4 ways California North Coast wineries can capture the big growth in online wine sales

At the onset of the COVID-19 shutdown, a National Association of American Wineries survey of 1,085 tasting rooms found that they expected to lose 70% of March sales and 80% of April sales.

With tasting room sales dropping to little more than zero, the outlook was especially grave for producers relying on direct-to-consumer (DTC) sales. According to a recent RaboResearch report, 45% of DTC sales (around $2.5 billion of the $5.5 billion annual DTC business) was tied to tasting rooms and events in 2019. Desperate for relief, wineries are relying on e-commerce to fill the massive tasting-room hole. Only 10% of DTC sales took place online in 2019, so few could have anticipated just how successful this strategy has turned out.

According to data from WineDirect, on-site winery sales dropped nearly 80% in the first three weeks of April, compared with the same period last year. However, online sales grew a breathtaking 185%, which offset 82% of lost tasting room revenue.

Another winery e-commerce platform, Commerce7, saw online sales quadruple since the crisis began, with 57% of wineries on their platform experiencing a net increase in sales.

For contrast, according to a Brewers Association survey, the median U.S. brewery has been able to recover only 25% of tasting room revenue during the crisis. For further context, the online wine sales growth builds on the pre-COVID rise in U.S. online alcohol sales discussed in my Feb. 26 Vine Notes article.

Many wineries are still hurting, of course, and e-commerce success has come with a steep learning curve. But investments in e-commerce will save many wineries from closing their doors forever and will offer big payoffs for tackling other foreseeable challenges like tourism traffic peaking and increasingly frequent wildfire disruptions.

Since this crisis began, my colleagues in RaboResearch and I have been talking to tech companies, logistics companies and many, many producers to learn what wineries are doing to drive online growth. From these conversations, we identified four ways that wineries can boost e-commerce.

1. Emails: If you've got 'em, use 'em!

The formula for most winery e-commerce is fairly simple: consumer enters tasting room, winery collects consumer's email address, winery sends email offer to consumer, consumer buys wine online.

According to a study from WineDirect, wineries that were successful at selling online had an average email list five times larger than that of the average winery. Wineries that did not invest the resources to collect emails from tasting room visitors before COVID-19 aren't seeing nearly as much success in online sales.

To succeed in the new environment, wineries also need to keep rigorous statistics on which email campaigns are working and for whom. Wineries that identify their most valuable customers and create personalized marketing messages that resonate with these customers will be the most successful.

2. Shipping fees: If you've got 'em, lose 'em

WineDirect's other finding about what drives e-commerce success was also impossibly simple: People don't buy wine online if shipping is expensive. Successful wineries found ways to cut shipping charges in half.

The profit from sales won with shipping incentives - like minimum purchasing threshold or a shipping loyalty program (check with your fulfillment partner) - will more than outweigh shipping costs and help build even stronger customer relationships that could eventually also drive tasting-room visits.

3. Try acquiring new customers

With so much of the economy on hold, the cost of ads (digital, podcasts, print, etc.) has plunged.

Furthermore, consumers, trying to cut back on trips to the store, are more receptive than ever to buying online. Wineries can take advantage of this super low-cost environment for new customer acquisition with ads that drive website traffic.

A winery's email list is also a huge advertising asset. They can use it to create a look-alike audience and ensure that their digital ads get in front of the most receptive audience. Asset-light DTC brands have been doing this for ages. This is a great time for old-school wineries to do it too.

4. Be the consumer: Try using your own website

This sounds obvious, but there are a lot of bad websites. Wineries need to try using their own platform, and then identify and fix anything that constitutes a barrier to a seamless, enjoyable shopping experience.

Wineries need to make sure it is easy to order and check out on their website. They should also use this opportunity to strengthen content and identify opportunities for upselling.

Finally, nothing kills a sale faster than forcing the online shopper to get up and search for a credit card then key in the number. Successful online transactions happen fast. Websites that employ one-click checkout options aid in making the final sale go smoothly.

Keys to success

Wineries' success in selling online tells us a few things.

• First, it speaks to the strength of their brands and the relationships they have built with customers. Even as consumers deal with a pandemic and recession, they are making the effort to log in to winery websites and order wine. That isn't possible without rock-solid brand-customer relationships.

• Second, consumers are willing to buy and reorder wine online. Who knew?

• Finally, e-commerce is no longer a test ground. Its enormous potential is now proven.