By Elizabeth Hans McCrone
While fourth quarter numbers are still being crunched and the gains and losses of 2020 have yet to be fully tabulated, one thing is crystal clear: online sales of wine and other alcoholic beverages made a huge difference in a year wreaked by the havoc of Covid and a wildly unpredictable economy.
Consider this from Jim Agger, Senior Vice President of Ecommerce at WineDirect, one of the country’s leading DTC winery software and fulfillment solutions enterprises.
“The top 25 percent of companies who had at least 20 percent invested in ecommerce … were able to not only replace revenue lost by tasting room sales, but did more,” Agger reports.
And that might be putting it mildly.
Agger revealed that in the quarter ending in June, 2020, some businesses saw a near tripling of economic activity related to ecommerce, with revenues rising from $40 million a month to almost $120 million.
The opposite also held true, Agger says, for companies who relied more heavily on foot traffic and tasting room sales without comprehensive email lists or well developed online sales and fulfillment capabilities.
“They found themselves in a much worse situation because they couldn’t pivot,” Agger explains.
WineDirect itself has seen exponential growth in its 8-year history, expanding from an initial 200 customers to more than 2,000 today.
The company, which specializes in DTC sales, fulfillment programs and marketplace services that can connect wineries with third party sellers like EBay and Vivino, has three fulfillment centers in California, another two in Oregon and Ohio and offices in Vancouver, BC and McLaren Vale, Australia.
It’s WineDirect’s business to track sales growth across all DTC channels that it develops for its winery clients, so the company pays close attention what happens annually with tasting rooms revenues, wine club subscriptions and ecommerce activity.
It’s the latter category that produced eye-popping results in the wake of Covid-19 during 2020.
“We saw lots of new buyers in the days following the stay at home orders,” Agger confirms. “Ecommerce nearly tripled during that time.”
WineDirect reported seeing a nearly 400 percent increase in ecommerce sales over the three summer months, and analysts questioned the reason for it. Were more customers, stuck at home, drinking out of sheer boredom, they wanted to know? Just replenishing their cellar supplies? Or, was this a true DTC channel shift and an indication of a longer-term trend?
Market observers were excited to discover that increased sales activity from ecommerce held throughout the rest of 2020. Agger asserts that ecommerce wine sales revenue for the last two quarters more than doubled from the previous year.
While this is a truly promising development for the industry going forward, other important trends also emerged through the frenzy of last year’s online buying that, Agger believes, wineries would do well to heed.
If wineries want to either initiate or retool their ecommerce platforms to take advantage of this new activity, he warns that they need to be prepared to meet customer expectations – like free shipping, fast shipping and something he calls transparency about where their orders are during the shipping process.
“It puts consumers at ease when they have that tracking number in hand,” Agger points out. “Wineries need good communication with their fulfillment providers … there needs to be deep visibility in the tracking information.”
Agger also counsels that if wineries want to deliver that “wonderful, pristine experience” to their online and, hopefully, repeat customers, they need to do away with steep shipping costs and weeklong delays in delivering wine.
“We’ve seen consumers at the end of their (online) experience come to the $60 shipping charge and drop that shopping cart,” he recounts. “They feel like it’s gouging. Wineries need to understand that the cost of shipping has to be built into their marketing plans.”
“We are very lucky in the industry that consumers are voting with their dollars and buying from producers directly,” he adds.
Along that line, Agger claims that consumers are indicating that whom they buy from is as important as what they buy.
“They are most responsive to businesses whose values conform with their own,” he clarifies.
Agger argues that wineries are in a unique position to capitalize on, for instance, a pro-environmentalist sentiment given their “front row seat” with the effects of climate change that have increased the severity of drought conditions and wildfires.
According to Agger, WineDirect itself has invested in carbon recapture projects and committed itself in 2021 to completely recycled and recyclable packaging that uses pulp-based and other compostable components.
“We’re making an effort to express our values, so our wineries can express them to their own consumers,” he attests. “It’s an important tool to attract and retain business.”
In the end, Agger is optimistic about the future. He notes that in September when wineries were allowed to resume outdoor tastings for a time, retail sales resumed to the same levels they were in year’s prior.
Agger says wineries need to “layer up” to support those customers eager to get back to what he calls “reality.” But, he cautions, a solid ecommerce and customer outreach program needs to be an integral part of the plan.
“Wineries that have larger, more mature ecommerce programs, their business is more secure, more robust and more likely to survive under any circumstances,” Agger declares.
