The Silicon Valley Bank (SVB) State of the US Wine Industry Report 2024 and the 2024 Sovos/ShipCompliant DTC Wine Shipping Report came out earlier this year, giving us some insight about how the U.S. wine industry did in 2023.
These reports spurred a webinar session with Sovos/ShipCompliant and Commerce 7, reviewing the Sovos report and going over the online sales data trends from Commerce 7, along with some strategies to bring DTC numbers up.
This session, plus other reactions to the reports, are underlining just how much room there is for “digital growth” in the wine industry. Here’s what we’re hearing from the experts.
It’s Hard to Read the Tea Leaves
“The question everyone is asking: ‘Are things good or bad?’” is how Rob McMillan, EVP and founder of the SVB Wine Division, summarizes the inquiries he gets around the report. “…it’s not a binary question. Some are doing well and some are not doing as well.”
This should not be too surprising, given the events of the past few years. But it does leave one wondering what is the best way forward.
From what we’re seeing, there are three clear signals from the market that should be considered for success:
- The cost of visiting a tasting room has increased significantly in the past few years. This includes not just tasting room fees, but also hotel, airfare, and even tips. This will require some rethinking in 2025 and beyond.
- DTC remains a crucial channel for wineries. This is especially true for smaller wineries, for which DTC sales can account for more than two-thirds of revenue.
- Putting these together: DTC sales will depend as much on digital tools and digital sales channels as on the tasting room itself. Now is the time to think more holistically about that customer experience.
Room for DTC Growth Through Digital Channels
Between inflation struggles, cultural shifts toward negative associations with alcohol, and wildfires engulfing valuable wine growing regions, it can be difficult to imagine better conditions coming for the wine industry. However, there is a silver lining: Customers are still shopping online, and there are some proven strategies to improve DTC wine sales through these channels.
For example, there are wine club trends showing that wine consumers really do enjoy the perks of getting specialty wines shipped to their homes.
- According to the SVB report, 39% of DTC sales are from wine club purchases—just as much as those from the tasting room, also at 39%.
- Average wine club shipments increased from 2.7x per year per customer to 3x per year per customer, according to SVB.
A digital presence is important to make DTC work—but not all wineries are taking advantage of these channels. In another post, we discussed the growth of some other up-and-coming technologies that might affect the wine industry, but when it comes to social media, not all wineries have been taking advantage of its potential. SVB mentions that 73% of winery respondents use Instagram and 72% use Facebook, but usage of other platforms is much lower, with YouTube being the next-highest at only 13%.
Actionable Expert Tips from Commerce 7
The Sovos/ShipCompliant and Commerce 7 webinar brought to light a number of straightforward tactics to increase online sales. Their simple, yet effective, tips are backed up with hard data from Commerce 7’s 2023 Data Book.
1. Gather Emails in the Tasting Room
Most wineries already do this, but Commerce 7 mentions that the wineries with the lowest email capture rates are capturing email addresses only about 3.3% of the time while the top 10 wineries gather emails about 69% of the time. This is a huge gap—and also a huge missed opportunity for those lower-performing wineries.
They go on to say that wineries capturing the fewest email addresses sold about 18 cents online for every dollar that they sold in their tasting rooms, while the top 10 wineries sold 78 cents online for every dollar in the tasting room. What a difference getting an email can make!
2. Make Online Shopping as Easy as Possible
There are also several ways to improve online cart conversion, and most of these revolve around making the process easier for the customer. For example, you can try implementing “buy” buttons on the list view pages of wines, so that customers don’t need to click into the product page to add to their cart.
3. Shipping Discounts Make a Difference
The SVB report notes that most wineries have done away with free shipping, but some still offer some form of discounted shipping. Commerce 7 data shows that lower shipping costs can make or break a sale, and so absorbing some of the shipping cost in other ways is a good strategy. They say:
“Shipping costs are the number one reason for cart abandonment. So if you’re aiming to increase cart conversions, it’s essential to find ways to reduce your shipping costs for the customer.” They go on to say that 90% of consumers say they’d shop online more when given discounted shipping.
That said, you will need to think carefully about offering discounted or free shipping, as there are many details and legalities involved.
4. Persistent Carts and Abandoned Cart Reminders
Persistent carts and abandoned cart reminders are a couple of simple tactics to deal with abandoned carts for any online ordering system. Persistent carts save the cart contents so that when customers log back in they can see what they had been looking at when they last visited the site.
Abandoned cart emails are automatic reminders emailed to customers. According to Commerce 7, these are opened about 45% of the time—and for those that do open the emails, a purchase is made about 50% of the time, resulting in an impressive increase in sales. They also note that both of these options are “set it and forget it” implementations on a platform, so essentially no extra work is going into these sales.
5. Offer Flexibility in Wine Club Shipments
According to Commerce 7, flexibility is key when it comes to wine clubs. Members want the ability to modify shipping dates and frequency, pick their own wines, and select how many they get. More flexibility ultimately leads to more revenue.
They also note some impressive statistics:
“When members have the opportunity to edit their shipments, we’re seeing that 32% will take advantage of it. And when they edit the shipment, we see a 17% increase in SKU count for edited packages, which results in a 9% increase in the average order value for those edited packages.”
So, there’s a lot to be optimistic about. For one thing, last year’s data showed high OND sales, and the holidays are just around the corner. There’s also clearly a lot of opportunity to increase online DTC sales. It will be interesting to see how trends start to improve with a few tweaks to websites and some training on how to effectively get emails in the tasting room.
For more information, check out some additional insights on the SVB and Sovos/ShipCompliant reports or set up a meeting with our team to discuss how trends in the wine logistics and shipping industry can shape your business.