A conversation about marketing wine online with Paul Mabray of VinTank

“We make wine work online.” … Paul Mabray, VinTank Founder & Chief Strategy OfficerPaul Mabray at the 2009 Wine Bloggers Conference

The Backstory

WBM charting sales up 7%Against the background of the Wine Business Monthly lead story Tuesday, November 3rd, announcing ‘Wine Sales up 7% in October,’ is last week’s story of AmazonWine’s failure to launch. While the story of Amazon.com’s attempted entry into the online wine sales segment has been well documented, this quick summary will tend to facilitate the following discussion. The Financial Times reported on March 5th 2008 that Amazon.com planned to start selling wine online in the USA market. Amazon had in fact ventured down this path before, investing $30 million in return for a 45% equity stake in pioneer online wine marketer Wineshopper.com in 1999. But that investment evaporated as Wineshopper ceased operations within a year. And then continuing to keep their toes in the water through an association with the longstanding Wine.com selling gourmet food baskets without wine through Amazon.com. During the formativeDini Rao of AmazonWine.com stages, AmazonWine chose New Vine Logistics as its fulfillment partner, but this arrangement was endangered when NVL abruptly ceased operations on May 29th, 2009. Inertia Beverage Group stepped in purchasing NVL’s debt obligation from Silicon Valley Bank, and then via auction on July 27th acquired the assets of the financially stressed NVL. IBG initiated an integration of the NVL fulfillment business into their existing operations. On October 23, 2009 both New Vine Logistics and AmazonWine.com made announcements. NVL filed for Chapter 7 in the US Bankruptcy Court in Northern California, winding down the closure of the corporate entity; and, Dini Rao, Senior Account Manager at AmazonWine, sent an email to potential winery partners stating, “ we have recently decided not to resume shipping. As you know we were excited to work with you to build the AmazonWine business. For that, this was a very tough choice for us.”

1893 Edvard Munch, The ScreamIn light of an apparent wine market uptick, the subsequent gnashing of teeth, and what to me was an overly pessimistic take by journalists and bloggers alike rang as an overreaction to the actual events. The collective ennui displayed by many in the wine industry seemed more reflective of recent difficult financial times, and of hopes unfulfilled. And, many of the comments tended to be colored by the respondents particular points-of-view based on their involvement and specific roles in the wine industry. To get a clear picture of the effects of the AmazonWine decision not to move forward, I reached out to experienced digital wine marketer, Paul Mabray of VinTank for his take on the wine industry’s ecommerce marketplace. What follows are key bits of wisdom from this conversation covering digital marketing and the online sale of wine in the United States.

The Conversation

VinTank LogoTWM: What was the genesis of VinTank?
PM: After Inertia Beverage, I was looking for a way to continue to contribute to the wine business, to continue to add value, and I wanted to help wineries adopt an agile business process. The key idea was to provide thought leadership on the synergistic future between wine and technology, to keep innovating in the wine industry.

TWM: You have a significant background as one of the pioneers in winery e-commerce.
PM: I was lucky to work with some of the pioneers in DTT and DTC efforts at WineShopper.com/Wine.com, as a Beverage Industry Consultant with Sumitomo Mitsui Banking, and as the Founder/CEO of Inertia Beverage Group, but as the saying goes, most of the pioneers died with arrows in their backs and those that survived became the guides to help settlers safely go westward.

VinTank's sign outside the Napa OfficeTWM: This history is somewhat mirrored by your VinTank partners/team members.
PM: Having assembled a very strong team with collectively over 50 years experience in the wine and tech industries most notably eSkye, BevAccess, Inertia and Wine Trade Network, Vintank is now the recognized leader in online sales strategies and execution. The partners include Eric Hsu/Director, Creative Strategy, Patrick Angeles/Technology Strategy, Clay Wallin/Business Development/Operations and Ashley Bellview/Marketing and Social Media Associate.

