In our previous post, we took a look at the history of flash sales and how they became a fixture in the DTC wine industry. Although this sales model has fared better with wine than with many other products, it does appear that the culture at large does not have the enthusiasm for flash sales that it once did.
Inevitably, any sales model will go through a cycle of high expectations and high popularity, followed by a “bursting of the bubble” and a leveling off. (For comparison, see the Gartner Hype Cycle for new technologies—it predicts much the same sort of thing.) Although completely natural, such “renormalizing” makes wineries gun-shy about innovations that come down the road. That attitude persists even though data shows that flash sales have either held steady or grown over the years.
That attitude has begun to cast its shadow over subscription services as well. Subscription services have become increasingly popular, and many new companies are doing innovative things with them. But just as models for subscription services are being perfected, some wineries and wine sellers are voicing their skepticism. Indeed, a few have even wondered out loud whether subscription services are “the new flash sales.”
It would be beneficial, then, to compare and contrast the flash sales model with the modern subscription/wine club model. Although they share some similarities, each was born out of a different economic time, with marketing and sales goals. Thus there are some stark differences, and those differences can mean that their fates will differ. More importantly, both are unique solutions that wineries can adopt, depending on their needs and business situation.
The Evolution of Flash Sales and Subscriptions
The idea behind flash sales was simple: Provide deep discounts for a limited time, usually 24 hours, as a way to build excitement (and website visits) while off-loading excess inventory. The model really began to take off in 2007 and 2008, at the start of the recession. Sellers suddenly found themselves with excess stock, and consumers, for their part, needed to tighten their belts. Flash sales were an easy way to move slow-moving items, and customers felt like they were getting a real deal.
The idea of short-lived sales at steep discounts was not an invention of this century, of course. What made flash sales new and different was the extremely short duration of the sale—which marketers played up—together with the power of the web to deliver sales announcements and finalize transactions.
In a similar way, subscription services have also been around in some form or another for a long time. The fruit-of-the-month (or steak-of-the-month, or cheese-of-the-month…) idea has been around since at least 1910(!), and “wine clubs” have been around for a long time too. So the basic idea has a long pedigree.
What has changed these days is the approach that many companies are taking to subscription services. Heavy market research has gone into what makes subscription services successful, and the services themselves are morphed to accommodate current tastes and trends. For example:
- Subscription services can now be molded to consumers’ individual tastes. Many subscription services start with a discovery process that homes in on new customers’ tastes and preferences. Existing customers have the ability to add, drop, or substitute items. More and more clubs are getting away from the “one size fits all” model.
- Subscription services are as much about content curation as they are about wine curation. Reviews and recommendations are forming a larger part of the wine experience, as are engaging stories. Subscription services are including things like food pairings, recommendations for future purchases, humorous content, and stories about each winery and vintage. And, of course, technology is making it possible for consumers to track their own experiences with different wines, archiving their reactions for future reference.
- Subscription services are much more engaged. Older subscription services simply sent out a new shipment every month. Today’s subscription services do more; they offer exclusive deals, inform about upcoming events, and reach out to members via email and social media. Club members feel very much a part of an actual club, and not just recipients of a monthly “mystery package.”
These are just a few differences between modern subscription services and older thing-of-the-month clubs. (For more on modern subscription services, see our post on Dollar Shave Club, or our white paper from the ShipCompliant Direct 2016 panel.)
So, subscription services and flash sales are both modern versions of older, existing models. And they are both methods for selling wine directly to consumers. Both attempt to engage consumers and rely heavily on email, social media, and a web presence to do so. These similarities make the two models seem very much cut from the same cloth.
But this is just an appearance. Psychologically, the two are very different.
Contrasting the Two Models—What Motivates Consumers?
Remember, flash sales gained in popularity when there was a two-fold need. Sellers needed to get rid of excess inventory, while buyers wanted a good bargain. In a scenario like this, price comes into focus. Sellers had to find a way to slash prices low enough to trigger the buy and still make a profit. On the consumer side, because the sale included just one or two items, there was no choice. Price was the main parameter in the decision—quality, speed of delivery, and content less so.
Subscription services have gained momentum in a post-recession economy. Here, a good deal is still appreciated. But it is the exclusivity of the offer, not its limited time span, that motivates consumers. With subscription services, personalization, quality, customer service, convenience, and content are all features that attract and retain those club members. Price is, if it matters at all, a secondary focus.
This means that the modern subscription service has much more flexibility to deal with changing economic conditions. If the economy were to worsen (knock on wood!), subscription models can easily adjust to retain their members by offering steeper deals, smaller shipments, or more suitable pricing tiers. This, plus consumer engagement, helps retain consumers until conditions get better, at which point the model can adjust again to offer more exploration and curation.
Psychologically, flash sales were driven by a scarcity mindset. Consumers were compelled to snap up the outrageously good deal before it was gone. And while these kinds of sales are still popular in the wine space, the marketing campaigns that went with them sometimes led to burnout. In contrast, subscription services are more driven by feelings of inclusion and community, as well as a sense of exploration and adventure. The feelings may not drive a sale immediately but grow steadily over time and create intense feelings of loyalty.
Thus, the two models differ greatly in what is actually motivating the sale and sustaining engagement. For this reason alone, one cannot predict how one will do by looking at the other. Both are part of a general expansion of DTC sales, which have already totaled $2.2 billion in the past year.
On the bright side, both are different enough that each can be a tool in a winery’s arsenal. For example, a winery can have a full-blown subscription club for loyal customers and still offer the occasional flash sale to offload slow-moving inventory. Better yet: Make the flash sale exclusively available to your club members. Or, if you are still building your club, give your members early access to the sale. Such hybrid models can work wonders, as they allow you to hit all the important customer motivation points.
And in the end, why wouldn’t a winery want to use every tool available to reach customers where they are today?
Copper Peak Logistics offers craftsmanship fulfillment for the wine industry. We have decades of experience with Direct to Consumer (DTC) wine sales, under a number of different models. If you would like to discuss options for starting one of these models or enhancing what you have, contact us.