Leadership Talks | The role of the e-commerce after the pandemic in the wine industry
Steve Raye
10 June 2022
Steve Raye, a true guru in the wine world, president and CEO of Bevology, author of Get US Market-Ready and Lecturer at Cornell University, returns to Bologna Business School for a new appointment with Leadership Talks, valuable opportunities for discussion dedicated to Global MBA students.
The focus of Raye’s talk this time is the role of e-commerce in the post-pandemic wine market, perhaps the sales channel that has driven most of all the change in the wine industry in recent years. But there is more to it than that, and one of the phrases Ray utters at the beginning of his talk is illuminating precisely in this regard: “Technology is changing everything. And it’s not just me and my entire world that is changing: technology is changing all kinds of things.”
On how to manage this change, Steve Ray has little doubt: it is a train we cannot miss, and if we are not prepared to get on it, we risk being swept away by it. In e-commerce, he explains, the numbers speak for themselves. Four years ago, e-commerce accounted for about 2 percent of the total beverage business, but it is estimated that by 2025 the total online wine and spirits business will reach $42 billion, an increase of 66 percent, confirming a positive product trend that began with the Covid-19 pandemic. If in 2019, the growth of the online segment was 12 percent, in fact, in 2020, it reached 43 percent, and by 2025 e-commerce will account for 6 percent of the global alcohol market. A share that appears to have tripled from the 2 percent recorded in 2018.
Among the markets to watch are undoubtedly the United States, for which an annual growth rate of 20% is expected. A growth that will lead the U.S. to be the most important global market for online spirits. Also growing is China, which is now worth about 33 percent of the online alcohol trade.
That of e-commerce for wine is thus, yes, a trend born with the pandemic, but it is now well-established and on the rise. Specialized websites make it possible to shop for large quantities of bottles while also offering considerable discounts and periodic coupons with various benefits. However, there are also specialized wine delivery apps that allow even a single bottle to be purchased. This variety of offerings reflects the needs of an increasingly diverse target audience and a market divided into two macro-categories: on the one hand, the more demanding and traditionalist, older consumer, who seeks products from well-known brands with good value for money; on the other hand, a younger consumer, who chooses e-commerce and uses delivery apps to quickly access premium bottles with immediate delivery.
Steve Raye presents a comprehensive picture of the global wine market, in which e-commerce is the magnifying glass for understanding consumption dynamics, but also distribution and communication dynamics, which from the United States then go on to determine trends around the world. The change in buying and consumption habits is so evident and so conditioned by the situation of the past two years that it represents a truly epochal event. Yet what is going to happen is by no means a foregone conclusion, and Raye’s talk comes down to an exquisitely pragmatic level. The point, in fact, is not to get lost in academic analysis but to figure out how to seize the opportunity. In very simple terms, “How to sell more of your products to more people in more places in the US and make more money doing it.”
We need to rethink the product and the way it is presented for it to stand out in a digital context. Basically, you need to redefine the business by thinking of your online storefront as if it were the retail display. Sounds obvious; it is not. An optimized presence implies a series of steps that cannot always be delegated to the digital agency: those who produce those who sell wine must be keenly aware of the dynamics of online sales and dialogue on an equal footing with the tech agencies they support in development. Thus, multidisciplinarity becomes an essential skill even for those who want to move into a tradition-bound market like wine, returns to the center of the discourse.
Having control of the sales flow, carefully analyzing data, and investing in growing our knowledge of the target audience and its behaviors are essential steps. Data speaks, and monitoring it completely and professionally may require specialized staff: getting out of familiar logics and selecting people who can handle the data analysis is the key to be in control of online sales. Test, see what works, repeat. And arrive at such a deep knowledge of our ideal consumer that building loyalty will be an almost spontaneous step because it is easier to help and meet the expectations of those you know very well.
Raye puts the customer at the center and reminds his listeners that wine e-commerce management has strict rules and that these rules apply even to small businesses, which must be willing to invest, train and carefully analyze the information that the online business allows them to acquire. Apps and marketplaces cannot be the shortcut: with high fees and management that often does not allow complete control of the process, they should not distract the seller from the need to build their business online.
Yet apps can be an important data capture and management tool. Indeed, in any online business, one must take into account privacy and related legislation, which becomes even more insidious if the market one intends to conquer is the U.S. market. Raye explains the difference between apps that support in selling without providing the company with any kind of data, which remains the property of the app itself, and apps that provide data and help companies build their business by creating and managing a database. This is the difference between Drizly and City Hive, and Raye, who puts technological expertise at the center of the discussion and invites people to learn about and explore these tools, bringing detailed and comprehensive examples and case histories.
Knowing the online wine world is also essential to understanding where to go to start conversations useful for engaging prospects and building constructive relationships. “If you’re looking for a needle in a haystack,” says Raye, “you need a magnet.” But, in fact, listening to him, the first thing that comes to mind is that you need to locate the haystack first: don’t wait for the customer to find you, but look for them where they already are, where conversations about wine take place. This is undoubtedly the first step. What about my magnet? The language, the content, the value I can give to each type of person. The tone of voice changes depending on the type of prospect. Having built the client base, it’s a matter of remembering that my best prospect is my client. So keep an eye out for the most important online wine businesses in the U.S. and worldwide – Raye provides a comprehensive list.
Hearing Steve Raye talk about wine, and wine retail is like diving not only into the history and dynamics of wine positioning and sales, but of marketing in general. From the store to e-commerce, his deep knowledge of the industry’s sales dynamics leads him to provide listeners with precise directions, explaining in a simple and comprehensive way a process that is not simple because the industry is particular: it has limitations, laws, and a need for skills, including in terms of logistics, that are not common to everyone. The customer’s expectation of an experience that touches people’s deep chords, linked to pleasure, conviviality, and origins, is another extremely delicate point: understanding it and not disappointing it is no longer just a matter of production and selection, it is a matter of technological skills and carefully thought-out investments.
Because today the experience begins online, product knowledge and appreciation often disregard company history, and white labels are more fierce than ever.
Learn more about Bologna Business School’s Global MBA in Food and Wine.
