Supplier’s take their inventory, and place it in a fulfillment/distribution warehouse, where it is kept on consignment basis. (technically, this could be the distributor’s warehouse) The supplier is responsible for shipping it to the warehouse, and is responsible for all the costs of warehousing the wine. When a trade order is placed for the wine, it ships directly from this fullfillment center to the restaurant/specialty shop/retailer. Once the wine is delivered, the monies to cover the taxes are then transferred to you, the distributor, along with a ‘virtual portfolio handling fee of $3-$5 / case.

Now… $3-$5 / case may not compare to the $15-$20+ / case that you are currently receiving, however, you no longer have capital tied up in inventory, nor do you have these overhead expenses. Furthermore, your supplier isn’t being put out in the cold, and the brands are still generating some revenue. If the brand were to flop completely, it costs you nothing. If the brand suddenly takes off, you then add that brand or supplier to your traditional portfolio.

This model benefits both suppliers and distributors.

It makes it simple and easy for new/young/small suppliers to become affiliated with a distributor, and its almost guaranteed that if the brand is successful, it will be included in the distributor’s traditional portfolio.

As more distributors realize the potential of embracing direct sales, they will realize these virtual portfolios are a risk mitigating means of adding wines to their portfolio. Even to the point that a distributor can take on thousands of suppliers, and place them in the virtual portfolio, at no cost (beyond a clerk or accountant processing the tax payment, and the commission check), and monitor their performance, waiting to find that hidden gem. As distributors align themselves with companies that set-up and handle direct sales, they will find that not only can they add their own brands to their virtual portfolio, but they will also be able to add other brands in the direct sales channels to their portfolio. This is because all suppliers need a distributor to sell direct to trade in a particular state. So if you are a distributor representing 10 states, and you agree to utilize this virtual portfolio model, you just opened 10 states for direct to trade sales, and you can be getting a piece of every case sold direct-to-trade in those states.

We feel that those distributors who are the first to embrace these methods, will be the ones that are most successful in the future of this industry.

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We recently started a series on getting your online sales vehicle rolling. Today, we are going under the hood to talk about the e-commerce engine used to power your shopping cart. At Grape Thinking, we have an established relationship with Inertia Beverage Group, as Paul, Andrea, and crew, in our humble opinions, have the best grasp and influence on the changes in the industry and are truly “Powering the Wine Revolution”. As such, they rank as our recommended engine.

So, what does this sales engine do exactly? As a winery, it has the vital role of coordinating the sales request between your customer and their bank, your fulfillment center and your bank.

A good engine should:

• have a simple and fluid shopping interface
• automate orders from customers
• track discounts, coupon codes, taxes, and shipping
• be integrated with your fulfillment center for tracking product depletion
• automate wine club shipments
• allow wine club members to easily manage their accounts.
• automate credit card processing
• provide easy access to sales reports
• self-update without disrupting your business
• offer sales volume and ship-to-state monitoring for compliance issues. (a service now free for anyone)
• provide simple tools for updating product selections, descriptions, and pricing
• come equipped with customer service and support tools for shipping and billing issues

Some of the most well-known sales engines available in the market today are Inertia Beverage Group’s “ReThink Engine”, eWinery Solutions, and Nexternal. They all require a set-up fee, which is used to create the shopping cart on your site, and have ongoing expenses – a combination monthly fee and/or commission. The great thing about paying them a commission is that it creates motivation to set up multiple affiliate networks with sites such as: RadCru, Wine.Woot, WineSpies (coming soon), Wine.com, Ambrosia Wine, … to name a few.

Part of getting set-up with the engine of your choice, will require you to establish merchant bank accounts, to accept payments from Visa, MasterCard, etc… This is not a difficult task, and can generally be accomplished by phoning the Merchant Bank, filling out an application, and faxing it back.

You will also need a website and webhost. Some of the providers, like Inertia, offer web-design and hosting as an additional service. There are also some up and coming online communities that will offer you a profile as a winery, that can be used as your webpage, and linked to your shopping cart/landing page/e-commerce engine.

We have invited all e-commerce providers to post their information on our site to try and bring the discussion to one place, and have a true resource and guide for those of you interested in direct sales. If you are a winery, feel free to comment with any questions you have regarding being set-up in direct sales. If you would like to inquire about our services, just Contact Us. As a peak into the future, we’ll get into more detail on fulfillment and distribution, web-page design, and marketing techniques.

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Now… here comes the fun part. Getting YOUR link out, and turning that funny looking bit of text into revenue to use for dinner and a movie. Here are some things that can help:

• Write a blog post, incorporating your new affiliate link
• Place the banner ads in rotation on your site
• Seek out people who need your product (forums and other blogs)
• Run a viral campaign based around one of your affiliates (We can help here!!)
• Don’t forget to include links in your newsletters
• Create an additional page on your site listing all of your affiliates, and why you chose them

Most importantly, remember that when you send people to someone else’s website you are laying out your reputation. Don’t be an affiliate just for the money, make sure you would actually use the product or service.  Check out our some examples by doing a search at TasteVine.

If your trying to sell your wine online, check out this post on “Building a Direct Sales Vehicle“

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Using an affiliate system is a very simple piece of the marketing puzzle… all you need is a website and something to sell.

Here is an overview of the process:

You create a sign-up page (refer-a-friend|referral|affiliate) where your affiliate prospect enters their contact information, preferred method of receiving payment (having a PayPal account is handy here), and agrees to your terms and conditions.

You need to be sure you are very clear in explaining the compensation for your affiliate service.

• Will you pay a set commission?
• Will you offer site credit/points or free products?
• Is the commission perpetual or first-sale only?
• Is it a single-tier or multi-tier commission?
• How often do you pay?

Once the form is complete, a random and unique url (http://yoursite.com/xxxxxx) is generated, which is linked to a page describing the product or service being promoted. You should also provide resources to your affiliates (banner ads, images, online brochures, FAQ’s) to make it easier for them to market your product/service.

Here is how the sales are tracked.

1. The affiliate places the unique url (ie: https://www.paypal.com/us/mrb/pal=XTSWT9LTNZE96 ) on their website, in their email, blogposts, forums, comments, or anywhere it will be noticed. Paypal for example has provided us with the html code to place this image that has our unique url imbedded. This is ideal to show our customers that we accept Paypal, and also to have a chance to make money from a referral if someone wants to try the service.
   

   

2. Someone clicks the link and goes to your site! A script (set of commands that automate a process) places a cookie (small file used to identify a user, track movement within the site, and store shopping cart information) on the visitors computer. Even if the person were to leave the site, and then come back by typing the basic url (ie: http://www.paypal.com) they will still be associated with the referring partner.
3. A report is generated daily/weekly/bi-monthly/whenever-you-want that details the metrics of your marketing network, and what monies are due each affiliate. A script could be used here to automate the process of issuing credits, writing and printing a check, or sending affiliate payments via paypal.

Once you are set-up for affiliate sales, it can become an extremely effective marketing tool. Especially when you start being creative with your incentives. A few examples:

Pfax (an unlimited fax-to-email service for $3.95/month) offers us a month of free service for any referral we send, and also offers a free month of service to those we refer. This method helps to create an incentive for the affiliate, and for the new customer to use the affiliate as well. Their service, however; uses coupon codes (ours: hwmvd24085)to track affiliate sales, which can be an ineffective means without some incentive to the customer.

iContact (an email marketing and blog management tool) offers us a perpetual commission for every user that signs up. That means that we make a commission every month for as long as that person is a customer… which is sure to be a long time, as the service really is outstanding!!! Grape Thinking also offers content writing and assists with set-up and email acquisition, so the partnership has been working out great.

• If you need help setting up an affiliate network, we’ve got what you need. View our offerings, and get a free quote.
• If your interested in direct sales, read our series on “Building a Direct Sales Vehicle”

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Now pause for a moment here. 1000 years ago people were sending Giraffes around the world, and people were amazed. In today’s society we can send clothing to the antipodes in less than 24hrs, and we’ve come to expect it… and don’t find it all that amazing. But yet we don’t see Giraffes as all that special. What high standards we have! But at the same time, we must marvel at how unimaginative we can sometimes be. Especially in the wine industry, there can be a lot of pissing and moaning and scepticism about the internet, and whether the 3 tier system will ever change etc. etc. Nassim Nicholas Taleb’s book The Black Swan highlights this phenomenon all too well. His main thesis is that man has never been able to predict what will happen, and that every major discovery and event in history has caught us completely by surprise. From the discovery of penicillin, to Black Thursday, almost everything in history has astonished the experts and upped the ante of the unpredictable.

We’re a remarkable species purely because we adapt so well to change. Adaptability is vital to survival, and thus it remains a wonder to me how big distributorships fail to see this. The Black Swan is right there in front of them in the form of direct shipping, and yet they refuse to see it or acknowledge it, and even spend good money trying to crush it. History should have taught them better, the only thing that stays the same is change.

