REthink Wine Blog

Shipping is one of the key friction points for people buying wine online (another blog I’ll talk about the others). As an online marketer in the wine industry, I love shipping. It is the magical lever that I can increase sales, increase customer acquisition, and avoid channel conflict.

The problem is that many wineries look at shipping as:

1. A cost to pass onto a consumer
2. A profit center
3. A cost that needs to reconcile exactly for accounting (the worst expression of shipping)

I recommend highly you look at shipping as a marketing vehicle rather than an operational necessity.  One of the best examples of an online company that used shipping as a marketing lever is zappos.com.  You can read a great write up here.  What they did wonderfully was focused on the customer and to help make it better, they gave up 25% of their revenue to allow for free shipping.  Instead of spending expensive marketing, the marketing budget was reallocated for shipping.

Now why is this relevant to wine?  Again, shipping is one of the main barriers to wine purchasing.  It is expensive, cumbersome, and logistically painful (adult signature, compliance, etc).  So how can a winery use shipping as a marketing expense:

1. First - the website price wineries generally present is a higher SRP than exists in the retail world so that we avoid channel conflict.  To stimulate sales and yet not anger your retailer partners/competitors is to reduce your shipping cost so that the total purchase price is competitive with the regular channel.  You help mitigate the frustration with “under-pricing your retailers” since your SRP is equal or higher than the channel.  In reality you have created a competitive advantage that can not be matched by resellers of your product and still yield the same margins.
2. Second - look at your business regionally.  Generally you will find that the majority of DTC business is West Coast based.  To help stimulate East Coast business analyze your shipping cost and do a weighted average.  A great example is a winery we work with recently analyzed their business and found that 80% of their business was West of the Rockies and 20% was East of the rockies.  They raised their West Coast pricing by $1.50/package and lowered their East Coast business by $10 and aggressively promoted the great pricing for East Coast customers on their web site.  Within a three months they had grown East Coast sales boy 100% and suffered no loss in profit thanks to working with a weighted average.
3. Third - look at shipping as a customer acquisition cost.  How much is a customer worth to you?  $10, $30, $50, $200?  Give shipping away or make it a flat price.  Mywinesdirect.com (and other wine retailers) have had incredible success with this model.   I am sure you have seen the Wine.com ads with $0.01 shipping promotions.  In reality a winery has more room to leverage shipping since the margins are so much hirer for you than wine retailers.
4. Fourth - Use shipping to up-sell.  “Shipping included on a case or more” is incredibly effective to get someone buying 7 bottles to upgrade to 12.

There are so many more ways to change shipping from an operational tool to a marketing tool - be creative, do your financial analysis, and measure the results.  Look at how other great online retailers leverage shipping (Amazon for example is great with “threshold helpers” and Amazon Prime, their subscription service that gets you reduced shipping).  But whatever your decision, shipping is your friend and can help move your online sales significantly if used correctly.

This entry was posted by Paul Mabray on Friday, March 21st, 2008 at 10:38 am and is filed under E-commerce. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.