4 e-commerce channels that can boost your winery's direct-to-consumer sales
Growth numbers reported on U.S. online alcohol sales are encouraging. They are estimated to have reached $2.6 billion in 2019 and are growing by 22% year over year. As wine and other beverage companies plan for 2020 and the future, they must take a strong look at investing and participating in the online e-commerce ecosystem, or risk missing critical opportunities to build digital relationships with millions of omnichannel consumers leading to significant sales.
In recently published RaboResearch report “U.S. Online Alcohol Sales Reach USD 2.6bn,” beverage analyst Bourcard Nesin takes us through the online sales channels that wine and beverage producers should be considering.
Pay attention to these e-commerce channels
The four most important e-commerce channels are online grocery, alcohol marketplaces, direct-to-consumer (DtC) wine and online liquor stores.
In a previous report, we estimated that online alcohol sales in the grocery channel – online sales from supermarkets, supercenters, warehouse clubs and sales from grocery stores through Instacart – were worth $87 million in 2017. While small at the time, our prediction that supermarkets would “develop into the most important driver of online alcohol sales” has proven correct, with sales more than tripling over the past two years. In 2019 alone, online wine sales in grocery grew by just under 100%.
However, despite its triple-digit growth, alcohol's share of online grocery revenues was less than one% in 2019.
So, what's the issue? The main reason that alcohol sales are lagging behind other categories is simple: many grocers aren't selling it online. While we estimate that the fulfillment of alcohol purchases via ‘click and collect' is legal in 39 states and third-party delivery is legal in around 30 states, navigating the complex patchwork of state alcohol regulations doesn't seem to be worth it for many grocery retailers.
Unlike grocery retailers, online alcohol marketplaces do not own any product and instead provide a platform where actual retailers can sell alcohol online (e.g., Drizly, Instacart and Vivino). Because they are not retailers themselves and do not have a liquor license, most marketplaces are not subject to tied-house laws. This creates a huge opportunity for brand owners as they can legally direct traffic to these marketplaces and spend promotional dollars to boost their products. We estimate that the marketplace channel has grown from $100 million in 2017 to $265 million in 2019.
E-commerce is responsible for $950 million of sales in the DtC wine market, growing approximately 9% year over year. The vast majority of online DtC wine sales comes from consumers who previously visited a tasting room and later purchased wine or signed up for a wine club. For smaller and midsize wineries in particular, DtC sales are a critical source of revenue, but due to their size, most wineries have struggled to expand their e-commerce reach beyond consumers who have previously visited their tasting room.
For this sector, increasing this footprint through best practices in email marketing will be the most important factor going forward. What are the top performers doing differently? Winery software and fulfillment solutions company WineDirect found that, among their clients, the 20% of wineries accounting for more than 89% of e-commerce sales were collecting more emails and charging much less for shipping.
The online liquor store channel, with e-commerce sales worth an estimated $1.1 billion in 2019, largely exists to serve high-end wine and spirits consumers not satisfied by the limited selection of their local bottle shop. Retailers in this channel sell through their own websites and in some cases ship orders across state lines (often illegally). While high-end wine and spirits brands can't ignore the size of this channel, restrictive interstate shipping laws certainly make it the most complex. We will have to wait and see the impact that recent court decisions have on the development of this channel.
Other helpful tips from e-commerce experts
To compile his report, RaboResearch analyst Nesin worked closely with e-commerce teams from a wide range of beverage companies, and a few common themes emerged out of these discussions that might help wine and other beverage companies move the needle in this arena.
First, companies need to invest more resources in content management and the technology required to organize and distribute that content to retailer websites. Even for teams investing heavily in their e-commerce capabilities, content management is extremely difficult. However, this content is the digital manifestation of your brand and therefore, cannot be neglected.
In this omnichannel world where brands have less control of where and how consumers interact with them, it's also imperative to make sure your brand looks great everywhere. Do a Google image search for your brand and make sure that what you see is accurate and reflects you in the best light.
Other helpful tips include familiarizing your sales team with the e-commerce side of the business and prioritizing being consumer-focused even as you are immersed in the technological side of the business.
Wine and other beverage companies cannot afford to let their focus and investments in e-commerce channels take a back seat to other sales avenues. Every year, millions of new consumers start shopping for food and beverage products online. These freshly minted consumers are creating new shopping habits and developing new brand relationships in the online world.