The Online Market for Wine
Posted by Kristi Taaffe on September 19th, 2008The recent news that Amazon is looking to get into the wine retailing game broke like a wave a few days ago. What the impact of the multi-billion dollar company coming into the online wine selling market will be can’t be said at this point. And there is also great deal of speculation of exactly how they are going about doing business online with wine.
But this isn’t what was truly interesting about all the press on Amazon’s wine program. Down deep in these stories was an estimate by Barbara Insel of Stonebridge Research on the size of the e-commerce market for wine. Insel, one of the top analysts and business consultants in the wine industry, estimated for the reporter that $2.8 billion of America’s $30 Billion retail wine market comes in the form of direct sales. Although the article didn’t mention this fact, that $2.8 Billion is only winery-direct sales and does not include online wine merchants.
Also interesting was Insel’s estimate that seven percent, or roughly $200,000,000, of that $2.8 billion in direct sales occurs exclusively online. It’s not winery club sales. It’s not tasting room sales. It’s pure online transactions from winery to consumers. We think this is significant because it demonstrates just how large the upside is for savvy wineries looking to increase their sales. There is clearly a lot of room to increase the 7% to something more. It’s likely that this percentage will increase over time in an organic fashion. But for individual wineries that are hovering around that 7% figure with their own sales, they can find a way to increase it substantially through strategic online marketing and prospecting for qualified customers in every venue they offer their wines.
The fastest way, however, to increase your pure online sales is to talk more frequently to the customers in your data base. Consider your email marketing program, for instance. Are you leveraging your communications as best as you should be? Consider a few of Angela Sanchez’s Tips for Increased Email Conversion.
To get an indication of what it would mean to increase your online sales from 7% to 10%, imagine allocating three percent of your volume sales that had been sold to wholesalers, and selling it instead direct to the consumer. Amazon will have some sort of impact on overall online wine sales. But you can impact your own bottom line right now by shooting for an immediate 3% increase in direct sales through strategic e-commerce marketing.
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September 23rd, 2008 at 7:20 am
Great info about on-linesales. What sort of impact do you think increased online sales will have on availability and pricing for restaurant wines, if any. There are already many wines that are difficult to obtain, will this make it harder and in order to get these wine will the prices go up?
Again great insight into the online world of wine sales.
October 2nd, 2008 at 11:05 am
Most wine marketers realize the importance of keeping their brand in front of the public to remain viable. Restaurant placements are a key part of that strategy, so I would not expect the well known, highly allocated wines, to be less available than they are today. That being said, as on-line sales increase, many of the high quality, undiscovered wines, will have to make decisions on how to spread their finite wine supply over the available channels. This could lead to these wines being offered to fewer accounts than in the past.
That said, standard practice in restaurants is to markup wine 2x+. Increasing online sales from 3-7% will have minimal impact. In fact, greater online exposure to wines and their MSRP may even help provide a check and balance on restaurant pricing of those wines.