TWM: Looking at the Wine Industry today what do you see?
PM: Now, looking at the wine industry VinTank sees a product category mired by antiquated laws, complex distribution paradigms, unique product qualifications and innumerable complexities. Through technology and innovative strategies, we are dedicated to finding solutions.

TWM: So, what are the challenges facing wine marketers?ecommerce marketing solutions
PM: The wine industry is tremendously fragmented and insular. It also suffers from one of the most antiquated, regulated and complicated distribution paradigms. It is an extremely long tail product with approximately 250,000 individual SKUs entering the market annually with many remaining in the market from 3-10 years. Plus there has been a tremendous proliferation of brands with ever decreasing market access through traditional distribution channels. Mix this with technology and you have a lot of complicated puzzle pieces to cobble together to help make a frictionless transaction occur.

TWM: Is there a key to a successful ecommerce strategy?
PM: To be successful in the digital end of the wine business you have to focus on the right things, focus on a multi-channel strategy, focus on a direct business model, and make your strategy consumer centric.

TWM: I’m thinking that the disparity of compensation between traditional sales management and DTC sales management shows a lack of awareness by many wine businesses of the potential of online wine sales.
PM: The disparity in traditional sales management salaries and DTC management salaries is a sad reflection of the myopia of traditional wine beliefs. DIRECT in all its forms (marketing, consumer and B2B sales) is the most profitable and important channel for the majority of US wineries.

Focusing on ecommerceTWM: I’ve heard traditional marketers say sales is sales, so, is a different skill set required by ecommerce managers?
PM: Out of 6,000 plus wineries in the United States there are only 20 dedicated ecommerce managers. Wineries view their primary DTC efforts as their tasting room, or their wine club, but like the broad market with on and off-premises requiring different skill sets there are different segments in DTC. Tasting rooms are DTC’s on-premise and the Internet its off-premise, and they each require different skills. Ecommerce requires a new type of online sales channel expertise and relationships. It also requires a commitment to creating and growing online brand presence, and a dedicated online sales and marketing strategy.

TWM: Given the new construct, just who’s the most important customer at a winery?
PM: All customers are important but I’ve been told by most wineries that their most important customer is the one who visits the winery and buys wine during their visit. An important customer, but your winery’s most important customer is the one who Googles your wine and through your winery store, and inspite of paying what is most likely the highest MSRP, buys the wine.

TWM: The adoption and integration of DTC and DTT technology solutions for wineries seems to be slow and fragmented.ecommerce interface
PM: The adoption and integration of applicable software technology including CRM/POS/Accounting is very clumsy. There are as many as 20 different systems that have to be integrated between hospitality, CRM, ecommerce, wine club, compliance and accounting. Unfortunately accounting system integration usually drives the process in a winery. My question is do you want an accounting centric system driving your business or a sales centric system…?

TWM: It seems that grape growing and production are years ahead of winery sales and marketing on the adoption of cutting edge technology solutions.
PM: We are a production centric industry. Viticulture and winery production departments utilize bleeding-edge technology and software. However software vendors for other functions have to deal with such a fragmented industry and slow technology adoption that they have to struggle to support themselves with such a small market share to divide (6K US wineries) that it causes lesser investment in R&D and artificially helps to create friction for innovation.

TWM: Can you identify the various DTC market segments?
PM: Online retailers, marketing agents, consumer marketing portals and direct to trade.

Thinking of the futureTWM: What does VinTank see as future trends in the wine industry?
PM: We think you’ll see more B2B marketplace attempts. The industry sorely needs alternative routes to market. We also think you’ll see more market agents explode once they get confident in understanding the ABC Regulatory Advisory. Finally we see mobile continuing to grow to be a stronger force that drives wine education and point of purchase decisions. Mind you all these items require wineries to lead the charge and adopt the alternative channels but in this current environment, they have all the advantages, they just need to commit the resources.

