Building an Online Wine Marketplace

After integrating Vin65, Wine Direct now sets sights on online wine sales

by Andrew Adams
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Each Wine Direct worker is assigned a color and RFID scanner to help them select the right wines for a shipment.

American Canyon, Calif.—In the far southern edge of Napa County, where reclaimed marshland is rapidly turning into warehouses and other commercial properties, one of the newest buildings is the sprawling headquarters of WineDirect.

The building covers nearly 260,000 square feet and includes offices and a vast fulfillment center, plus room for winery case storage. Completed in August, the building represents the final integration of WineDirect and the winery e-commerce and website provider Vin65.

It’s also the base from which the company is hoping to find success as a leader in online wine sales while continuing to take advantage of growing direct-to-consumer sales. Part of the company’s strategy is to take advantage of online wine marketplaces, a model that Amazon recently abandoned. 

Jim Agger, WineDirect’s vice president of marketing and business development, provided Wines & Vines a tour of the new building, describing it as not just a milestone in terms of its fulfillment capacity but also because all parts of the company are now under the same roof. “That’s been a big, huge shift for us,” he said.

Past several floors of glass-walled offices and work stations, the new building opens up to a vast warehouse that seems spacious enough to dock a dirigible. At one end of the structure, opposite a row of truck bays, are large metal racks containing thousands of cases of wine from hundreds of wineries. Electric lift trucks whiz among the racks, plucking cases that are brought over to a series of conveyors where orders are assembled.

Wine Direct works with more than 200 wineries in order fulfillment, and when the company receives cases from one of its clients, each is assigned a bar code and label. Cases only move when the firm receives an order. “We have to have the same rigor on inventory control as a bank,” Agger said.

‘Pick to light’ fulfillment
The company uses what is known as a “pick to light” system, in which the workers each have their own color and RFID scanner. After scanning an order, colored lights and numbers guide them to pick up the right wine to complete the order. Once the order has been filled, the wine returns to a holding area, where it circulates on conveyors and returns only if it’s needed to fill another order. After a certain amount of time, the wine goes back into storage.

Completed orders are then sent to quality control, where another worker checks each bottle of wine as well as any other packaging flourishes requested by the client. Agger said wineries—especially premium boutique ones—are doing more to create an “unboxing” experience for customers. This can include wine and order information in a high-quality envelope or other materials that need to be in just the right place inside the shipper. As he or she double checks an order, the employee has a photo to refer to showing how a correct order should appear.

In a separate area, a couple dozen workers go through the laborious process of packing individual bottles of wine for shipment for a well-known sparkling wine producer. Agger said it probably was a wine club allotment and said such shipments are becoming more and more rare as customers expect—and wineries can provide—custom club shipments. “Consumers want to build their own shipments,” he said. “Personalization puts a big strain on a winery.”

But when club members have the option to build their shipments, they tend to order more and stay club members longer even if they don’t take full advantage of custom orders. “We’re reacting to consumer trends and preferences,” Agger said.

Once an order is complete and double checked, it’s loaded on to trucks for shipment. Wine Direct operates a hub in California’s Central Coast to serve its clients there and another fulfillment center in Ohio. The added reach ensures it can fill 90% of all U.S. orders by ground shipment within 48 hours. The company employs 120 full-time workers in American Canyon and 122 more at its other facilities.

Many mergers in the making

The company that would become WineDirect was initially founded as Inertia Beverage Group by Paul Mabray in 2003. By 2009, the start-up was able to secure enough capital to acquire a fulfillment company in an auction; New Vine Logistics, one of Amazon’s early wine ventures, had been left flailing since the web giant pulled the plug.

Mabray would soon leave to launch social media-monitoring platform VinTank, and former DHL executive Joe Waechter took over as CEO and president in 2010. IBG changed its name to WineDirect and signed a licensing deal with the fast-growing e-commerce firm Vin65, which was based in British Columbia. 

Two years later, in June 2012, WineDirect acquired Vin65 outright as well as another fulfillment firm, WTN Services, from 1-800-Flowers. After that deal, WineDirect also acquired Elypsis Winery from Admiral IT. Elypsis built enterprise resourcing planning (or ERP) software as well as point-of-sale (POS) and customer resource management software for the wine industry. That deal bolstered WineDirect’s winery services package.

Then, in 2015, Sovos Compliance purchased WineDirect’s compliance division. Sovos already owned ShipCompliant, and that meant all of Vin65’s clients now were working with ShipCompliant. Vin65 founder Andrew Kamphuis announced his departure in 2015, staying on through the final integration as a consultant.

Wine Direct has more than 1,800 winery customers, and most of those are utilizing the company’s e-commerce services. It’s here where Agger sees future growth and continuing challenges.

According to the latest Wines Vines Analytics Wine Industry Metrics report, direct-to-consumer (DtC) sales in November were 26% higher than in 2016. November’s total sales of $417 million and sales volume of more than 800,000 cases are both all-time highs.

But as DtC and online wine sales continue to grow, consumers expect more and more of the DtC wine experience. Deliveries need to be fast, shipping costs low, and consumers are starting to expect easy orders via smartphone or tablet. “That bar is just continually being pushed higher,” Agger said.

Confident in online marketplaces
To that end, WineDirect has pursued partnerships with online retailers to create more wine marketplaces for consumers to find wine.

This comes as the Amazon wine marketplace is set to shut down by the new year. Agger said if one were to ask 100 wineries about the Amazon market, more than 90 would say it wasn’t worth it for them, but one or two wineries were making millions in revenue.

Those wineries need a replacement, and WineDirect is betting they can find one with new options such as eBay and Vivino or the online “stores” of loyalty programs.

In February 2017, Wine Direct and eBay announced a partnership to offer more of WineDirect’s customers’ wine on the online auction and retail site. Vivino launched as a wine-recommendation app that draws on data from its 27 million users. The San Francisco-based company was launched by Danish tech entrepreneurs Heini Zachariassen and Theis Sondergaard, who joined in 2010. The app has about 5.5 million users in the United States.

The company’s customers upload scanned labels, reviews and wine ratings with nearly 500 million scanned labels, 8.8 million wines and more than 201,00 wineries according to the company’s website.

In April 2016, Vivino launched an online market that sells wines based on user reviews and from 500 merchant partners. These partner companies process orders through Vivino’s checkout system that is designed to provide a “two-click” sales experience.

The company’s new “premium” service includes free shipping and represents its latest effort to tap into the potential of the U.S. DtC market.

Agger fully expects Amazon to be back in the wine game soon and said the company has always done well finding ways to achieving success for multiple parts of its operations. “You can look at everything they do, and there’s multiple benefits,” he said.

Following the acquisition of Whole Foods, Agger expects that pattern to continue with wine, possibly getting folded into the grocery delivery service Amazon Prime Fresh or with online sales and in-store pickup. “They’re just hacking away at grocery, over and over again.” 

The Amazon market may be shutting, but Agger is confident that several other markets will prove to viable places for wineries to find online success. “Wineries will be able to pick what works for their overall brand strategy.”


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