“We make wine work online.” … Paul Mabray, VinTank Founder & Chief Strategy Officer
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 formative 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.”
In 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.
TWM: 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.
TWM: 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?
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.
TWM: 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.
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.
TWM: 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?
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 wine (both retailers and marketing agents like Vinfolio, Winelibrary.com, K&L, Wall 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 industry 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…
‘Drilling Down‘ by Jim Nova
‘The Cluetrain Manifesto‘ by Rick Levine, Christopher Locke, Doc Searls, David Wineberger and Mckee Jake
‘Trust Agents‘ by Chris Brogan
‘Crush It‘ by Gary Vaynerchuk
‘Wikinomics‘ by Don Tapscott and Anthony D. Williams
‘Good to Great‘ by Jim Collins
The Take Away
Four 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 online 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.
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