TWM: Do online wine sales have a future now that AmazonWine.com has failed to launch?Wine Library logo
PM: We believe it does in a big way. Without demeaning the approach and choice of partners that Amazon made, it only saddens us that Amazon did not launch. Anything that would have help catalyze online wine buy activity we are 1000% behind.That being said there are many other companies succeeding online with Vinfolio Marketplacewine (both retailers and marketing agents like Vinfolio, Winelibrary.com, K&LWall Street Journal Wine Club, Wine Tasting Network) despite sub-optimal conditions(regulatory environment and compliance especially). And yet we are still waiting for one of the giants to emerge that would make our industryK&L Wine Merchants logo comparable to other luxury good verticals. We think that time will be soon and there will be more than one winner (probably a few of the companies mentioned above). However, one of the key challenges is winery participation. Only by supporting and feeding an alternative channel can it become healthy and the rewards will benefit the industry. We believe in wine online and we hope wineries start believing too. The internet is the most powerful and ACCESSIBLE tool we have ever seen in our lifetime. We (the wine industry) should be using it better.

TWM: Can you recommend five must read books for digital wine marketers?
PM: Sorry, I couldn’t do just 5…

Purple Cow by Seth GodinPurple Cow‘ and ‘Tribes‘ by Seth Godin

Free‘ and ‘The Long Tail‘ by Chris AndersonFree by Chris Anderson

Drilling Down‘ by Jim Nova

Wine Brands: Success Strategies for New Markets, New Consumers and New Trends‘ by Eve Resnick

The Cluetrain ManifestoThe Cluetrain Manifesto‘ by Rick Levine, Christopher Locke, Doc Searls, David Wineberger and Mckee Jake

Trust Agents‘  by Chris Brogan

Crush It‘  by Gary VaynerchukCrush It by Gary Vaynerhuk

Wikinomics‘ by Don Tapscott and Anthony D. Williams

Good to Great‘ by Jim Collins

The Take Away

J. Smoke WallinFour years ago, Smoke Wallin in his 2005 Wine Industry Technology Symposium keynote address said “The time is right for each of us in the industry to take a strategic review of our business practices and make sure we are optimizing the business using the most appropriate technology tools and strategies available.” Well, four years later that time is now. Paul Mabray and VinTank are moving the digital online wine bar forward and upward. If your winery is not yet diversifying its channel strategies, and/or maximizing its execution within the ecommerce channel, then this should be part of your 2010 brand plan. However, the execution of your DTC and/or DTT strategy will require the allocation of resources, both human and capital towards the establishment of an ecommerce platform management position, either as a direct hire or through a digital business development partnership. Contacts matter, relationships matter, and experience matters. The skill set required for onlinePaul Mabray profile picture sales and marketing efforts, while exhibiting some crossover capabilities, are unique to the channel and should be valued as such. As Paul Mabray recently tweeted “Twitter is not a strategy. Facebook is not a strategy. Customer service and communications need to be core to your strategy.” So, while it is laudable that some winecos are now developing social capital and evolving into savvy communicators by incorporating Social Media Management into their core tactics, what may be necessary for long term wine brand success is the establishment and execution by your wineco of a viable online ecommerce sales and marketing program.

Note: Copyright © 2009 Think Wine Marketing® All rights reserved.

24 thoughts on “A conversation about marketing wine online with Paul Mabray of VinTank

  1. Nice piece, John, as usual.

    The Amazon situation was quite unlucky for the industry, but I agree with Paul in that it can and will work, it’s just a matter of time. How do we get wineries on board faster?

    Also, I am curious as to what makes these guys (Vinfolio, Winelibrary.com, K&L, Wall Street Journal Wine Club, Wine Tasting Network) successful, in light of the regs and limitations, and what can others learn from them? Maybe there’s a hidden “Giant” waiting to emerge by the collaboration of some of these organizations.

    • I’m new to this but wanted to make a comment and ask a question. First, we just joined the WSJ’s wine club and had to be re-directed to a 3rd party in order to receive a shipment. That wasn’t hard at our end, thanks to the internet. But it seemed odd. Then I tried to give a gift of the WSJ’s wine club membership to two relatives who live in Canada, and was informed that it is NOT legal to send ANY wine there! More shocking, it’s a real hassle to send to some of the states in the US!!

      What a surprise. I could get online Class II drugs online, but NOT send a bottle of wine? This is crazy.

      Would love any ideas about sending good wines to my Canadian relatives — or they’ll never know what we make HERE in California, and THAT is the real crime.

      • Jeannine, as to point #1 most non-winery wine clubs have a 3rd party fulfillment partner. Also, a result of the repeal of Prohibition in December of 1933 the US Federal Government ceded control of the interstate shipment of wines to each of the states. With the dawn of the internet age many legal battles have been waged over this issue (see Granholm v Heald). The legal discussion continues, but you can always google and search for a retailer or e-tailer in the local market of friends or family. Yes, Balkinized and arcane and a result of old laws and statues at the state level. But you’re correct, with the internet & google it’s easy to find a solution. As to Canada, like the US market, each province has it’s own set of laws. It’s not impossible to ship wine to Canada, but expensive (duties and taxation) and a difficult process for consumers. Not knowing the destination of your wine gift. once again a little research will be needed on your end to find a local source. Unfortunately, Canada and the USA are each other’s largest trading partners, so hopefully one day this issue will be resolved. BTW: Canada is producing many terrific wines these day. Here is a great Canadian e-commerce developer/resource that will be better able to address your question: Vin 65 http://www.vin65.com/Contact-Us

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  3. A lot to digest and think about, but I would agree with both Paul and you and with many of the concepts and ideas that you have presented here. We all know the old expression of being caught between a rock and a hardplace. I think that the wineries and winecos are the rock and the many tentacles of government as the hardplace. But the Internet (and Internet consumers) is the water that can wear away the obstacles. I would correct Paul about his statement concerning the Internet. It is not just of our lifetimes but ever!

    But to get this powerful force working for us we need to broaden the based of America’s Wine Culture. As a percentage of our total (adult) population wine lovers are not significant. America has a well established beer culture. Truly the power is in the people and until we find a way to harness that power (& energy) the traditionalist will hold sway.

    A new vision needs to be born where wine is not a weekend beverage for good meals or for special occasions…like in Europe it is a central player is everyday meals. “Share a good wine with good friends in a good wine glass”. Then there will be an irresistible force that will change the wine industry traditionalist and those that make the wine laws.

    Paul..three cheers for customer service and communications…thanks Cork.

  4. I want that book Wine Brands, but it’s too expensive…

    I’d also recommend the books How Brands Become Icons, Buying In, The Smashing Book (when it comes out), and I just bought the book “The Peep Diaries”.

    Thanks for the post!

  5. Its interesting because the main things you mention with regard to marketing wine online do not seem to me to be unique to the wine industry but instead are good principals of direct online marketing. As a European (and therefore a wine lover if not a buff) I can see that a well thought through digital marketing strategy will produce results because the target marketplace is pretty compact. The challenge will be how to expand that market and not simply to rely on direct channels to target existing wine purchasers (where the offer is don’t buy it there, buy it form us), but to achieve defection from alternative beverages (where the offer is don’t drink beer try our wine instead) through brand , relationship building and engagement .

    Using the maxim that there is no such thing as a new idea I would look back at the early Heineken advertising as portrayed in Mad Men and concentrate on the aspirational elements of wine as a sophisticated drink with lots of European chic. Focusing on the customer and treating your marketing as a magnet rather than a megaphone will bring you an audience that will be open to the idea of wine at home and therefore lead them through on a journey from initial contact through to fist sale, repeat sale and regular sale whilst also earning referrals.

  6. Gosh – great overview. Thank you. I agree with Paul that the very best customer is at our winery “the one who Googles your wine and through your winery store, and inspite of paying what is most likely the highest MSRP, buys the wine.” Driving the desire to access our wine online is a multi-dimensional efffort that may require lots of skill sets – but worth the investment of time and resources IMHO. Wine online generally means wine shipped via common carrier. I wish for Fed Ex, UPS or even the USPS to be advocates for DTC and join lobbying efforts to free the grape and help remove some of he insane barriers that prevent wine more direct sales. The post office is in serious trouble! Think of the money they can make on shipping fees!