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As an online wine outlet, winery or retailer, your website and online engine is your Sales Vehicle. It should be responsible for everything, from how your customers perceive you, how they order your wine, how they are charged, where the order goes, inventory tracking, to even the actual printing of the label in the case of Windsor Vineyards. If your site doesn’t do this, wouldn’t it make your life a lot easier if it did?

If you use traditional methods, you have to communicate these same things to your distributor, who then has to communicate this to a retailer, who then has to communicate that with their stores, who finally puts it on a shelf for the consumer to purchase… and then the information has to funnel back to you. In the words of Tom Friedman, “the world is flat.” With the power of the Internet, there is no longer a need for such an inefficient hierarchal bureaucracy.

Wine 2.0 is already happening, showing the importance of online blogging, marketing, and social interaction, while Tom Wark has comically notified us of the WITS (Wine Industry Technology Symposium), which is the industry’s “this-is-a-very-serious-business” event (www.wineindustrytechnologysymposium.com)… lol. They will cover interesting topics such as sales automation, supply chain technologies, vineyard management systems, etc.

The point is that it’s time to get on board with technology and direct sales, which both allow you to manage your business easier, faster, cheaper, and with more control. With your sales engine having so much responsibility, it stands to reason that you would want to have something that is well-oiled, fast, smooth, and reliable. Unfortunately there isn’t a Sales Vehicle you can take for a test drive, as most require some custom work before they are ready to roll. This leaves you with quite a bit of research/legwork to be done when all you want to do is drive.

We are starting a series that will help you make the right decisions along your journey to “Building a Direct Sales Vehicle”. It will include choosing the right sales engine and designing your website, handling delivery and logistics, and gaining exposure in the online marketplace. We welcome discussion from all the service providers in these categories, (though we already have done the research and have our preferences), as we hope this series will make it a lot easier for those trying to get set-up in direct sales, and facilitate a faster change within the industry.

• Read Building A Direct Sales Vehicle Part II

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Some of these shippers work to make it easy to deliver wines. For example, UPS offers a free service where they call the intended recipient before they deliver to make sure that someone over 21 is available to pick up the wine. Unfortunately, I don’t think all the wineries are aware of this, as we recently received some wine, and it was somewhat of a hassle… apparently the only way that UPS will do this is if the winery gives them the phone number and requests the service when they place the order into shipping.

So… if you are purchasing wines, don’t forget to mention it. This will help eliminate the need for the driver to make multiple trips, and make it easier to get the wine into your hands.

If you are a winery, and are interested in the Wine Institute, you better be from California, because they apparently only represent California wineries. Maybe they have plans for expansion, or maybe Wine America’s helping hands are working on, something similar.

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So how is this new law hurting the majority of the wineries that are shipping into Florida. After all, if you are a winery producing over 250,000 gallons a year (100,000 cases), odds are you have a distributor who is taking care of you, and its probably more convenient for the consumer to go buy it at a grocery store anyway. Does somebody really want to wait on a bottle of Kendall Jackson? The concept of direct sales is mostly beneficial to those smaller production wineries that aren’t a staple brand for the distributor.

Regardless of who may benefit more, the fact remains that Florida, one of the nations leading wine consumers, is about to take a step backwards, and if you live in Florida, you should be concerned. Go to FreetheGrapes.org and personalize a letter to protest the legislation. It takes just a second, and if you don’t do it, don’t complain when your missing out on all the fun of these wines that can only be found direct.

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Your wine is your brand, and the worst thing for a brand is to not have a point of difference. So next time your strolling through the online world, and looking at all of the wineries’ webpages, pay attention, and one thing will become very apparent. Most winery websites follow the same template. It really does look like the winery sent in a few pictures and a paragraph description to the web-design company, and they just stamped the site right out. Granted this doesn’t apply to all wineries… many take the time to find a designer and pay them $1000′s to develop a site that is unique to their image. Unfortunately, the majority of wineries don’t have this budget, and resort to the ever looming “default” home page. This could be because godaddy.com gives you the template for free, or you put out a website simply because you felt you had to.

