For the modern winery, Direct to Consumer (DTC) sales is simply a reality. While traditionally, many wineries were able to pass off the sales arm of their business to wholesalers and distributers, shrinking profit margins and opportunities have meant that this is increasingly not an option.
Like many other people working in the wine industry, you’re probably aware that DTC sales can go a long way to make up for these lost profits. But are you aware that there are other good reasons that having a strong DTC strategy can be a deciding factor in the profitability of your winery?
Find out our top 5 benefits of focusing on DTC sales now.
1. DTC Sales are Increasing
A recent study by Ship Compliant in the USA found that 2017 was a record breaking year for DTC sales. Customers spent a total of $2.69 billion, representing a 15.5% increase in only a year. Not only that, the volume of wine increased by a similar 15.3%. And it’s not only overseas - here in Australia, the industry has also seen similar trends.
The fact is, selling wine direct to consumers is only going to grow. As consumer habits continue to change, influenced by our increasingly foodie culture, e-commerce and a growing luxury goods market, wineries are in a unique position to become front of mind with an effective DTC strategy.
Whether it’s a renewed attention on your cellar door, the increasing number of events held every year or a focus on your e-commerce offering, this growing market represents an obvious way to both move product but also grow profits.
2. DTC Profits are Up
It’s not just about the amount of wine that is being sold direct to consumers - DTC wine sales are simply making wineries more money. In the 1990s, DTC wine sales only made up about 20% of a total winery’s profits – now it’s up to 60%.
Obviously, a large portion of this is profit margins. Even taking into account the internal costs of selling wine, selling direct to consumers allows wineries to avoid the traps of big retailers and sellers who demand excessive discounts on their products. Each bottle is simply worth more and so, you actually need to sell less to make the same amount of money. If you’re selling similar amounts or increasing your sales by creating a strategy that connects with your customers then you’ll see an instant boost in profits.
And that’s where a strong DTC strategy really comes into its own. By creating something that resonates with your customers, the smart winery is able to build strong relationships that can last years.
3. Create Long Term Relationships with Customers
Repeat this after me: A business is its customers.
So why would you rely on someone else to take care of your business? By focusing on DTC sales, you have a unique opportunity to build a relationship with your customers. You can find out who they are, what they like and why they keep returning to you again and again. You can gain true knowledge and understanding to grow your business and make it run more efficiently.
Take for example John and his wife Jane. They love Chardonnay and regularly buy different brands at the local store. The staff member is pleasant enough to them, but isn’t compelled to sell them one product over another.
One day, they visit your cellar door. In talking to them, you discover they’re in the region as they’re celebrating their wedding anniversary. You start the tasting with your favourite Sparkling Wine, suggest somewhere they can have dinner while they’re around and maybe even give them a discount on their Chardonnay as a congratulations.
Where do you think they’re buying their bottle for the next wedding anniversary? These long term relationships can only drive repeat sales and remember, it’s always easier and cheaper to keep an old customer that to find a new one.
4. Restaurant Sales are Dying Too
The reality is, the industry has changed. Not only are the conditions for distributors and wholesalers different now, even other traditional ways to sell wine are starting to shift.
Increasingly, smaller wineries are finding it harder and harder to make it onto wine lists, with bigger companies dominating this space. While natural wines may be the exception to this rule, the recent Silicon Valley Bank report indicates that in 2017 only 17% of wine sales came from restaurants. Compare this to 2014, when it was 31% and the situation becomes obvious.
The reasons for this are likely multifaceted. Fast dining is playing an increasingly large role in the hospitality space and these locations are less likely to serve alcohol, while consumers’ preferences may also suggest a turn to cocktails and spirits or simply not drinking while out. Consumers are growing increasingly savvy to wine markups and with restaurant growth and profits stagnant, there’s little possibility of growth in this space for the short term. By using DTC sales and customer engagement to supplement this lost income, wineries can minimise the impact of this changing space and even benefit from the switch.
5. You have Control
While it’s true that very few winery owners got into the industry to run a business, passion and love will only get you so far.
By creating a DTC strategy that works, you are able to take control of your own business in a way that makes sense for you. Whether it’s focusing on the repeat sales that a Wine Club brings or attending events every weekend because you personally enjoy them, you can do what suits you and your brand best. In doing so, you also create protection for your business, making it less susceptible to external trends and changes.
While selling direct to customers can be daunting for many wineries, the rewards are nearly endless. Plus, the good news is that there are tools out there designed to make your life easier. The WithWine POS is more than your cash register. It automates many manual processes such as stock & wine club management to save you time, while our in-built data capture gives you easy options to grow your database and customer insights to make selling more effective.