As shelter in place orders proliferated in the wake of Covid-19 in March, wineries turned their focus from the tasting room to online sales - and it paid off. While tasting room sales fell by 80%, wine ecommerce sales increased by 340% YoY in April and May. As a result, total DTC sales revenue fell only 16%.
Clearly, many more consumers have now been introduced to the concept of purchasing wine online, along with a host of other household products. These new-formed habits are unlikely to disappear, even as brick-and-mortar businesses begin to reopen. What can we learn from what happened this spring to build more resilient DTC wine sales programs going forward?
At WineDirect, we’re in the unique position of having a broad view of the wine industry through the lenses of our over 1,800 clients. As a result, we have the world’s largest collection of DTC transactional data. Here’s what we found we analyzed this data from spring 2020 and 2019.
#1: Ecommerce Can Be a Significant Source of DTC Revenue
During April and May 2020, ecommerce sales increased 340% YoY among WineDirect clients, enough to recoup 60% of lost tasting room sales. This is particularly impressive given that for most wineries, ecommerce sales make up a small fraction of their overall DTC sales, only 2-3%. This year, they made up over 30% on average.
Source: WineDirect Data
Because of its small share of revenue, online sales have often been relegated to the bottom of the priority list, far behind wine club and hospitality. However, after the results of this spring, it’s clear that wine consumers are ready, willing and able to buy online.
As the economy reopens, consumers won’t abandon their newfound purchasing habits. And in the face of decreased visitation, whether because of capacity limits or overall declines in tourism, continuing to focus on your online sales will be critical to sustain your DTC business in the coming months.
#2: Wineries Who Focused on Ecommerce Before Covid-19 Performed Best
Wineries who derived a higher percentage of sales from ecommerce before Covid-19 hit performed best after the pandemic arrived. In fact, this was the only factor positively correlated with sales performance in spring 2020. Wine club size, price point and production size showed no correlation.
The top quartile of wineries, those who made >10% of DTC revenue from online sales, grew their DTC sales 10% in April and May, while those in the lower quartiles shrunk 18-28%.
Source: WineDirect Data
By the same token, wineries that rely most heavily on tasting room sales saw the largest decline this spring. Regions such as Texas, where the tasting room makes up almost 60% of DTC wine sales saw revenue fall 53% in April, while nationally DTC sales fell only 8% that month.
This does not mean that it’s not worth focusing on your ecommerce program if you don’t have one already. There are plenty of examples of wineries who successfully grew their online sales during shelter in place from almost nothing. However, it does take a concerted effort and investment. The good news is that the returns will continue to increase the longer you do it.
#3: Ecommerce Sales Are More Leveraged than Tasting Room
Overall DTC sales revenue declined 16% between spring 2019 and 2020. However, the number of DTC transactions fell by almost 50%. This disparity reflects the fact that online orders have a much higher average order value (AOV) than tasting room orders. In spring 2020, the average value of an online order was $353. In spring 2019, the average value of a tasting room order was only $108. That means that you need far fewer individual online orders to make up for the tasting room revenue shortfall.
Source: WineDirect Data
In this chart, we see that the total number of website orders in 2020 is relatively small. Compare this to the revenue chart above to see the outsize impact this smaller quantity of orders has on sales value.
How You Can Grow Online DTC Wine Sales
The data above show that ecommerce sales can be a highly effective channel for your DTC business. If you haven’t already invested in driving online purchases, now is a good time to start. Even as tasting rooms reopen, capacity limits and an uncertain tourism outlook mean those revenues will remain lower than usual for months to come.
Continuing to run special online offers and driving people to your online store is a great way to offset this revenue loss and maintain engagement with your loyal club members and fans who may not yet be able to visit in person. Here are some resources to help you get started:
WineDirect has long been focused on enabling our clients to grow online wine sales because we believe in the potential of this channel. This year so far we’ve implemented a range of new tools that do just that including: