Wine stores face threat from direct-to-consumer channel
While it’s hard to find a higher level of expert advice at retail, wine stores are the latest channel to be losing major share to direct-to-consumer (DTC) sales.
According to the “2016 Direct-to-Consumer Wine Shipping Report” from ShipCompliant, the volume of wine shipped from wineries to consumers increased 8.5 percent in 2015. That’s four times the two percent growth off-premise channels experienced, according to Nielsen.
The fast DTC growth over the last few years comes after a 2005 Supreme Court ruling relaxed rules for interstate shipping. With Massachusetts and South Dakota recently joining the fray, 43 states now allow direct wine shipments to consumers.
For wine stores, the most troubling aspect of the DTC trend is that it is being driven by the types of customers willing to pay for expert opinions.
With shipping costs a hurdle for bargain wines, the average bottle of wine shipped cost $38.23 last year, according to ShipCompliant. In the Napa Valley, which commands over half of the DTC volume, the average price was $61.41.
Able to make as much as twice the margin on a bottle sold direct versus traditional channels, small and large wineries have shifted to emphasize DTC sales. The efforts include building wine lists and pushing wine clubs while investing in hospitality centers and tasting rooms. Consumers see some discounts as club members while gaining limited releases and back vintages that used to be reserved for restaurant sommeliers.
Experiencing the winery and developing relationships with owners also makes buyers loyal.
“This emotional connection to the winery brand cannot be duplicated when buying through off-premise retail channels,” Lesley Berglund, chairman of the WISE Academy and an industry expert, told the Napa Valley Register.
Writing for NY Eater, Levi Dalton further noted that wineries only have to reach the “much smaller subset” of wine buyers who purchase “an outsize portion of the total wine market.”
A wealth of information, ratings and reviews online has also been challenging the ability of the local wine store to stand out for their wine knowledge.
- Direct Wine Shipments to Consumers Grow 4X Faster than Wine Retail Market in 2015 – ShipCompliant
- Napa wineries ship $1 billion in wine to consumers in 2015 – Napa Valley Register
- Why 2016 Could Be a Difficult Year for Sommeliers – NY Eater
- Does DTC mean the death of the wine store? – Steve Heimoff Blog
- How liquor stores could go the way of bookstores – MarketWatch
- A Savvy Breed of Winemaker Takes Business Sense to the Winery – The New York Times (tiered sub.)
Photo: St. Clement Vineyards
DISCUSSION QUESTIONS: How should wine stores respond to the direct-to-consumer threat? How is this challenge compared to the online pressures experienced in the book channel?