In the beginning of March when the seriousness of the Coronavirus outbreak began to dawn on US Consumers, WineDirect noticed an immediate 22% volume decrease in weekend tasting room sales compared to the previous month across the 900 US and Canada wineries that use their point-of-sale system. Since then many wineries have cancelled their tasting and event activities, and Governor Newsom has called on all of them to do so.
Not only does this crisis come at a time when the wine industry is experiencing a grape glut and stagnating growth, but it is on the tails of the Tubbs and Kincade Fires, which also severely depressed tourism and winery visits. Visits that wineries rely, perhaps too much on, for their businesses to succeed.
WineDirect’s 2019 Direct-to-Consumer sales report showed that point-of-sales transactions on average make up 34% of winery DTC sales, and the VinQuest’s 2019 Consumer Direct report by Vinteractive showed similarly that tasting rooms make up an average of 38% of sales. In both studies, tasting room sales were only surpassed (slightly) by wine club sales with most of those club members likely to have been acquired in the tasting room, and WineDirect’s report calls out explicitly that the real value of the tasting room is customer acquisition. It also states that eCommerce is the largest opportunity, though it currently only represents 10% of total sales.
“This hit to tourism underscores how important it is for wineries to have a robust online sales strategy, so they can leverage that channel when in-person visits (whether from virus outbreaks, fires or other natural disasters) decline,” states Adrienne Stillman, WineDirect Marketing Director. “We’ve been proponents of this for years at WineDirect, and it’s only becoming more valid.”
Even outside of crisis the tasting room based business model is challenged with 55% of VinQuest respondents reporting that attracting visitors is the primary barrier to growing tasting room sales, and 45% reporting that it is a barrier of wine club growth. While there are significant differences in the reliance upon tasting room sales across regions, with more mature regions being less reliant, even Napa at 19% and Sonoma at 28% are significantly exposed. Regions outside of California range from mid 40s to low 60s according to WineDirect’s report.
“Wine marketers have suddenly become 1st responders in the COVID-19 crisis,” says Bryant St. Amant, CEO of Vinteractive in an email to clients and friends.
“With tasting room sales sidelined for now, DTC wineries must fall back on social media and email marketing to survive,” he states. “The good news is that the average U.S. winery has 6000 email addresses and 3000 Facebook followers, and most wineries have excellent potential to boost their sales using direct marketing.”
To limit exposure to the fragility of a hospitality driven wine business, wineries need to address two challenges. The first is converting more sales from the tasting room to club and/or eCommerce sales, so that revenues become more stable even when visitation temporarily drops in times of crisis. The second, and probably harder, is finding new ways to acquire customers that purchase without visiting the winery.
“The tragedies, earthquakes, fires, COVID-19, of the last few years coupled with the huge increase in competition and the unforeseen environmental changes from new, extended wine tasting experiences have truly illuminated our winery’s over-dependance on oenotourism for DTC acquisition and the brittleness of that model,” says Paul Mabray, CEO of Emetry. Over the last year, Mabray has been traveling and speaking at twenty different wine industry events across the world on the topic of future-proofing wine, and warning about the fragility of the current model.
“These dark times show that we need to invest in ways to reach consumers in their homes to balance our DTC efforts and digital, eCommerce, search, social media, etc., is the most appropriate channel to do this,” says Mabray. “We are one of the last industries that has not adopted digital. Now it’s more important than ever that we make it a core part of our sales and marketing mix to endure through these waves of existential threats to our DTC businesses.”
While digital channels can be a solution for new acquisitions, strengthening digital tools can also play a role in improving conversions with existing customers. Commerce7’s 2019 Winery Consumer Experience Report offers some valuable insights on how to increase both wine club and eCommerce sales, and the keywords are personalization and customization.
Personalized content blocks consist of dynamic content that changes products, pricing, and greetings based on who is visiting the site and their behavior, and with 45.9% share, wineries with eCommerce websites on the Commerce7 platform had the highest share of add-to-cart clicks come from personalized content blocks, compared to 35.5% coming from product lists. Despite product lists rendering 13.6 times more than personalization blocks, personalized content is more than 16 times more effective at driving conversions.
Winery website traffic from mobile devices continues to grow and has overtaken desktop traffic in 2019, and 75% of wineries according to VinQuest, have adopted mobile friendly technology. However, there still appears to be room for improvement to make customers comfortable placing orders on mobile devices. According to Commerce7, while 54.8% of shopping carts are started on mobile devices, only 36.2% of checkouts are completed on mobile. Commerce7 recommends using strategies like Apple Pay, Google Pay, one-click checkout, and cross device shopping to help the mobile experience.
The Winery Consumer Experience Report also shows that offering choice and flexibility for wine club members pays off. When offered the opportunity, nearly a quarter of club members elected to customize their shipments, and they were twice as likely to add items than remove them resulting in 24.5% higher sales. Furthermore, offering members the option to put their club shipments on hold might stave off cancellations with 93% of users that were on hold going back to receiving club shipments and only 7% cancelling.
Stillman suggests that the loyalty of wine club members is something that can be leveraged to mitigate temporary drop in tasting room sales. “Your club members are your biggest fans. Consider offering an optional club shipment add-on for spring to increase order value. They will want to support your business, so make the ask. If you were going to have a live pick-up party, consider hosting a virtual event instead. For example, leveraging Facebook Live and have your winemaker / owners do a tasting of the current club shipments.”
For wineries that had to cancel events, Stillman recommends looking for opportunities to engage digitally instead, especially through video. “Taste Washington, for example, has created a hashtag #TasteWaPledge and is encouraging people to post about Washington wines they are enjoying on the days the event would have occurred this weekend.” But she cautions, “It’s important to remain cognizant of the unfolding situation. You don’t want to seem tone deaf or trying to profit off of a terrible event. So, be thoughtful about how you message sales offers.”
For wineries seeking to grow their email-driven sales, St. Amant recommends three things they can do right now to maximize results.
- Fix your email marketing system to avoid messages going into spam.
- Increase your message frequency; research shows that wineries who message their lists twice-a-month or more report double the sales growth
- Adapt your messaging content to the current situation.
“If your customers can’t visit you, it might be the perfect time to offer shipping incentives to reduce sales friction,” proposes St. Amant.
Those are all things that wineries can do today to alleviate loss of tasting room business, but to reduce exposure to future crises, wineries may have to rethink their acquisition and sales strategies and reduce reliance on hospitality.
By Kim Badenfort