As Online Wine Sales Grow So Do The Challenges
Given the state of the US economy retailers are more than a little anxious that this upcoming holiday season will provide a much needed lift in sales. Somewhat ominously the NRF is expecting season sales to be little more than “average with a predicted 2.8% increase over last year. Meanwhile, comScore expects eCommerce spending to grow by 13% an increase largely attributed to more online buyers. Once again the growth opportunity appears to be with eCommerce; however this broad prediction of growth may mask a more challenging reality for wine stores online.
In the coming month we will be preparing our annual benchmarking review of retailer websites on the BevSites eCommerce platform. This is our chance to give stores feedback about what is working for their site and how they compare to their peers. Some of these stores have been online for over 10 years allowing us to track how different strategies have performed over time. This year the word from some long-term clients is that it used to be much easier to collect sales online. Some of the early online wine merchants found they could generate healthy sales just by listing their inventory. The online marketplace is a different place today and the competition has grown much smarter.
There are two main factors that make it more challenging for retailers:
1. A fragmentation of consumers into different shopping channels and the use of a variety of devices to access the internet; as discussed in last month’s column
2. A rapid increase in the number of retailers and wineries now selling online to consumers.
To illustrate the second point, just two years ago Wine-Searcher was listing the inventory of 2119 wine stores across 49 states. That number has since doubled to include 4287 stores in all 50 states, DC and Puerto Rico, and this increase occurred in a depressed economy! The total stores listed on Wine-Searcher measures a level of sophistication about the competitive landscape. By the time a store has their products listed they are managing inventory updates and expect to generate sales online.
It is also worth mentioning the competition between retailers and US wineries. For small wineries in particular there has been a concerted push to improve their direct to consumer sales. Many have been successful in turning their distribution mix upside down from a majority of sales through the 3-tier system to a majority of direct sales through wine clubs and online purchases. While retailers may have felt a certain comradeship with wineries as they join in the battle to open more states for interstate shipping, the success of these allies has resulted in more competition for the online wine buyer.
This is not to say there are fewer opportunities online for wine stores, in some ways the reverse is true, but stores can no longer expect that listing their inventory will do all the work of drumming up sales. Now more than ever it is important that stores work to clarify their marketing strategy. For most stores a single strategy will extend to both the store and the web as advertising looks to drive interest to the website, and the website drives visitors to the store. It is more challenging to operate a separate brand online with different pricing, but hopefully it is more obvious for these stores that advertising is a necessary cost of operating a website.
The stores that will thrive in this more challenging marketplace are the ones that think creatively about business opportunities, they hire smart people, and find ways to differentiate their business on the web. Good luck with your holiday business.