Shifting the Focus to the Sale of Wine
Posted by Sheri Hebbeln on August 7th, 2008I’m relatively new to Inertia, having been here for about five months now. My role is in fostering relationships with the many different types of vendors who share this space with us, with the ultimate goal of building a “partnership ecosphere” so to speak, one which will provide the most value to our clients. And while I’m anxious to write about our plans regarding these operational partnerships, I thought I would write about a different sort of partnership today – the partnerships we’ve formed with our winery clients.
I’ve been involved in direct-to-consumer sales for many years now, and from what I’ve witnessed there are basically two different business models in use by winery direct sales platforms such as ours.Â
The Investor Dictionary defines a business model as “the mechanism by which a business intends to generate revenue and profits. It is a summary of how a company plans to serve its customers…….” The way I see it, there are basically two models in use in this space: 1) a “Perpetual License” model, and 2) a “Value Creation” model.  The former involves a flat fee, while the latter involves a small share of revenue.  In looking at the rev share model, the provider or business partner doesn’t have a viable business UNLESS its clients grow direct revenues.  So while both models satisfy the first half of the definition above, in making that commitment to its clients, the rev share partner has gone much further in defining the latter half of the definition – developing a plan to serve its customers.
Let’s look first at the subscription or flat fee model. In some instances they may build a website for you, in others they might simply host your shopping cart, charging a flat monthly fee in return. Typically your contract will show different fees for services such as basic support.   Under this model, the focus is naturally on maximizing the number of websites which are turned out each month. The model itself doesn’t provide incentive for the provider to work with existing clients to help them maximize revenue potential.
With a revenue share model, the focus by definition is on creating value. I believe that this leads to the strongest possible relationship, one which is mutually rewarding and delivers an increase in creativity and high priority response times.  Since I’ve been with Inertia, I’ve had the opportunity to view the many ways in which we view our roles and responsibilities in terms of creating value for our winery partners, both in our current business model and in terms of our overall corporate vision. While I won’t go into all in detail today, a few prime examples are:
Focus on quality not quantity: We study best practices, usability, and conversion rates. Each and every site is designed with one purpose in mind – selling wine.  Most importantly, as we develop the next generation of our platform, our focus is entirely on the ways in which we can leverage technology to connect our clients with demand, providing access to new markets and the opportunity for our winery partners to connect directly with both consumers and the trade, forging lasting relationships.
A passion for selling wine: A perfect example of this is the Inertia blog and the enthusiasm with which our bloggers share their thoughts and tips for maximizing direct sales. In addition to the blog, we offer quarterly workshops which focus on current trends in wine marketing, monthly newsletters loaded with useful tips, and a set of excellent training sessions. In addition, our client development group is devoted to working with our existing client base to help maximize direct sales.
REthink Compliance: Our free compliance tool is another great example of our overall vision at work. By helping to remove the remaining barriers to direct sales and providing winery partners with access to an even broader marketplace, we enable them to tap into demand channels that were not available to them in the past.
August 7th, 2008 at 6:20 pm
Sheri,
Excellent post. I agree that the quality of your product and passion your team has really make a difference.
Now to play the devils advocate abit on the revenue sharing model… While I agree with your the logic that is behind the argument, how do you deal with smaller clients, new clients, or clients who are important but maybe don’t have the sales that a large winery has? What if the winery never has the sales a large winery has (due to limited production, etc). Do these clients take a back seat to the work you are doing for larger wineries which bring in more revenue (and therefore more revenue sharing dollars)?
Also if you are are in a revenue sharing model, what part of the ecommerce sales generated by a winery can be directly related to the work your team is doing (and they do some nice work)? Sometimes the sales are controlled by the winery and the decisions they make (around pricing, promotions, and even site design, etc). You can walk them through decisions, but do you don’t always get the decisions you want and this can affect revenue.
And does a revenue sharing model only promote ecommerce sales? How about using the website to push tasting room traffic, etc. What happens when the goals of the site don’t align with the revenue sharing model.
I tend to feel like a revenue sharing model is similar to commission sales, and while commission sales do have positive attributes, there can be some negatives as well.
I don’t know if there is a great model out there, and I fully respect the revenue model Inertia has choosen, and I do see the passion your team has for promoting direct to consumer sales, I just wanted to know your teams thoughts on the areas where your model doesn’t fit as nice.
Andrew
August 7th, 2008 at 7:32 pm
Andrew,
I totally respect your point of view, but I think the smaller wineries that you mention are precisely the ones who have the most to gain, so in fact by using a revenue share model we’ve aligned ourselves with what is in the winery’s best interest – selling more wine direct. Especially given the fact that smaller wineries are the ones who tend to be penalized the most under a flat fee model, as they almost always pay more in monthly fees. They also stand to gain the most from our client development efforts, since they often have one person wearing many hats.
And yes, I’m a firm believer in using the website to promote tasting room sales. Our events engine and direct marketing tools are a great way drive people to the tasting room.
Sheri
August 27th, 2008 at 9:05 am
Shifting the Focus to the Sale of Wine
Focus on quality not quantity: We study best practices, usability, and conversion rates. Each and every site is designed with one purpose in mind – selling wine. Most importantly, as we develop the next generation of our platform, our focus is en…