Wine E-commerce Remains a Niche

Store sales grow slowly, too, even as brands proliferate

by Jim Gordon
Alternative text
Explosive growth in brands has not resulted in fast-rising retail sales, Nielsen data show.

Napa, Calif.—In a conference focused mainly on digital technology for better wine marketing and sales, the first speaker’s message was sobering. E-commerce remains a niche market for wine, and in stores the explosion of new wine brands has not created strong growth.

Almost all, or 96%, of consumer packaged good sales occur in stores, and just 5% of consumers intend to buy wine online in the next six months, according to Laurie Rains, a vice president in Nielsen’s Retail Consulting and Analytics Group.

As the first featured speaker at the June 25-26 Wine Industry Technical Symposium, Rains seemed to be grounding the audience of 250 with a picture of how conventional the wine marketplace is, before several speakers to follow would try to lift the attendees to the heights of digital marketing possibilities.

“While there is a lot of growth around spending online, for the most part people still shop in stores,” she said. Her research showed that 19% of consumers intend to buy shampoo or vitamins online, while just 2% intend to buy spirits online and 6% intend to buy beer online.

What’s more, growth in dollar sales for consumer-packaged goods in general is below the 2011 level, she said, and the change in units sold is flat. Nielsen expects the alcohol beverage category to do better, rising 3.6% in dollars and 2.2% in volume in 2015.

The state of the economy is perplexing, Rains said. Job growth, the housing recovery and lower gas prices have raised consumer confidence to near the pre-recession level, but health care costs are high, wage growth has been limited and contrary to the confidence indicator 50% of consumers surveyed think the U.S. is still in a recession. “These contrasts make it hard to find real growth opportunities,” Rains said.

The good news is that e-commerce has plenty of potential for growth. 87% of US consumers are online, with room to grow to the level of Norway and Sweden at 95%. 68% of US consumers now trust online comments. More than half of consumers say they are willing to try online grocery shopping, Rains said.

Millennials, aged 21-34, are much more active online shoppers and are very receptive to “touchpoints” that give them recommendations or information from friends, social media and commercial media, among others. Which gives wine producers an opening.

These younger consumers like variety, since 40% of them buy more than seven wine brands per year. A profusion of new wine brands is available in US stores as 4,600 brands were added in the past year, Rains said, swelling the category by 19%.

But she said retailers are starting to understand that brand proliferation brings a degree of cannibalization and does not necessarily help them sell more wine overall. An opportunity exists for wine producers and marketers who understand how to use digital technology to reach the potential consumer more directly. Rains said they should be chasing the customer, not the competition.

Digital content is king
Wineries and marketers should use good digital content in chasing those customers, said another speaker, Joshua Saunders, founder and CEO of Uncorkd. The company developed an app for iPad wine and beverage menus that, he said, shows that readily available information helps sell wine.

His company recently surveyed 749 consumers who drink alcoholic beverages in restaurants, and found that uncertainty is the number one reason that people do not purchase wine. They avoid drinking wine or spending money on wine when they don’t know how it tastes.

Saunders said the survey showed that food and wine pairing suggestions and tasting notes are the top two things that would help consumers select wines from a wine list while dining out. Uncorkd provides that information for iPad wine lists and Saunders said, “We are finding rapidly increasing sales.”

The four changes that consumers would most like to see in restaurant wine programs are samples to try before buying, different size glass pours available, more by-the-glass options and more local wines available.

Wineries can also capitalize on digital content to help sales in their tasting rooms and elsewhere, he said. “You don’t want to only concentrate on the hard-sell of wine club memberships.” Wineries can use digital content to enhance the feeling of community while consumers are visiting and after they leave, he said.

Saunders cited a program at the Robert Mondavi Winery in Napa Valley as a good example. Visitors who don’t want to join a tour are offered the option of self-guided tours using digital “beacons” placed around the property, and an app that visitors can download to their smart phones.

As visitors stroll the property, the beacons talk to their phones and explain what the visitors are seeing, even leading them to the best places to take photos. Beacons are also being tried in stores to give localized offers on products as a consumer walks down the wine aisle, for example.

Saunders returned to the theme that content is king in helping people find a way to a winery’s products. He urged wineries to create great content for their websites, blogs, videos and social media, and said it doesn’t have to be expensive. “You want your information to be there. A lot of it is free to distribute, but you need to make sure it’s accessible, and available on all devices.”

Posted on 07.02.2015 - 18:39:07 PST
This shouldn't be a surprise. E-commerce is only about 5-7% of overall retail across the economy. People get too caught up in the hype. And for years data has shown it is only about 15%, at best, of winery direct sales. Also, probably most wine e-commerce is by brick and mortar stores.
Barbara Insel