The Current and Future Profit in Direct Wine Shipping

report_thumb1Last week ShipCompliant and Wines & Vines released their annual report on Winery-to-Consumer shipments for 2013 and in it was a pretty remarkable comparison:

• Winery Shipping increased 9.3% by volume over 2012• The traditional wine retail sector increased 1.3% by volume in 2013 (according to Nielsen).

9.3% increase  vs  1.3% increase!!

Some of this remarkable spread surely has to do with new states legalizing direct shipments in recent years. This leaves considerable room for increase that you don’t see in the traditional retail sector where selling wine on the ground has always been legal. For example, shipments to Maryland, which opened for shipping in 2011, was up 41% in 2013. New Jersey, which opened for shipping in 2012, was up 35%.

Still this huge gap in increased volume between winery shipping and retail sales begs the question, how much room does the winery to consumer shipping channel have to grow? The SC/WV report suggests that over the next decade a 7.5% growth rate is likely. If this happens, and I honestly don’t see a good reason to believe it won’t, then the amount of money spent on winery shipments will reach more than $3 Billion by 2023.

Here’s the interesting thing. Does anyone believe that remote shopping with the help of the Internet won’t continue to be embraced at higher and higher rates by Americans?? Is there any reason to believe that Americans will pull back on the percent of goods and services they buy remotely? If someone does believe this I’d love hear their reasoning.

The majority of shipments from wineries to consumers are surely the result of club memberships. Then comes shipments from mailing list allocations. These two kinds of transactions are not driven by the traditional type of Internet commerce where the buyer goes online looking for wine. This tells me that the winery that uses all the knowledge they can muster concerning who buys what, where they are located, who they are demographically, how time of year impacts purchasing, a good understanding of the trends pushing certain varietals and how customers have interacted with the winery in the past can significantly increase their pure internet transactions.

In fact, the ShipCompliant/Wines & Vines report tells me there exists tremendous opportunity for wineries in the direct shipping marketplace, even those without tasting room (though having one certainly is a HUGE advantage).

One of the keys in all this, however, is wineries finding a way to expand their direct shipped sales without having to give up too much margin. They will have to be careful in working with third-party marketers and they will want to put a premium on gathering customer data, particularly when they do work with third-party marketers to drive sales.

One thing I don’t have the answer to is at what level of production and at what price point does it make sense to hire someone at a winery dedicated completely to online marketing and sales. However, It strikes me that those wineries making more than 5,000 cases per year at an average price point of $30 or more and who are selling half that direct, should absolutely be considering the benefits of bring on a full-time online marketer.

 


3 Responses

  1. Car; - January 27, 2014

    We buy over 90% of our wine online. Part of the problem is that New Hampshire is a state store state although other outlets are permitted. Most of the time when an article or posting on a wine interests me and I go on the state wine index, I find it not available. One development that might drive the online percentage down is the appearance of a Trader Joe’s in the neighborhood. I can’t go there without buy a few bottles.

  2. Afternoon Brief, Jan. 27 : WIN Advisor - January 27, 2014

    […] The Current and Future Profit in Direct Wine Shipping […]

  3. Scott - January 28, 2014

    I remember when I was in my first street job with a distributor, and the restaurant sales reps would beat their chest about a big percentage increase in sales on a given item when their goal was 15 cases and mine was 250 cases. A 9.3% increase on winery shipments isn’t diddly compared to a 1.3% increase through traditional channels for wine sales. How many 9L cases is the 9.3% vs. the 1.3%?


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