Every winery is different, every wine and its vintage is different, every wine maker unique and lovable in their own ways… How do you share that with an audience? How do you attract the audience? The solution isn’t for a winery to work intensely at marketing themselves, but to do what they do best… be unique. One of the most recent internet phenomenons is myspace.com. As the name portrays, its MY space… unique to that individual, created however they would like. Granted there are almost always similarities in basic design, but every page has a personality to interact with… not to mention the page is plugged into a community of millions of people. How easy is it to stumble on a myspace profile… too easy almost… browsing through the site, clicking on friends’ friends, and their most popular friend, looking at the comments that have been made, going to a bands page, reading what the artists are experiencing, and even talking with them on their wall. Some wineries are even taking advantage of this already…Bellview Winery, (a small winery in New Jersey, they are only sold locally in the state, and they have over 500 Myspace friends) The one drawback is that Myspace pages give samples of the musicians work, whereas wineries will obviously not be able to give tastes of their wines.

The two “profiles” on this page, one for Estancia, and one for Dromos (picked simply because they’re a couple of the favorites here – click to enlarge) were quickly designed to give an idea of how a winery could have a community profile page that not only complements their website, but also allows interaction with the fans. It gives some basic information, and gives the ability to have an open discussion right on the page. They would need to be somewhat similar for ease of navigation, but the main point of difference being a combination of the functionality and the ability to interact with the viewers. Furthermore, it could serve a really cool function of providing a virtual tour of the winery. This is the type of feature that could actually had value to the consumer’s buying experience and even entice them to travel to that location, which could even be arranged through the profile page. Estancia’s website is rather advanced for winery websites and should not be discarded. Instead, there should just be an RSS feed on the profile page that brings in content from the website. Dromos, on the other hand, has practically no website presence and could greatly benefit from a profile.

The problem of rubber-stamped websites can be solved, but two very important things have to take place for the benefit of these personality profiles to realize itself. First, wineries have to be willing to update their profile with new content on somewhat of a regular basis… this applies to their websites as well. Second, and more importantly, in order for these profile pages to really serve their purpose, they have to exist within an established online community of wine consumers or within an online community of wineries, in which consumers go to check out their options. WineWeb and RadCru are doing some very interesting things, creating online marketplaces for wineries. However, they have a minimalist presence for the winery, especially their personality. This is probably because, as previously mentioned, it will be very difficult to get wineries to consistently add content and update their profiles. Ultimately, it’s going to take the attention of the consumer before the wineries start putting in the effort.

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One of the best ways for wineries to connect with their customers is through an email marketing program. However, if wineries were given the capability to e-mail customers personalized newsletters, promotions, RSS feeds, etc., would they actually want or take the time to do it? Winemakers are rustic people and have a very strong passion for what they do. They enjoy the human element of winemaking and having close relationships with people that they do business with. Technology, especially e-communication, takes the face away from the customer, which in the eyes of the average winemaker or winery marketing director is not a real way of connecting. The marketing potential, however, is too great for this perception to not change in the near future.

In reality, wineries have indirect relationships with their customers through salesman, retailers, and distributors and that barrier is something that has existed for awhile. Thus, this new direct-to-the source e-comm. approach probably makes wineries a little timid, especially since they’ll have to become tech-savvy to utilize its potential. Even though they may be turned away at first, this does not deny the fact that if wineries directly connected with their customers more often, they would have increased success … they just need a medium that understands the consumer and understands how to deliver the winery’s information when and where the consumer wants it.

There’s a great product called iContact that simplifies this whole process. Through its web-based system wineries can send newsletters with personal messages, new products or promotions as well as surveys that get customer opinions about various issues, such as the quality of the latest vintage. They do RSS feeds, autoresponders and all that good stuff, as well as detailed metrics and tracking systems that inform who is opening newsletters and surveys, and therefore who is more likely to become a quality customer. This type of info can be so valuable to wineries because, with it, they can feel confident that they know who their customers are and what they want. Furthermore, they know that if they deliver on their customer demand, they can develop quality long-term relationships them.

The most important thing, however, is for all of this information to consistently get to the people that want it, while absolutely never becoming spam! This cannot be emphasized enough. It is a must that customers personally sign up for these newsletters, surveys, etc, which they can do on winery websites or other community sites. If people keep getting messages that they don’t want, they are just going to be annoyed and probably won’t buy your product again. iContact has strong relationships with ISPs to guarantee that messages get to the customers, while strongly advocating ethical approaches to email marketing that are about building relationships rather than overloading inboxes.

This is some cool stuff, and there is no doubt that smart, tech-savvy marketing directors out there will start doing it for their wineries. For those that are more technologically challenged, I guess you’ll need a little guidance.

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