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May 2011 Issue of Wines & Vines
 
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How Wineries View Flash Sales

Common experiences range from enthusiasm to skepticism

 
by Paul Franson
 
 
wine flash sales price
 
Consumers love flash wine sales sites for an obvious reason: the drastic discount prices. But what do the wineries that use flash sites think of them?

Recently Wines & Vines solicited opinions about the sites from wine executives, and responses ranged from “a necessary evil” to enthusiasm—though most harbor mixed feelings about seeing their wines discounted and getting meager rewards.

Jean-Charles Boisset, who owns De-Loach in Santa Rosa, Calif., and Raymond Vineyards in St. Helena, Calif., as well as his family’s Boisset brands in France, sees the positive: “Rather than viewing flash sites as a means to clear inventory or raise cash, our experience has been that they can be a valuable additional marketing tool to communicate winery messages, to reach a new and savvy consumer base, to expose consumers to wines they may not readily find at retail or through traditional distribution channels, and to be at the forefront of an innovative new sales channel.”

Like Boisset, Lisa Goff has used flash sites as a way to expose wines to new customers, people her wine company doesn’t usually encounter. She’s the vice president of marketing for the Crimson Wine Group, which owns Pine Ridge in Napa Valley, Archery Summit in Oregon and Chamisal Vineyards in the Edna Valley along California’s Central Coast.

“We sold some wines,” Goff says, “but it’s hard to track whether the customers bought more wine from us.” She said that the sites generally have not shared customer information with her. As for whether the flash sales were financially worthwhile, she would only say, “The wholesale environment is competitive, too.”
wine flash sales
 
Benefit to the brand?
At St. Supéry in Rutherford, Calif., vice president of marketing Lesley Russell has used a number of sites including Rue La La and invino, but the verdict isn’t yet in. “We track sales carefully and haven’t seen a lot of proof that there’s been any benefit to the brand.”

Russell does believe that luxury sites like Rue La La and Gilt should provide good brand exposure. “We like to see our brand associated with Dolce & Gabbana and Movado among people who want luxury but also seek deals,” she senses.

She also has used invino, formerly called the Winery Insider. “They take their own photos, generate content and write their own notes. It’s relatively small volume, but invino is a licensed retailer and buys the wine.” Wine Spies is similar.

Russell recognizes the danger of being discounted, so she prefers private sites that CellarTracker can’t track. She admits that use of the sites was “inventory related” but complains, “If it doesn’t help to build our list, it’s not that valuable. And that generally isn’t happening.”

She acknowledges that a retailer like invino that buys the wine can hardly be expected to share customers.  In dealing with some flash sites, however, St. Supéry ships the wine to the customer. “We have their physical address but no other information. And Rue La La prohibits wineries from soliciting the customers via fine print in a lengthy contract.”

Even if St. Supéry did mail offers to the customers, Russell believes they probably wouldn’t be very supportive. “These are people who use the Internet and social media, not the post office.” She adds, “I haven’t seen an email address for a customer from these sites in a long time.”

Regarding markups, Russell noted that the winery gets between FOB and wholesale prices. “We’re better off to sell to the consumer, of course, but if you’re trying to sell wines that retail between $50 and $80, that’s a tough sell these days. People will buy them at a discount, however, and feel they’re getting a great deal.”

 

 

wine flash sales varietal
 

A happy vintner
Laura Zahtila, who runs Zahtila Vineyards in Calistoga, Calif., is pleased about selling wines via flash—at least over wine.woot, the only flash site she’s tried. She says, “Our experience with them has been very good. They were very professional and moved wine really well.”

Zahtila says she liked the way she was able to interact with a whole wine community on the wine.woot site. “It was great exposure.”

She acknowledged that her margin was weak, but she was running long in some wines and this helped deal with that problem. On the other hand, she’s seen few wine.woot members at her winery in Napa Valley. “The users seem to be very focused. They only buy discounted wines.”

By contrast, another special offer sent over the web worked very well for her. A lodge in Calistoga offered a Groupon special and she participated. It sold out. “We got a lot of visitors by participating in that promotion in January. It was a great January, and it’s a notoriously bad time for visitors.”

Andrew Murray, owner of his eponymous winery in Los Olivos, Calif., reports very mixed results with flash sites. “I had a great experience with wine.woot, Rue La La and Lot 18, but I actually lost customers with another site.”

Murray first tried the process when he was long on a wine and a wine.woot sales rep happened to visit. He put the wine up for sale on the site, and sold it out. “At the time I didn’t feel I made any money on the deal, but it was good marketing exposure.” He added, “It was a great experience, and now we know that we sell wine direct to some of those customers.”

He admitted, in fact, that he buys wine from wine.woot himself. “They have crazy good deals!”

Take a higher cut
The Santa Barbara County winery owner is especially enthusiastic about Lot 18. “Unlike some other sites, they stake their reputation on the wines they sell. They really qualify the wine and promote it. It’s really a high-end presentation,” says Murray. He adds that they take a higher cut for this effort, however.

Murray also had good results with Rue La La, but he isn’t sure it helped the brand much. “They sold quite a bit of wine for us, but we had no participation. They just offer the wine for sale. On the other hand, I’m a customer of theirs, and I identify with the high-end goods they sell.”

He does feel that Rue La La expanded his sales outside California, where he’s best known. However, he isn’t enthusiastic about Rue La La’s control over customers. “You have to sign a privacy clause and agree not to contact their customers. You’re sticking your neck out, and they’re taking advantage of you.”

Like Russell at St. Supéry, Murray also thinks customers who buy from the sites wouldn’t be very responsive to letters anyway.

Murray had a bad experience with one site that expected his winery to mail the promotion to its own customers. “This didn’t expand our market. In fact, we lost some customers who were members of our wine club and instead bought from the offer. On top of that, we hardly sold any wine through the offer.”

He knows that the flash sites can undercut his wine club offers, but other than with that one site where he sent the mailing, no one has complained so far. Murray has only dealt with marketing services, not Internet retailers who buy and then resell the wines.

Financially, he took in about $20,000 working with the sites. “I got less than half what I would have; it wasn’t even the distributor price, but I had the wine, and I’d rather someone drink it than sit on it.”

Still, he thinks the process isn’t a long-term solution for winery success. “I’ve been to that well a bit too much, I fear. I don’t want to be known as a discounter.” He adds, “It’s not a sustainable way to do business. It could work for a new winery or someone trying to sell inventory, but we’re going back to our core business: direct to consumer, wine club and distribution. It might work well for a new winery trying to get established,” he adds.

Murray may be speaking for many wineries that have sold via flash sites when he concludes: “Flash sales can either make money or gain new customers if you do it right. But probably not both.”

 
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