Evaluating DTC Wine Shippers — What to Look for if You Are Seeking a Strategic Partner
10.29.2018  |  by Milton Cornwell

Many wineries have been down the path of exploring fulfillment companies that specialize in DTC wine shipping. There are many of them and they all have their own strengths and weaknesses. With the significant growth and profit opportunity of the DTC wine sales channel, it is important to find a Third-Party Logistics (3PL) company that will give a winery access to best-in-class capabilities.

Companies That Have Logistics Needs Review 3PLs for Various Reasons

Companies inside and outside the wine industry have logistics needs, and addressing them has never been more important. The rise of DTC wine shipping over the past 10 years has evolved into a critical piece of customer acquisition, retention, and—hence—profits to the winery.

Most organizations will review their 3PL needs for the following reasons:

  • They want to outsource an internal function. It has grown too big, or too hard, and it is not a core competency.
  • They currently outsource, but the chosen vendor is not performing up to expectations. This happens quite often, where 3PLs change or have conflicting internal agendas, and performance to their clients suffers.
  • There are corporate governance guidelines that require periodic review of vendors over a certain spend threshold. Typically reserved for larger companies and/or publicly traded ones.

No matter what the reason, it is always helpful to have a list of relevant things to examine when reviewing 3PLs.

Things to Consider in Your Evaluationthe Nuts and Bolts

Let’s face it—you outsource DTC shipping to take advantage of a professional 3PL that can do it better than anyone else. At least that is the concept. We have developed this checklist to help you find the very best strategic partnership for your winery, where it may not be one thing, but rather the combination of them, that makes a difference. We strongly recommend creating a matrix of attributes, giving them a priority ranking, and then grading potential candidates. You should have a short list of potential partners in no time.

How Long Have They Been in Business?

A very important attribute is longevity. You want and need stability. We have seen many smaller operations come and go due to funding issues, and even some very large organizations needing to rely on continuous rounds of funding to survive. Look for someone that has a solid record of accomplishment over time and is committed to growing the DTC industry. Remember, everyone wants to get into the wine industry today, but very few players really know the ins and outs of DTC shipping.

Where is the 3PL Located?

This might seem obvious, but where are the 3PL’s facilities located? Are they convenient for your staff to drop by for meetings and/or to pick up orders or returns? Is your bulk storage located in a bond facility close to the pick/pack operation? Do they have multiple locations across the country to reduce time in transit and help manage freight costs? Finding someone with the right geographic coverage makes sense for a number of reason.

What is the Size of the Operation?

We have written in the past about how important a good fit is when looking for a DTC shipper. This is very helpful to have both the winery and 3PL aligned with common goals and interests. Some 3PLs are looking to simply grow as fast as they can, and others that are small may not be well suited to handle a wide variety of services and solutions.

What Insurance Will You Need?

This one is rather simple. All DTC wine shippers require their clients to self-ensure their products. The only time that becomes tricky is when reviewing the physical location. Some insurance carriers may frown upon a facility that has not been kept up to date, such as having inadequate fire suppression systems, or an operation located in a building shared by other companies that may have hazmat or combustible materials stored on site. Know what you are getting into first.

What Shipping Carriers Do They Work With?

Does the DTC wine shipper have an agreement with only one carrier, forcing you into using that one? If it is different than the one currently being used, you may need to change your front-end e-commerce site and alter the delivery experience tools used by your customers. These are hidden costs and potentially unwanted changes forced upon your customers.

Do They Ship Legally?

Let’s face facts. There are DTC shippers that break the rules and ship to states they shouldn’t. The notion of wine shipping being legal for an individual is not in keeping with what the Wine Institute advises and/or the small parcel carriers deem compliant. Only a licensed entity can ship wine legally. With far greater regulation in play today, make sure you are choosing a reputable 3PL that will not get shut down for illegally shipping wine.

Do They Offer Customization?

Does the 3PL have the capabilities to do custom kitting, gifting, and packaging of unique items for inclusion with a wine club shipment? Ask to see samples. These tactics are becoming mainstream for wine club managers as they strive to create differentiation in building their brands. Even if you don’t do this today, it is always nice to know there are these capabilities when you need them. (That said, beware vendors who offer too much outside their core capabilities.)

What Type of Contract Do They Require?

A comprehensive services agreement is good for both parties. Ask for a copy to review the terms. It should cover business and legal conditions, level of services to be provided, and what is required from you as the client. Be wary of any agreement that does not have a short and simple termination clause with or without cause. That is a red flag, even if there are cure provisions designed to handle a dispute.

What Type of Pricing Model Do They Use?

The wine industry uses rate cards featuring bottle and zone pricing, along with standard services charges for things like receiving, storage, returns, etc. Sometimes a 3PL will give away the standard services charges and e-commerce technology as free. This constitutes a bundled pricing model. While this may be appealing up front, it is not free. The cost of these services is undoubtedly included in the rate card. An unbundled model will charge for the services on an “a la carte” basis, as they are used. A winery can actually manage their cost better using this approach. Remember this—bundled pricing favors the seller, while unbundled pricing favors the buyer.

What Are the Billing Terms?

Do they bill you every week, bi-weekly, or in arrears at the end of the month? This has a big effect on cash flow for a winery. Do you have online access to billing backup details? A good 3PL should be able to provide you with immediate access to detailed reports at the order level.

Do They Have a Documented Implementation Program?

A good 3PL will be able to walk you through a written implementation program. This should be readily available for you to see, and should be very detailed regarding the step-by-step processes. This way, nothing is forgotten or overlooked, and the winery can know up front what their responsibilities will be.

Technology Reviews

Technology can literally tilt the table. Get a demo of the 3PL’s client portal to see how easy it is to use and the level of functionality. This will be your primary window into the activities being performed on your behalf. At a minimum, you should expect to see single order entry, inventory updates and queries, low stock notifications, compliance management tools, customer contact information and shipping profiles, returns management, and standard/ad hoc reporting capabilities.

Do They Have a Data Security Program?

Customer lists are closely guarded secrets and considered confidential information. Does the 3PL have a documented data security program? If not, how comfortable are you that they can protect your customers’ personal confidential information (PCI).

Are They FDA Registered?

This is no trivial matter for 3PLs. The Food Safety Modernization Act, along with the FDA, is imposing registration of a facility if it handles food-related products. Wine is certainly a food-related product, as are food items that may be paired with a wine club shipment. Make sure your DTC wine shipper is licensed for both.

Things to Consider in Your Evaluation—the Industry View

At the end of the day, there are two more criteria important to your evaluation. These tend to hit close to home for the wine industry, because we are not just an agriculture business or a beverage business—we are truly a people business.

What Type of Company Culture Do They Have?

Company culture is important to employees because workers are more likely to enjoy their time in the workplace when they fit in with the company culture. Ask the 3PL to define their company’s culture. Can they succinctly communicate it? Does it fit well with your organization? A true partnership begins with having a common ground and speaking a common language. This will manifest itself in a winning customer experience.

Who Do They Currently Serve?

The most obvious credential for a 3PL is their current client list. Are their clients similar in size and stature to your winery? Can the 3PL clearly tell you what makes them unique and equally important? Can they tell you what type of client is a good fit? Finding a 3PL that is a good fit and can provide you with exceptional client service and flawless operational success is not hard—just ask for references.

Want more information on how to evaluate DTC wine shippers? Or do you want some information on Copper Peak and what makes us unique? We’d love to hear from you and have made it easy to reach us by using this Contact Us link.

Milton Cornwell