Wine Clubs vs eCommerce: the times a-changing

February/March 2015

Bruce McGechan, M&P

Agenda

• eCommerce is failing the wine industry

• What’s a Wine Club and why have them?

• Wine Club Structures

• How to Grow a Wine Club

• Metrics

• M&P

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Why isn’t normal eCommerce working for wine consumers?• Retail in-store purchase gives immediate gratification

• Higher freight and fulfillment costs of eCommerce vs going to a retailer

• and vs other industries’ freight costs

• Enjoyment of shopping at a fine wine stores

• Online experience can be frustrating, credit card fraud concerns

• Winery brand stories are much weaker online than at the cellar door

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Source: “Wine Marketing Online” (2013) p.68

Why isn’t it working for wineries?

• “Build it and they will come” assumption

• Single purchase eCommerce acquisition costs are high

• Brand story is hard to tell online

• Channel conflict with retailers restricts discounting

• Cheaper at the local store/supermarket

• Fulfillment once per day for small amounts is costly — almost the same as large amounts using batch fulfillment

• Ad hoc (and custom choice wine clubs) are hard to scale

• Concerns about technology and internal training issues

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The movement to wine clubs

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Australian Wine Clubs

6

0%

15%

30%

45%

60%

2009 2015Source: Australian industry estimate

Percentage of Australian Wineries with Traditional and Recurring eCommerce Wine Clubs

• eCommerce is failing the wine industry

• What’s a Wine Club and why have them?

• Wine Club Structures

• How to Grow a Wine Club

• Metrics

• M&P

Agenda

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What is a Wine Club?

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Email List with offers

Recurring purchase paper form

Recurring purchase via POS or eCommerce

Programs:Email & Loyalty

Continuity: #/period, fixed shipping dates

Mem

ber-only benefits

cred

it c

ard

Discount Club - website / login

Why have a Wine Club?

• More high margin sales

• Save fulfillment cost and time

• Brand building

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1. Direct-To-Consumer (DTC) worth much more

• Assuming @$50 higher price per DTC case vs distributor case

• 1000 DTC cases = $50,000 of additional revenue (and profit)

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Source: Deloittes NZ Wine Vintage 2014 report

4000 cases = $200,000

10,000 cases = $500,000

1. Wine club customers are worth much more

• Cellar Door order value*: $70

• Wine Club order value*: $480 (over 26 months)

• Idea is to sell clubs not bottles

• e.g.14,400 visitors pa of whom 1.7%* buy wine = 245 people

• At $70 = $17,150 of wine (at cellar door)

• At $480 = $117,600 of wine (over 26 months)

• Difference in revenue of $100,400

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*Source: SVB Tasting Room Survey 2014 (slides 14 and 35)

Recurring >

7X= $100K more revenue

Single>

Wine Clubs have little overhead vs other channels

• Distributor and trade channel

• sales staff, travel, accommodation, entertainment, coop spend, trade events

• Cellar door channel

• cellar door building, staff, cellar door marketing and events

• Wine club alongside a cellar door

• software

• (wine club manager)

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2. Fulfillment efficiencies1.Division of Labour

• Famous example: 1 person making pins, made 20 pins per day.

• Breaking the process into 18 separate steps, with 10 people made 48,000 pins a day (4800/person)

2.Automation of tasks

• Process of normal eCommerce shipments, done one by one: check payment, print label, arrange shipping, email customer

• Recurring eCommerce and batch shipping process: in one go using software

• 10X more efficient example of a large wine club

• 30 days reduced to 3 days using more efficient fulfillment practices and technology

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3. Brand building

• Make your customers feel part of the “inside circle”

• More opportunities to communicate with your customers

• Brand messages with the shipments and via email

• Member only benefits build the brand

• Become more loyal

• Advocates

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• eCommerce is failing the wine industry

• What’s a Wine Club and why have them?

