Will the retail apocalypse hit the wine business (being prepared may not be a bad thing)
All around the world there are signs of an impending retail apocalypse. Seemingly no industry is out of the reach of this doom as more and more businesses shift away from physical retail stores and instead focus on online sales while ramping up their distribution networks. It got me thinking, is the wine industry going to face a similar fate? Or will it be able to survive? Though we cannot be sure right now, the best thing anybody can do is be prepared and make sure your businesses are ready.
What could possibly make wine buying/selling move online?
We may not see the business shift coming for a long time, but in some ways its already right there happening in front of us. Certain industry trends will cause small wineries to look for revenue and the easiest opportunity for them could be the online route. Wine Enthusiast has warned that restaurant sales will dry up for small wineries. Most restaurants rely on distributors to be the gatekeepers of the wines available to them, and this is especially the case for chain restaurants. The one silver lining in this regard is the growth of independent restaurants being new avenue for small wineries, but the challenge of being discovered by these restaurants still remains.
One other factor is the souring of the wine club revenue stream. The idea behind having a wine club is a good one. You get recurring revenue from people who enjoy your wine. But in reality the challenges have been laid bare. High growth rates have been met with almost identical attrition rates. Wine clubs are just not growing fast enough to make them worthwhile. You also have to take competition into consideration, as companies like Winc (for better or worse) offer a more varied product offering. Even Blue Apron, Martha Stewart, and Macy's have wine clubs.
Wineries should begin to look more into selling online
If traditional revenue sources are challenged, through volume and profit margins, then it makes sense for a business to look into new sources of revenue. Thankfully for a lot of wineries, that revenue source is there and they are using it. They just need to do a better job of it.
Sillicon Valley Bank Vice President Rob McMillan mused that wineries are relying on 60% of their revenue to come from direct to consumer sales, but only 3% of sales come from online sources. That is pretty slim, and it means that 97% of your revenue in that channel relies on at least one physical interaction taking place (ie a visit to your winery). That puts a lot of strain on keeping up physical interactions which are expensive and require a lot of effort to start earning a profit off of them. McMillan continued "If wineries could get that number (percentage of sales coming from online sources) to 15% or 20%, that would be the next revenue stream."
But what about the experience of buying wine in person?
As an industry, we collectively put a lot of emphasis on experience of buying the wine in person being a crucial factor. This is why we host tastings, run tasting rooms, and have events. It is still important, but I am not sure it is as crucial as we think anymore.
We have to look at why we think the experience is crucial for the consumer, and whether or not we can replicate that experience in an online or digital setting. Countless industries have successfully navigated this conundrum, so why can't wine? What we have to do, and this is by no means an easy task, is make sure we get to the very heart of what consumers want and how we can make it easier for them to buy.
What the online route offers is greater control over your customer interactions, allowing wineries the opportunity to cement and grow their relationships directly with consumers. If you are a winery reading this, know that your customers are doing this with almost everything else they purchase in their lives. Their clothes, their electronics, and everything that makes them who they are gets purchased online. If you can give them the option to buy from you online, and you can make it super easy, then they will be more inclined to purchase directly from you. They know where you are, where they can find you, and have access to you whenever they want it. This can only be a good thing, and will be opening up a world of potential for new and repeat sales.