DtC Expert: Cater Outreach to Winery Customer
Club members deserve more personal communication, wine sales expert says
Napa, Calif.—The wine industry is abuzz with talk of direct-to-consumer (DtC) sales – shipments increased 10% in value for the 12 months ending in October -- but a DtC expert says many wineries have their priorities misplaced.
Boutique winery owners and managers realize that most small- and medium-sized wineries, especially new brands, have trouble getting effective wholesale distribution in the wake of distributor and winery consolidation.
They also recognize that profits for wine sold directly to consumers far exceed that sold through the three-tier system (or even two-tier, where direct-to-trade sales are allowed). Knowing that, many older wineries have focused on tasting room and wine club sales, but others are heeding the siren call of e-commerce.
At recent conference sponsored by the Seminar Group, Tammy Boatright, president of VingDirect, which helps boutique wineries implement and improve DtC operations, brought some reality to the market.
“It’s a fallacy that e-commerce will give big returns,” she stated. “And if you focus on the Internet, you may overlook the biggest sources of revenue and profits like tasting rooms, wine clubs and outbound sales.”
Prior to founding VingDirect in 2009, Boatright served as head of Foster’s Wine Estates’ U.S. direct-to-consumer division including serving as acting president of Windsor Vineyards from 2005 to 2007 and president of International Wine Accessories from 2004 to 2007. Windsor Vineyards remains the largest U.S. shipper of wine direct to consumers and utilizes outbound telemarketing as the primary sales channel. She has more than 20 years of direct marketing and general management experience. She is an instructor at WISE Academy and a frequent speaker at industry conferences.
Boatright emphasized, however, that DtC is an ideal sales channel for the wine business. There’s a growing U.S. consumer base as Millennials come into the market. Customers can become far more engaged with wine brands than, say, soap or cereal. And wine clubs can provide treasured annuity sales.
She said that for wineries that sell fewer than 5,000 cases per year, DtC is the right channel to create sustained profitability. Using recent numbers from Wines & Vines, she noted that more than three-quarters of U.S. wineries sell fewer than 5,000 cases per year. Direct-to-consumer sales are virtually their only option.
Another 18% of wineries sell fewer than 50,000 cases, and unless well established, they may depend on direct sales for profits, too.
On the other hand, the three-tier system is better for wineries with large case production volumes.
She also said, “The best indicator for success in DtC is annual tasting counts,” not Facebook likes or website page views.
Boatright finds that some wineries overlook key direct-to-consumer channels:
• Tasting rooms
• Wine clubs
• Inbound and outbound phone sales
• Traditional mail
Some wineries throw away opportunities by not collecting contact information from their tasting room visitors and event participants. The only time most wineries get this data is when they sign up club members. Mail, phone and the Internet aren’t particularly effective ways to prospect.
Boatright emphasized the importance of the tasting room as the most valuable DtC channel. “Not only does it bring in revenue, but it helps build the customer database, can provide a high conversion of visitors to customers and, especially, turn guests into wine club members—the highest value of all.”
Among VingDirect winery customers, Boatright reports these results for the year ending Aug. 31, 2013:
Sales conversion is defined as closing a sale, signing up a club member, etc. She noted that the average conversion rate in most businesses is about 1.5%, and credits the appeal of wine with the difference.
Boatright also said that tasting fees can significantly affect the conversion rate, but added, “Free tasters may not be good prospects.”
Even small percentage increases in conversions of customers to club members can have a big impact—from $8,000 per year for a winery that sees 1,000 visitors per year and increases its conversion rate by 1% to close to $1 million for a winery with 40,000 tasters increasing conversion rates by 3%.
She also tracked wine clubs for her winery customers:
She said the average time a member stays in a wine club is 18 months. “Businesses overall typically lose one-third of their members each year.”
Boatright then outlined the realities of some other forms of DtC.
Many wineries don’t place much priority on inbound phone calls, which are often transferred to a loud, busy tasting room—or even a bookkeeper. Yet these callers are likely good prospects, as they’ve taken the trouble to phone. This method is good for that first order and customer reorders, as well as customer service issues.
Boatright reported that mystery shopping shows most wineries aren’t really prepared to “sell” wines and memberships on incoming calls. She suggests ensuring that c allers get to a responsive sales representative.
A channel that some wineries exploit extremely well (but is overlooked or even considered suspect by some) is outbound sales or telemarketing. “This is a huge channel,” Boatright said, noting that Windsor Vineyards closes 95% of its sales this way and has had 150 telemarketers calling.
However, it’s not a good channel for prospecting. “It doesn’t work,” she said flatly. Outbound calls are best for incremental revenue to club members and other people who have bought wine. It’s also good for reactivation of expired club members and customer retention.
It also has the highest sales-conversion rate of any DtC channel with 25%-35% in some cases.
And outbound sales has the highest average order size of any direct-purchase channel: 1-1.2 cases, on average.
One fallacy among vintners is that people will be offended if they receive sales calls. That may be true for insurance or home siding, but most customers are happy to get calls from a winery. “We’re your winery,” she said. “People welcome the calls.”
Email is best for building the connection between visitors to the tasting room and the winery, and for selling tickets to events.
“It doesn’t cost much, but it’s not good for sales,” Boatright said. “You do better on the phone.”
She said email offers sales conversions of 3% to 5% and low average orders of three to six bottles.
Finally, Boatright noted that ecommerce is best for repeat orders from customers, branding efforts and building a connection between customers and the winery. It offers no personal contact, and she finds that most winery websites don’t recognize customers and consider their history, or fill in contact information and discounts.
“It represents 2% of total wine sales,” she said. “It’s not a good acquisition channel. Don’t expect ecommerce to solve all your problems.”