DTC FTW

Tin Sheets Marketing, Sales Leave a Comment

I want to start by saying that I love Vin65. They have been quietly spearheading the revolution in DTC (direct-to-consumer) wine sales in the face of giants like Amazon and doing it in a hugely innovative way, namely through decentralization. Unlike Amazon that continues to centralize by buying fleets of trucks to preform their own last mile delivery services or fleets of planes to perform first mile delivery. Simply put, Amazon is growing by centralizing their services under their own roof, whereas the model that Vin65 puts out there is different, instead of seeking straight growth for themselves, they are providing tools for helping their customers grow. They provide massively powerful systems like the ecommerce self-fulfillment solution EasyShip, client SMS communication, unified CRM platform, social media monitoring via TMRW Engine, and wine shipping collective 46Brix and put those tools directly into the hands of their client wineries. They are betting on you to succeed so much so that their company growth depends on it.

The traditional winery model is one that makes most sales via the three tier system, working from the recognized scales of efficiency: 8,000-12,000 cases, 14,000-18,000 cases, 25,000-30,000 cases and on up. Should you as a winery follow the traditional model of continuing to max out your scale of efficiency by maximizing equipment usage, expanding via distribution to new markets, constantly maintaining and focusing on third tier clients, then the Vin65 platform may not be the right choice for you- but your days may be numbered.

If it makes you physically ill to see that your best products sell for half of the retail value to the distributor, if the thought of earning the margin back that you are giving to the distributor sounds amazing, then Vin65 might be the right choice. However, it is not an investment-free choice, and I’m not just talking the cost of the service. For a moment lets consider the case of the fictional Rivet Winery. Rivet Winery is fairly close to a population center, but still a little off the beaten path. They make 20,000 cases of premium wine retailing for an average of $20 per bottle, with the wholesale price on that wine at an average of $125 a case ($10.42/bottle). After crunching the numbers, that is a “to winery value” decrease from retail to wholesale of 52%! If you work this out to gross revenue, the numbers get a little more startling: the 20k cases sold via DTC would yield a revenue of $4.8M, while the same wine sold through traditional three-tier systems would yield a much lower gross of $2.5M.

Of course most wineries are not in a position where they sell 100% of their product through one channel.The key here is the ratio of DTC to Wholesale sales. For Rivet Winery, let’s assume that they have been running a moderately-sized wine club and have a busy season that keeps their tasting room busy for 4-5 months of the year. In volume, the tasting room barely manages to earn 10% of the volume of the wine made at Rivet, but the 10% brings in $480K or 21% of the total revenue- that’s some heavy lifting for 2,000 cases of wine! What if Rivet Winery doubled that to 20% DTC sales? The DTC total is up to $960K and the gross revenue is up to $2.96M from $2.73M. It’s not that hard to see the impact on the bottom line of investing in DTC sales. If you look at the cost of the top-tier product offered for the VIn65 system as your sole investment to grow your DTC business, in this case of Rivet Winery just $11,988 was spent to earn an additional $230,000. Not a shabby ROI.

Obviously in this example Vin65 is the variable that grew sales in the tasting room by 10% and that certainly is not the case for everyone. From my personal experience, we saw even greater success and grew sales in our tasting room 25% year over year for the life of our use of the system (3 years) on only 4-5% visit growth Prior to implementing Vin65’s products, our DTC sales were 40% of our volume to begin with – the ROI for us was huge.

Focusing on DTC sales takes a lot of time investment above and beyond just installing the right system; it also involves lots of record keeping, a substantial amount of face to face time, and most importantly, perfect customer service practices. It is these details that let you maximize what a great system like Vin65 has to offer. It is pretty simple- if you think you are okay at customer service, you probably aren’t. You have to know that you are awesome at it, or you aren’t good at it – this is hard work, and takes more work than winery sales on the wholesale side do by a multiple of at least four.  Vin 65 is a great tool box, but if you don’t use it well you can’t expect amazing results.

I have said over and over why Vin65 helps a winery – but why them? To help Illustrate why they are the top of the heap in my mind here is a quote from a recent newsletter:

1. Personalization-Wineries have come a long way in using technology to get to know their customers better. DTC has allowed wineries to actually know who is buying their wine, unlike the 3-tier system where it was always a mystery.The problem? You’re not actually using the data that you’ve collected. In order to send effective emails with a great call-to-action (CTA), you need to personalize the content. In order to personalize, you need to have the data available to segment and analyze.

2. Email Marketing– Email marketing goes hand-in-hand with personalization. Sending emails is easy – but sending good emails, with an effective CTA, to a targeted audience is tough. So, don’t ask “how often is too often to send emails? I don’t want to spam my customers.” The truth is there isn’t a secret sauce answer for every wine business. Here’s the long and short: Stop focusing on frequency of emails (once per month, once every 2 weeks, etc.) and start focusing on the content. One simple, single-focused email with a great CTA will outperform the traditional newsletter type email with 3 recent blog posts, an event, 2 wine releases, and a club event. There’s too much going on – so no action is taken. Half of your customers are reading your emails on their smartphones, so a single-focused email will get much better results. Target and segment to see the sales role in.

3. Dialing in Technology– Technology has gotten better and better each year – but wineries still seem to work in silos. A customer walks into your tasting room and asks about the wine club, or whether they can buy wine online and your tasting room staff doesn’t know. Staff aren’t collecting email addresses because their boss isn’t in charge of the website. This flows through the technology: your tasting room staff is using a POS that’s not tied to the winery CRM. Your marketer doesn’t meet customers face to face. Your wine club manager works with active members – and not your entire customer base.As an industry – we’ve got to blend the pieces of our business together so the customer has a seamless experience. After all, the customer experience is the most important – and your systems should work to make it better and better.”

This is the way they think. They want you to have access to their data to let you know what matters – this is not a situation where you buy the tools and have to figure out how to use them, the relationship with Vin65 is a partnership where Vin65 wineries benefit by being part of the bigger picture of the DTC wine revolution.  So if you are the winery that is focused on maximizing economies of scale and not working on the DTC experience you will be fine, but how long will it be before the DTC revolution is the new way and you will be the one struggling to catch up?

In summary you should consider Vin65 and/or growing DTC if you:

1. Are in a location where people walk in the door
2. Have web presence (or the desire to have one)
3. Recognize the importance of Social Media
4. Rock at DTC sales tactics or are trying to learn
5. Want/have a wine club
6. Are willing to invest a significant of time building your reputation, training staff, and making people happy
7. Have access to stable internet and basic technology skills

You should avoid Vin65 and/or growing DTC if you:

1. Recognize that you simply do not have enough customers coming through the door
2. Are not willing or able to train staff
3. Do not see value in a web presence
4. Think social media is without merit
5. Don’t want to deal with the complexities and workload of a wine club
6. Don’t have the time to invest in the necessary support work
7. Don’t believe, embrace, or understand technology and have no desire to learn.

Curious to know more about DTC sales and what Tin Sheets can do to help?  Want to talk about Vin65 with someone or need help setting it up? Reach out to us via e-mail at info@tinsheets.com.

Disclaimer: Vin65 did not ask us to write this and is by no means the only option or mandatory to grow DTC wine sales – but it certainly is the best, if you ask us.