On Nov. 11 while the United States was celebrating Veterans Day, China was celebrating Singles Day. Originally conceived by university students to celebrate being single (note all the ones: 11/11), the day has morphed into the world’s largest online shopping extravaganza that dwarfs even Black Friday in the U.S.
Through e-commerce sites like Tmall.com, China saw record sales of wine and spirits via online outlets on Singles Day this year. Leveraging the Tmall, the online outlet for YesMyWine, the Chinese wine retailer reported a 50 percent increase in volume.
FINE WINE CLIMBS ONLINE
With the overall growth in e-commerce, it is no surprise that it has become the fastest-growing marketing channel for retail wine sales. E-commerce grew 20 percent per annum in recent years and is projected to expand at 12 percent for each of the next four years, far outpacing the growth in any other retail channel.
According the Rabobank’s latest Wine Quarterly report, “Evolving E-Commerce Opportunities for Wine,” the increasing importance of this channel and the rising number of e-commerce platforms presents opportunities and challenges for wineries looking for new ways to reach consumers.
The growth of online wine sales isn’t unique to China. Although growth rates vary across markets, they are consistently high. In the United Kingdom, for example, wine sales revenue of independent online retailers, or e-tailers, grew 11 percent in the first quarter of 2015. That compares to an increase in total wine value of only 3.5 percent in the same period.
Part of the driving force behind the growth of wine sales online are, of course, millennial buyers, an increasingly critical wine drinking demographic and the largest share of online buyers. In China, more than 75 percent of online consumers are ages 18 to 38, essentially the same age range that appears to be driving wine sales growth in recent years.
COMPETITION PREVAILS IN E-TAIL
The growth in this channel has not only caught the attention of wineries but also other e-tailers, and the channel is seeing a rapid increase in the number of competitors. To remain competitive, e-tailers are being forced to expand their offerings of both products and services.
For example, Wine.com has dramatically increased its product offering, doubling the number of SKUs it offers in many markets from a year before. Additionally, it now offers the opportunity for members to chat live with sommeliers to answer questions and help choose wines.
The channel offers wine marketers an important opportunity to grow sales and improve efficiency, but they are encountering an increasingly complex proposition. Most wineries are still in the early stages of developing an online strategy, which is important before going full speed into this channel.
Standing out in a crowded field, choosing the right platform and avoiding channel conflict need to be considered as part of an overarching approach. Given that most winery revenue still comes from traditional off- and on-premise channels, success in online sales must be driven in ways that minimize suspicion and also conflict with other channels. Unique line extensions or alternatively packaged SKUs for online channels are methods used to avoid conflict.
Getting noticed in an increasingly crowded market can be just as challenging in online sales as it has become in traditional channels. Wineries can choose to put their brands on popular online platforms, but without sufficient support, the brand easily can get lost.