• Wine Club Structures

• How to Grow a Wine Club

• Metrics

• M&P

Agenda

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Wine Club StructuresProduct

• Red only, white only, mixed, varietal, reserve

• Majority of subscriptions red only

• Club member only wines

Frequency

• Monthly, Bi-monthly, Quarterly, Biannual

Quantity

• 2—4—6—8—12 bottles per shipment

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Subscription Price

• Tiers

• Low—a few lower priced wines in some lower priced packages, lower frequency, fewer bottles

• Normal—regular wine selections, regular frequency

• High—reserve wine in some higher priced packages

Wine Club StructureCommitment Period

• Depends on discount

• Little or no discount then no commitment

• Do you really need a commitment period?

• People who sign up for discounts quit the club earlier

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Discounts

• None—see member benefits

• Member only discounts on all bottles

• Discounts for additional purchases over and above the wine club shipment

• Some wines, or lower discounts on reserve wines

• Free tastings

• Other products T-shirts, food

• Events

Member benefits

• What would you do when your friends and VIPs visit the cellar door? = your wine club

• Special wines

• Exclusive or first time access to scarce wines

• Exclusive tours

• Members-only tasting events, reserve tastings

• Special member tasting room, lounge, or roped off area

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Wine Club Events (instead of discounts)

• Events: off-site, winemaker events, parties, art gallery shows…

• Estate walks, mushroom hunts, horse buggy rides in the vineyards

• Regular wine education events

• Shakespeare or film festivals

• Concerts and music events

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Source: www.intowine.com/sonoma-wine-clubs-club-club-assessment-author-jim-arnold

Artesa member events

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Brown Brothers (quarterly)

21Source: www.brownbrothers.com.au/packages/subscriptions/

Benziger

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Example:

Plus:• complimentary vineyard tram tour

• member-only tasting room and events

Stella Bella

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Chateau St Jean

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Moshin

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“ The Moshin Wine Club is a pre-release tasting program. You’ll receive 6 bottles of yet-to-be-released small production wine 2 times a year. Once you try the wine, you can have 6 weeks to

reorder your favorites for an extra 5% off…”

• eCommerce is failing the wine industry

• What’s a Wine Club and why have them?

• Wine Club Structures

• How to Grow a Wine Club

• Metrics

• M&P

Agenda

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Grow your wine club

• #1 is Cellar Door

• A cellar door without a wine club is like a car without an engine

• At events

• Online

• Email marketing

• Direct mail and phone sales

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Cellar Door Training

• Cellar door staff training

• Pour, inform, and sell

• Conversation naturally and respectfully includes wine club information

• information about member only wines, free tastings, events

• Straight forward pitch

• Ask on purchase and/or at end of brand story/tour

• Enthusiasm should show: the club really should be a great thing!

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Cellar Door Wine Club Sales

• Offer commission (for cellar door team and individual)

• Show daily, weekly, month sales by individual and team

• Wine Club has high visibility in the Cellar Door

• posters, brochures, forms, iPad sign-up apps

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• eCommerce is failing the wine industry

• What’s a Wine Club and why have them?

• Wine Club Structures

• How to Grow a Wine Club

• Metrics

• M&P

Agenda

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Conversion rate and Net Wine Club Growth

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Average attrition rate is 20%, growth is 35% (SVB )

Use Door counter and POS

Can be as high as 20%

Sales and Length

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• eCommerce is failing the wine industry

• What’s a Wine Club and why have them?

• Wine Club Structures

• How to Grow a Wine Club

• Metrics

• M&P

Agenda

33

Convert

Consideration

Discovery

Repeat

Workshops 2015 - Cellar Door Focus

• Social Media (Last month)

• Wine Clubs: boosting wine purchases (Feb/Mar)

• Driving Cellar Door and Website Traffic (May/Jun)

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About M&P

• M&P: Wine Specialist Digital Marketing and Ad Agency

• Wine Websites: eCommerce & Wine Clubs

• Advertising (online, social media and traditional) & Design (logos and labels)

• Social media management software and Mobile Apps

• Marketing and Cellar Door Strategy

• NZ Exclusive Distributor of Specialist Wine Website, Wine Club, and Social Media Software

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Questions?Contact Details:

Bruce McGechan

Mobile: 021-245-8881

Email: bruce@winemarketingpros.com

Facebook: http://facebook.com/WineMarketingPros

Twitter: @BruceMcGechan

Blog: www.WineMarketingPros.com/blog

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