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  8. John,

    Great piece! Paul points out some very important points that are sadly being missed by many in winery management. It will be interesting to look back on this in 10 years and see what the landscape looks like, I imagine and HOPE it will be radically different from today.

    Great job!

    ChrisO

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  10. Paul Mabray is definitely a thought leader for online wine sales and technologies.
    Great interview with wonderful overviews for wineries that are clearly hungry for knowledge.
    There are going to be some bumps in the road ahead for wine online, regulatory issues being the biggest.
    I agree we will see more B2B efforts. As well as more aggregation efforts, channels to drive sales for existing online retailers, etc
    Cheers
    Amy Atwood

  11. John,
    excellent piece with terrific insight. Agree with Paul’s comments all the way. And hey, as one of the “pioneers” why not :) !

    Regards,
    Smoke

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  14. There is a massive change underway in the mobile media market as it becomes unshackled from the operators’ portals that have dominated it for a decade, all without having made any significant inroads into the content use of mobile users. The new capped data packages, fuelled by further competition, will see a total revamp of the mobile media market. It will no longer be based on portals but on direct services by content and services providers via open source phones and mobile-friendly Internet-based services. The next step is the continued emergence of m-commerce and in particular m-payment services. 

  15. A lot to digest and think about, but I would agree with both Paul and you and with many of the concepts and ideas that you have presented here. We all know the old expression of being caught between a rock and a hardplace. I think that the wineries and winecos are the rock and the many tentacles of government as the hardplace. But the Internet (and Internet consumers) is the water that can wear away the obstacles. I would correct Paul about his statement concerning the Internet. It is not just of our lifetimes but ever!

    onlineuniversalwork

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  18. I once listened to a Japanese wedding speech where one of the fathers said, “go into a marriage with both eyes open but then close one eye once you’re married”.

    Likewise you should not expect too much from online in the same way you should not expect too much from your spouse ;).

    So to provide some gritty realism to this post from a wine
    retailer point of view.

    ***Advantages of Selling Wine Online***

    – It’s more convenient for time poor consumers who don’t want to drive, find a park, walk to the store, ask for product information, and wait in checkout line.
    – The internet and retailer websites can provide a vast array of
    content (reviews, ratings, recommendations) as well as advanced sorting and screening and even virtual wine cellars.
    – Sophisticated direct marketing can be conducted using databases and purchase history. This can lead to more repeat custom.
    – For some industries there are lower distribution costs e.g. music, newspapers, DVDs. Sometimes a wholesaler can be avoided like in the case of Dell Computers. With wine in the US this advantage is not as apparent.
    – You can sell all over the world at any time to of they day.

    ***Disadvantages of Selling Wine Online***

    – Consumers do not have the instant gratification of possessing
    (and soon drinking) the wine. The mail order industry has been limited to about 3% of total retail sales in the US. Internet only, or pure play retailers, probably face the same issue.
    – Many like the ambience of a fine wine store and find it integral to the shopping experience. Some people enjoy going out to shop. Men often joke about women being addicted to shopping when in fact some of us in a fine wine store can be just as bad. The actual purchase of shoes (or wine) is only one part of the shopping experience where as diversion from the routine of daily life, exploration of trends etc can be more important.
    – Sending single bottles of wine can be very expensive from a order processing, packing and shipping perspective. When a consumer “picks up” they are in effect using packing and shipping themselves at their cost of time and petrol. So retail stores may actually be the most cost effective way to get a wine from the winery on one side of the world to a wine drinker in the middle of New York.
    – Search engine result pages and poor websites can be confusing and frustrating rather than a seamless simple process that they should be.
    – Some consumers still have concerns about using their credit card (which they shouldn’t be) and giving their personal details online (which is perhaps more reasonable).

    So I agree there is a segment of wine consumers that will buy direct from a winery – but only a segment…

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