Market overview

In terms of wine, online trading is a surprisingly mature market, as first online wine stores were among the e-commerce starters in the mid-1990s. However, in most industrial countries the online market shows similar characteristics: Only about 5% of all wine sale takes place online. According to experts like Michael Pleitgen (Weinakademie Berlin and Heilbronn University) and Nikolas von Haugwitz (Hawesko), rapid growth of the online wine market is still to be expected. Between 2006 and 2015 global online wine sales already increased by 600%. [1]

This is the reason why all major stationary players make strong efforts to gain market share in the online segment: Discounters, supermarkets, stationary retail chains, regionally significant retailers, mail order retailers and even food delivery services. Additionally, pure players, who only sell online, compete to gain market shares, although they have to build their customer base from scratch. Many of these players will most likely not survive the intense competition, especially as Amazon targets the same customers but benefits from vast economies of scale and an advanced logistics chain. [2] Aggravating this situation, margin pressure is not only developed by the big players but also from hobby wine distributors, who sell wine as a side-line job online without the need to make a living from it.

The situation seems to be similiar to the offline world, with one major difference: The cards have been reshuffled and the game is not decided yet.

Reasons to enter the online market

Wineries can profit from this situation for mainly four reasons:

  1. With rising demand of internet markets and just the minority of wineries focusing on it, it still is a competitive advantage just to be present in online shops at all – although there is no denying that being fully successful requires a little more effort.
  2. Going that extra mile gives online sellers access to customers with an up to 4 times higher willingness to pay for authentic products, especially if you target the premium price segment [3].
  3. Even wineries lacking other typical sources of customer acquisition, like a restaurant or touristic offerings, can win back direct customers online.
  4. It scales. Selling wine offline to many different customers is either time consuming or requires additional staff. Online sales usually gets easier once it starts taking off.

Get started with wine marketplaces

Like in the offline world, winemakers can choose from a number of channels that require different efforts, adress different target customers and have different requirements to be met.
Some marketplaces don’t require any more than just entering product information, which can be time consuming but is rather risk-free. Marketplaces usually demand a share of the actual sales, which can be incorporated into the wine prices. Some also have a full service offering but demand higher stakes. Others even charge a monthly fee just to get listed. Also, extra charges for prominent places on the portal or advertised listings are pretty common. Unfortunately, it’s not set that higher costs result in more sales or save marketing efforts. Just a vague rule of thumb: At marketplaces that limit the amount of wines or require an application your wines are naturally more likely to be found. But with no upfront knowledge, choosing the right platform(s) can become challenging. That said, the overall effort needed is most likely still lower compared to offline sales.

Here are some questions that can help wineries choosing the right marketplace:

  • Are the fees reasonable / what services are offered for the fee?
  • Do I need extra marketing or does the marketplace take care of it?
  • Who is keeping the stock? Are there extra charges for the stock?
  • If the stock is still kept at the winery, what options exist to update it when numbers change (automatically)?
  • How will the wine / the winery be presented to customers? Does it match the winery’s image?
  • What are the chances customers find the wine / How many customers are visiting the marketplace / How many other wines are listed?
  • What information can I provide to the customers?
  • Does the wine get re-labeled so the brand disappears for the customer?
  • Who controls the pricing?
  • Are there restrictions for selling wine elsewhere online (own shop / other marketplaces)?

Running an own online shop

An own online shop requires a higher one-time investment, that may pay off quickly, as there are no additional intermediaries that participate in your margin. But just setting up a shop out of a construction kit doesn’t do the trick. Without at least some online marketing budget planned, it may take years to get listed at prominent places online, i.e. by search engines and wine bloggers. This marketing invest is usually lower if the existing winery customer base is rather internet-conscious, the brand already has a large offline reputation or if the winery serves a niche. Another option to achieve attention is meaningful content for the customers, like food recommendations or production information. In any case, an online shop needs to be maintained as carefully as offline customers.

Once potential customers have reached the website, there are further pitfalls that can reduce the conversion rate of online shops. To name a few and avoid them, here are some requirements towards a successful online shop for wineries:

  • Intuitive user experience and properly presented product information
  • Offering of common payment options
  • Appealing, winery specific look (corporate identity)
  • Search engine friendly content and keywords
  • Mobile-friendly (responsive) design
  • Fast loading times (have an influence on search engine ranking)
  • Fulfillment of legal requirements (age-check, mandatory product information, …)
  • Easily maintainable content and product catalogue

Sources & Recommended Readings

Sources

[1] CBI, 2016.
[2] Röder, J., 2014. (German)
[3] Szolnoki G. / Hoffmann D. (2014). (German)

Recommended Readings

Book: Wine Online Marketing, ASIN: B00LKJAUOQ