By Jeff Carroll, GM, Avalara for Beverage Alcohol
You’ve seen the headlines by now. Online share of the $120 billion US alcohol sales market will grow from 5% to 20% within 5 years. Uber plans to buy Drizly for $1.1 Billion. Vivino raised $155 million to accelerate growth. Wine.com announced annual revenue growth of 119%. Spirits and beer brands and marketplaces are jumping into DTC left and right, while also looking to expand their roster of available states. Online wine retailers are pursuing an aggressive litigation strategy to take advantage of the recent Tennessee Wine Supreme Court ruling and augment direct-to-consumer (DTC) shipment availability.
These headlines should provide both a lot of hope and a little bit of fear for wineries. On one hand, consumers are finally waking up to the fact that it’s easy to order alcohol online, and the opportunity to capitalize on the behavioral shift is massive. On the other hand, it’s never been more competitive. Breweries, distilleries, retailers, marketplaces, and delivery apps all see the same trends and are investing heavily in efforts to take a piece of the pie.
Wineries have a distinct advantage right now and should seize the moment. With 47 states available for DTC shipments, wineries can reach 97% of the US population. Retailers, breweries, and distilleries are all pursuing legislation to expand the list of available DTC states in 2021. But, access is currently extremely limited, with retailers having access to 15 states representing 29% of the US population, breweries with 11 states representing 18% of the US population, and distilleries with only 8 states representing 12% of the US population.
Most wineries have already begun some form of digital transformation and are now better positioned to take advantage of the favorable trends in online behavior. There are many great resources out there to illuminate best practices for how to raise the bar with online DTC sales. Several of these are included below to help you prepare for ecommerce growth in 2021.
5 tips to prepare for ecommerce growth
- Invest in your DTC team. Depending on your size and ambition, this could be a fraction of one person’s responsibilities, or a full team with different specialists (i.e. ecommerce manager, digital marketer, data scientist). What’s important is that they have a charter to succeed and have the ability to implement, test, and measure strategies for acquiring new customers. Find great people, and set them up for success.
- Evaluate and retool your systems. Do your ecommerce and customer relationship management (CRM) platforms have the capabilities you need to attract and retain new customers? If not, now is a good time to initiate a review and retool process before the holiday season kicks off again. Paul Mabray has a really helpful article and corresponding directory of wine DTC systems.
- Choose your states wisely. Take a closer look at your return on investment and be deliberate about the states where you are licensed. Jason Haas from Tablas Creek created an excellent guide for choosing states based on cost and complexity. For instance, is South Dakota worth the hassle?
- Tighten up logistics. Customer expectations have changed dramatically since the advent of DTC wine shipping and next-day delivery is now the expectation. Whether you’re shipping in-house or through a third-party fulfillment house, it’s important to review your fulfillment costs and speed of delivery. Incremental change can have a substantial impact on both customer loyalty and your bottom line.
- Bake in compliance. The headlines about monumental growth in ecommerce sales of beverage alcohol will certainly lead to increased scrutiny from regulators. States are also looking to ensure that only products owned and produced by the licensee are shipped to consumers. If you’ve been depending on companies that promise to let you “use” their licenses in certain states, now is a good time to ensure business continuity by acquiring your own licenses and setting up an automated solution for performing real-time shipping verification and tax calculations.
The tailwinds are strong, and now is a great time to double down on your digital efforts. There’s no need to reinvent the wheel. Because the wine industry typically lags other verticals by five to ten years at times, there are plenty of hard-earned success stories to learn from. Just look at the explosion of online subscription models for examples. The timing could not be better for investing in your team, improving your DTC operations, and committing to success in 2021. You got this!