Jul 09, 2020
The COVID-19 pandemic has been the unexpected catalyst for a digital transformation in the world of wine. A transformation that, admittedly, we as an industry were not quite prepared for and, some might argue, was well overdue.
However, what we’ve lacked in muscle memory and infrastructure, we’ve largely made up for in fleet-footed agility and a hard-won resilience that has stood the test of time.
What’s truly fascinating about this online wine revolution, is the fact that it’s happening in the midst of unprecedented social distancing and being driven by home-bound customers whose online purchases are breaking all expected sales forecasts.
South African e-commerce sales lines have increased by up to 550% since the South African COVID lockdown lifted on 01 June 2020. Some have blamed South Africa’s harsh sales restrictions for the sales spikes (arguably the tightest restrictions in the world), but the data says otherwise. On a global scale, sales lines have shown the same trend playing out, even in countries where alcohol bans did not occur. In the United States, for instance, Wine.com has reported a quadrupling of their revenue to more than $1 million per day since 28 March 2020, with revenue of over $100 million for the last quarter.
In the midst of the frenetic (and sometimes chaotic) e-commerce activity, Vinimark gathered a panel of local and international wine industry experts to share their insights into the unfolding online wine revolution, and to offer practical guidance for how producers, brands and retailers can harness the unprecedented momentum currently experienced by e-commerce in South Africa.
The discussion was chaired by wine journalist and creator of HanDrinksSolo, Jono Le Feuvre, with a panel consisting of James Pietersen from WineCellar.co.za; Mike Ratcliffe, Director at Vilafonté Wines; Geoff Harvey, Director of Marketing and Exports for Vinimark; Brendon Geary, Head of Buying at Yuppiechef; Carolyn Martin, co-founder of Creation Wines; and Paul Mabray, CEO at Emetry.
Whilst discussing a few of the wine sales trends to emerge post-lockdown, Harvey pointed out that well-known brands – both premium and value - have been enjoying the lion’s share of online sales.
In a hard-hitting affirmation of this observation, Pietersen said: “As a producer, if you have a well-established brand, you would have done well during this post-lockdown period. If you haven’t done well, it means that your brand needs quite a bit more work.”
For those who fall into the latter category, this may come as an unpleasant reality check, but also a timely wake-up call to re-evaluate your brand direction and strategy.
While this could come across as an insurmountable task, the first step is rediscovering your brand’s story, and using all the platforms at your disposal to share it with passion.
In the wake of the sales ban, many producers engaged offered wholesale discounts as their fastest route to recovering lost sales. And while this may seem to work in the short term, panellist Paul Mabray pointed out that it is not without its drawbacks: “If you’re going to rush to increase sales, discounting is the fastest way to get there. But that doesn’t necessarily mean that it’s the brand’s best course of action. When was the last time you saw an iPhone on discount? Never! You never do. And it’s not just them – every retailer that sells Apple products is not allowed to discount them. So, that’s one of the most pervasive technology tools in the world and it’s not that their products are cheaper or that they can’t discount. It’s just that they choose not to. They’re very strong on their price.”
Panelists agreed that it may take time and effort to build brand value but that, in the long run, those efforts yield their own financial rewards.
Quoting Andre Kamphuis of Commerce7, Le Feuvre pointed out that consumers base their decision on three factors: price, product, and experience. But that they’re not evenly weighted.
“According to Kamphuis price only really accounts for a 10% role in how a purchase decision is made,” he continued. “The quality or nature of the product accounts for 35% of the decision’s outcome, while 55% of consumers are swayed by the experience of the purchase.”
Le Feuvre pointed out that companies need to be aware of the very important distinction between strengthening one’s sales line, versus strengthening one’s brand position.
Creating a type of subscription service is one of the models that brands can use to attract and retain customers in the post-lockdown era. While it may take some effort to build the correct model, it offers a far more sustainable alternative to discounting.
Mabray pointed out that subscriptions will look different from company to company, but that there were fairly well-developed consumer motivations that drive subscriptions:
- Replenishment – customers opt in to receive a weekly, monthly or bi-monthly case of wine from you to keep their cellars stocked.
- Experience – customers opt in to a subscription that offers some kind of unique experience. A great example of this would be farm-to-table type boxes that would include fresh vegetables, preserves, baked goods and a few bottles of wine. This also opens doors for collaborations with other industries and businesses within your wine region.
- Access – customers opt in to a subscription that offers them access to exclusive experiences, products or previews of products.
Of course, brands who have been doing well with online sales post-lockdown have also dealt with their fair share of unprecedented challenges, not least of which has been to meet increasing customer demand in the face of insufficient infrastructure, logistics and manpower.
