek?
4. Key value shifts in consumers amongst changing demographics
A reflection on the US population by age shows that the average age of wine drinkers continues to grow older, and a prominent growth opportunity is selling to younger consumers. We learn from the report that young consumers, who have now endured a recession and a pandemic, have different values, are more health conscious, have lower discretionary income, and are more ethnically diverse than previous generations. The panelists shared data that shows consumers are making efforts to reduce overall consumption of alcohol, explaining that they are opting for a healthier lifestyle. Wineries can evolve their marketing to these consumers by increasing transparency when it comes to labels. Wine labels infrequently list health information (i.e. calorie counts, gluten-free), in contrast to spirit or RTD beverage producers, who are highly successful with young consumers. Wineries may consider repurposing this marketing technique, bearing in mind the importance of a proactive approach of equipping consumers with deeper wine education.
Additionally, the videocast explored how young consumers expect that the brands they support will show up and engage with humanity and current events in the world. The report states that “the social intersection between a brand and the consumer is increasingly connected to the decision to purchase particular products, including wine.”
5. Future means work from home, live from home, in luxury?
Wineries will need to consider many permanent changes that lie ahead, such as the shift to working from home, the increasing relocation of consumers to the suburbs and the acceleration of consumer online sales, all of which could take sales away from other channels. Consumers are enjoying wines from their homes, rather than when dining out. The report shares that “families who were able to work from home saw some expense savings that position them for an expected push in spending in a post-COVID era.” This complements the report’s findings on premiumization. People are drinking less, but drinking better. It makes sense, as more consumers order online: shipping a $6 bottle of wine may not feel warranted, but wines in the $20+ category does. The trend for dollar value per order continues to forecast in the positive direction.
We join SVB in looking ahead to the bright future, in a post COVID-19 world, with their final prediction: there will be a lot of pent-up demand for celebrations and closeness, which usually means celebratory wine! Author of the report, Rob McMillan, said that he was “amazed at the resilience that this industry has demonstrated”, a sentiment shared by the panelists, and us too at WineDirect.