Are There Still Opportunities Online for Wine Stores? //php get_posflags()?>
Posted on | October 5, 2009
Written by | Ian Griffith
Has the Economy Impacted Online Sales?
After years of supporting wine stores online, I take it for granted that most any retailer can benefit from a presence online. So it was with some puzzlement that I revisited this question for a presentation at the Empire Wine Merchants’ Retail Seminar.
To be sure, the past 4 Quarters has seen the first online sales contractions in U.S. retail ecommerce history. These numbers are for all US e-commerce except travel, but we have seen these numbers correlate pretty well with what we see with wine stores. According to ComScore’s measurements, online retail sales in Q2 2009 were down 1% on the previous year, a negative showing only surpassed by last year’s holiday season. However, when compared with Bricks and Mortar retail sales growth which has been hovering around -10% since last November, it doesn’t looks so bad online.
For stores that are deciding whether to make an investment online, future projections are more relevent. Forecasts are pretty consistent that the recovery has probably already begun, and that by next year we should see modest growth online. Looking further ahead eMarketer expects modest growth next year, after which the rate of growth should return to double digits peaking around 2012. After that they expect strong but declining rates of growth.
How Many Wine Stores are Online
To answer this question we’ve taken a look at the growth in Wine-Searcher listings over the past 5 years. Wine-Searcher is the primary wine directory that concentrates exclusively on product listings for wine and spirits. They will actively search out listings on retailer websites however we submit regular feeds for stores on our platform which represents a significant boost in sales for those stores. Wine-Searcher’s listings have grown 5-fold over this period which looks like a very prosperous time for them. Unfortunately this historic data was not available for US retailers so the current number of 10,000 listings is a global number that includes wineries and brokers. An examination for their current listings shows they list 2,119 U.S. wine stores across 49 states. This includes, for example, 268 in New York, the second largest market to California. There are estimated to be 2500 licensed retail stores in New York State which suggests over 10% of these stores have ecommerce websites.
A Typical Retailer’s Growth
This chart of sales figures is missing the values on the left axis. The numbers here are really as relevant as the trend as it’s all a matter of scale. Small sites will have a similar growth path to large sites and while we host sites doing millions of dollars, some do much less.
It was a challenge to select an example of a store where local conditions in the store didn’t distort the impact of the website. In some cases the store’s shift in priority was perfectly appropriate and other cases was profitable. However, we see on a regular basis that success online depends on key personnel, along with the focus of store leadership and the commitment of resources.
Gradual growth is most typical. As you can see here it took 4 holiday seasons for this store to hit their highest sales point. After that the store lost a key employee and then earlier this year faced a ban on interstate shipping. This year they have been refocusing their web promotions on the local market.
Focus on Local Strengths
While the past year has been a tough one in retail, we’ve been seeing consistent interest from retailers in ecommerce as a sales channel that continues to offer growth. While retailers are often looking for access to new markets, the more sustainable path to growth is based on local sales.
The more a store can integrate their website with activities in the store, the more the store can benefit from local customers that are online but who chose not to place orders through the shopping cart.
Customers online who may never visit the store are more likely to trust a merchant that displays interesting store events.
- Your credibility is increased
- You offer more opportunities for customers to find you online
- You support store customers with more information about events they plan to attend
The Website is More than the Shopping Cart
The temptation is to measure the success of the website using the shipping cart totals, however this is just part of the picture. A 2004 study by Dieringer Research Group estimated that for every dollar in sales that goes through the shopping cart, as much as another $1.70 is delivered to the store registers but began as online research.
There are a number of ways a website benefits the store that don’t show up in the cart:
- Researching purchases online before visiting a store has become a common practice for today’s shoppers. If your inventory isn’t online you will miss out early in the shopping cycle.
- Point readers of newspaper ads and print catalogs to the website for more information on your promotions. Some will elect to complete the sale online, while others are seeking clarity before visiting the store.
- Event information shows web visitors that your store is vibrant and has a loyal customer base.
The Risk to Not Participating Online
While Bricks and Mortar is fighting the competition in the rear-view mirror, the competition is looking years ahead. Sucharita Malpuru, keynote speaker at Shop.org 2009
The marketplace is different than it was 5 or 10 years ago, but for many stores this underlines their conviction that to compete they need to be online. As the Internet has become more integrated into our daily activities, stores need to include the Internet as an integrated part of their marketing if they want to be seen where their customers are. While the opportunities online may now require more effort by the store, the risks have also grown so that stores that do not operate online can become marginalized in a way that hurts their options for longer term growth.