Speaking from personal experience, Martin said that once the ban on wine sales and distribution was lifted on 1 June, the Creation Wines team had a few thousand orders to package and send out. Despite working with one of the leading logistics companies in South Africa, they had major challenges in fulfilling smooth deliveries. No doubt a testament to the unprecedented number of orders.
“We’ve had to embrace the new reality rather rapidly,” she said. “Among other things, we had to redeploy some of our team to do different things that they had done before. So, there was a lot of relearning required.”
Interestingly, it was not only boutique wineries such as Creation Wines battling with logistical nightmares, but even e-commerce giants like Yuppiechef.
“We were absolutely not ready for the increase in demand – especially on alcohol – on our e-commerce platform,” Geary said. “When liquor sales were turned on again, our customers expected the usual levels of service they’d come to expect from Yuppiechef, however the backlog of orders (placed during lockdown) coupled with the slow turn around of our supply chain meant that they were just not going to get their orders immediately.”
For Geary and his team, the biggest lesson learned from this was that what happens behind the scenes – whether its supply chain delays, courier backlogs or any number of logistical glitches – the customer will interpret it as a an error on the seller’s (in this case, Yuppiechef) part.
“It’s meant very quick changes in our strategy around products that we offer, as well as suppliers that we work with.”
Responding successfully to these challenges and thriving as a wine business in a post-lockdown online world requires a customer-centric and proactive approach to communication.
Off the back of his experience building the Vilafonté digital experience, Mike Ratcliffe shared his thoughts on the topic: “Digital and online hasn’t just arrived. It’s been around for at least 20 years, so if you’re going to succeed, you need to have a strategy in place. You can’t just shoot from the hip. We need to realise that it’s the responsibility of the producer to manage both their online and offline presence.”
The panellists agreed that the customer’s online purchasing experience starts well before they actually buy anything – and only ends once the product is in their customer’s hands. Put another way, just because a producer has handed a crate of wine over to a third party courier, this doesn’t mean that their realm of responsibility has ended. If anything goes wrong between producer and customer, it is very much the producer’s responsibility to solve the problem.
Firstly, as Mabray pointed out, it’s important to have a dedicated team member who is responsible for responding to queries, comments, compliments and complaints across all online channels. Online is where the growth is, yet we still don’t have dedicated resources assigned to dealing with online enquiries and customer service.
“Ultimately, the customer chooses where they talk to you. Not you. Whether you like - or believe - in a channel or not is irrelevant. The fact is that customers may try to reach you there,” he said.
In other words, creating and maintaining digital feedback channels for customers is crucial during a time where we cannot connect with them in person.
Martin emphasised this by saying that since Creation Wines has not been able to listen to their customers in the tasting room, they’ve channelled a lot of energy into listening to them online through social media as well as targeted email newsletter campaigns.
“We’ve also created Creation tasting kits, which can be sent anywhere in South Africa,” she said. “These tasting kits are like a moment of truth, because the customer gets to experience the product and interact with us on a virtual platform.”
While clear communication is key to customer satisfaction, bringing in a personal touch can add untold value in cultivating brand loyalty among your consumer base.
Of course, with many producers having to fulfil thousands of online orders, its impossible to pop a hand-written note into every box. But this doesn’t mean that taking a personal approach is not possible.
One of the hard truths highlighted by Mabray is the fact that every customer is important, but not every customer has the same importance.
“There’s a hierarchy between people who buy once, people who buy once a month and people who buy twelve cases a month,” he said. “The person who buys twelve cases might very well deserve to receive a personal phone call or email from you once in a while.”
Mabray argues that it’s important to weight the type and regularity of communication with different customers according to the regularity with which they buy your products and, of course, also the money they spend.
For this reason, segmentation mapping of your database – identifying our customers’ buying behaviour and their buying triggers - is hugely important to creating a more personalised experience for customers.
“Ultimately, remembering that our customers are human beings is really fundamental; that’s where many of us lose track,” Mabray said. “Remember that there’s a human at the other end of our communication. That’s what being customer-centric is all about.”
While many wine producers may see online retail as something of a stopgap until restaurants and tasting rooms reopen, the panellists agreed that e-commerce is not only here to stay, but is also set to grow well into the foreseeable future.
The fact is that we will need to get comfortable in the online realm and embrace the endless communication, storytelling and sales options that e-commerce has to offer.
Importantly, this is a journey that no brand needs to take alone – this is an excellent time to learn from one another, put heads together and collaborate.
In an effort to encourage this, Vinimark will be hosting more webinars that tackle difficult wine industry topics in the coming months.
Also keep an eye out for our first ViniCast podcast episode coming out later this month.
You can watch the full webinar here: https://youtu.be/Vi0-v1fPWd4
For more information on COVID-19, visit www.sacoronavirus.co.za