ecommerce story image 180x180 - The hidden cost of wine retail’s ecommerce miracle

Wine retailers around the world largely survived the pandemic by pivoting rapidly and successfully to selling online as well as in store. Post-lockdown, the economics of this enforced omnichannel approach will come under more scrutiny.

As part of my work, I find myself in frequent conversations with wine retailers. The feedback over the past 12 months, from retail businesses of varying sizes and business models, has been fairly consistent: “we’re rushed off our feet” … “so busy, it’s crazy” … “it will be next week before I’ve got time to deal with your enquiry”.

So far, so not very surprising. We know that shutting the on-premise early on in the Covid era drove a lot of spending on alcohol online. We also know that, once the initial shock of lockdown wore off, and the economy stabilized, many wine-drinking households found that they had more money to spend and less to spend it on. No holiday in Italy on the horizon? Try a nice Barolo instead.

However, this analysis misses a key operational change that has occurred within the wine retail sector: having to create (or massively enhance) an online operation alongside the traditional bricks-and-mortar operation. This ‘omnichannel’ retail model is now widely touted as the future of retail; however, as many of my retail contacts are now finding, the unspoken truth is that this hybrid model involves a lot more work – and therefore higher operating costs.

In the UK, as in many developed world markets, the wine retailing landscape is fortunate to have many smaller and mainly independent businesses, traditionally operating from one or a few shops. Pre-pandemic, trade was typically walk-in customers, picking their own choices from the shelves, bringing them to the counter, transactions fully captured on bar-code-reading tills programmed to analyse and record stock depletions. In the past 12 months, with most of these businesses trading mostly online, almost all transactions involve more workload – pick, pack and dispatch each order; resolve stock outages; order and store bottle-safe packaging; deal with delivery issues; talk with customers by email or phone; update web sites which, in many cases, had not been built to be the primary sales platform.

All of this is happening against a backdrop of also having to deal with incoming stock issues caused by the double whammy of the pandemic and, in the UK context, Brexit. In many cases, the additional bureaucracy has had to be tackled with fewer resources where shop staff have been furloughed. Thus, these many “we’re so busy” complaints may well be accompanied by lower not higher net profit per bottle sold. Finally, this widespread community of smaller businesses which has been forced to migrate to online channels are also having to compete with established and fine-tuned online-only businesses and with the several enterprising importers and distributors who have migrated from selling mainly to on-premise to a direct to consumer offer.

As normal shopping patterns start to re-establish, many mainly independent bricks-and-mortar wine retailers which have always been such an essential and characterful part of the wine retailing landscape will need to transition. A post-pandemic survive-and-thrive agenda for this community might include:

  1. Ensure online platforms are as slick, robust, consumer friendly, and as reflective of the individual business as are web sites and social media experiences of the best-in-class online-only retailers
  2. Focus on maximising efficiency of all the back-office processes essential in online operations – picking/packing/dispatch; integrated stock control and accounting; customer engagement
  3. Revive and enliven the unique consumer experience of coming into a real wine shop and enjoying browsing, chatting with passionate wine folk, choosing, spending time and money.

The first two points involve heavy and sustained cash investment in new technology and processes – and for many of these retailers, cash is in short supply. The third feels much closer to the hearts, and minds, of many wine store owners. Long seen as differentiating advantage of specialist wine shops, hand-selling allowed retailers to directly share wine stories in store with their customers, contrast and recommend different wines, and often successfully up-sell. For more engaged consumers, who tend to over-index on both online and independent channel usage, hand-selling has been an integral element of enjoying wine and has imbued the wine category with unique pleasures and indulgences. All this is expressed in the past tense as, obviously, twelve months of social distancing and lockdowns have effectively removed this pleasure from the wine shopping landscape. As pandemic constraints begin to recede, hand selling has the opportunity to return and restore a wine shop unique, and help pay for a complex omnichannel retail operation.

Hand selling works if people flood back into store. But what if they don’t? Is there an effective, and not investment-heavy, way of reconciling a wine retailer’s natural passion for their product, with the reality of the omnichannel model? From my observations of the past 12 months, the answer seems to be a qualified yes. Some useful things that I have seen implemented, without big tech budgets, include:

  • Better imagery of wine bottles, presenting front and back labels, even slowly revolving to replicate hand-turning the bottle in a wine shop
  • ‘Compare’ functions as used in selling many other product and service categories online, to contrast and differentiate between several otherwise similar wines
  • Short well-edited clips of winemakers tasting and talking about their wines, along with back stories about the winery, the vineyard setting, their history, what makes their wine special. As part of Zoom tastings for a wine community which I run, embedded 1-2 minute videos of winemakers telling their stories has completely transformed the buying experience for my customers.

The traditional experience in wine shops may still be making a slow and possibly only partial return. As it does, operational economic models for wine shops may have to adjust and respond to the impact of a year of near-lockdowns and different post-pandemic behaviours. Online can never fully replicate the pleasures of human interaction in selling and buying wine, or the bonus of a spontaneous “let’s taste this”. Faced with this reality for at least another year, perhaps longer, wine retailers will need to embrace the full toolkit of engagement – human as well as digital, to restore profitability.

 

Brian 180x180 - The hidden cost of wine retail’s ecommerce miracleAuthor: Brian Howard

Email: Brian@wineintelligence.com 

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