Wineries need to prep to sustain rise in online sales beyond the coronavirus pandemic, Wineshipping CEO says
In April and May, as the state was tossed into shutdown mode triggered by the coronavirus, the mandate may have provided a turning point, if not a wakeup call, for the wine industry when it comes to direct-to-consumer sales, according to the CEO of a Napa-based leader in selling wine online.
Eric Lewis, whose experience in the e-commerce business includes mattress company Casper, Google Express and the behemoth of the industry, Amazon, told a Business Journal Virtual Event audience on Friday that the market changed with the stay-at-home orders.
The CEO of Wineshipping, an online wine shipper founded in 1998, said not only did COVID-19 change everyone’s lives in mid-March when shelter-in-place orders began, so did the business of selling wine online.
"Right after the pandemic began to shut down businesses, in April and May we saw a 300% surge in wine sales," he said at the North Bay CFO Awards.
That peak was followed by a dip — about a 15% dropoff — but "growth continues.”
At nearly the same time, the executive said, Wineshipping was able to complete a significant acquisition.
Wineshipping and 24Seven Enterprises, which owns Pack n’ Ship Direct and Vin-Go, in April merged under Wineshipping’s parent company, DTC Logistics. The combination created one of the largest wine DTC companies in the U.S.
The Journal reported in April that through Wineshipping’s acquisition of 24Seven Enterprises, DTC Logistics now has 21 temperature-controlled warehouses nationwide and is able to deliver wine-to-consumer orders in more than 90% of the country in one or two days.
Not only in wine, but overall, customers, especially those born between 1981 and 1996, are getting comfortable with online shopping.
“There are more products and services coming online," Lewis said. "Twenty years ago, about 10% of books, 5% of movie tickets, and less than 1% of toys were purchased online. All these categories today are 80%."
Even furniture — which some thought would never be a good fit for online commerce — is making the shift, he said.
Selling wine this way is also capturing greater market share. Echoing others in the industry, Lewis said much of that growth in demand will be driven by the millennial generation — many of whom were toddlers when Amazon began. To them, "the telephone in their hand is a store" as adults.
"Literally everything they touch explodes in terms of demand with 66% of what they buy, they buy online," he said.
Because of this and other trends, direct-to-consumer wine sales may still be small compared to other sales avenues but are set to grow long term.
"I think DTC is where the growth is, and in that market, millennials will matter,” Lewis said.
For those businesses that want to ride the trend, Lewis said, they enter into a complex market with savvy consumers. To navigate it successfully, businesses need to drive people to the business website, give consumers a seamless experience when they get there and build trust so that they will return.
"And shipping (of wine) should be free,” Lewis said. "We know it is not free, but you need to build the cost into your price or other expenses."
He said companies need to build email lists to capture information, including when customers can resume coming to tasting rooms. "Make it easy to buy right on their phone, right at the table. Get them into your eco system." Because marketing online is so critical to capturing attention, he suggested hiring professionals, if possible.
“I believe we are on the precipice of a breakout," Lewis said.
The Business Journal Virtual Event, which recognized 19 executives from various North Bay industries, was underwritten by BPM and Comerica Bank. Award sponsor was Redwood Credit Union and winner sponsor was Dickenson Peatman & Fogarty.