How Do Wineries Beat the Amazon Effect — Customer Centric Shipping

Quick interlude blog — after participating in the most recent SVB DTC Webinar (the “After Dark” session) I gained a new clarity about the future of online winery sales. For the first time, I could see the market dynamics catalyzing change like never before, and simultaneously the wine industry awakening in ways I haven’t seen for decades. In the session, Rob was kind enough to ask me about some companies changing the future. His questions got me to thinking about Amazon, the customer experience and how selling wine online will be about adapting and innovating to reconcile both of these dynamic forces.

It’s become so prevalent, that there’s a phenomenon in the business known as The Amazon Effect. Due to their online dominance, they change customer expectations and disrupt entire industries. It is happening subtly with the wine industry, but a much more significant change is coming as a result of their purchase of Whole Foods and the inevitable transformation of wine retailer shipping laws.

There is no doubt that Amazon has changed user expectations forever. Consumers value free shipping, faster shipments, on-demand access to shipping progress and better shipping communications. We have a few crucial choices here; we can emulate Amazon OR, as a luxury customer-centric product, we can make different decisions.

For too long fulfillment has been seen as an operational cost versus a marketing activity. It is also too often viewed as a product-centric activity (deliver x to y by z date) vs. a customer-centric action. That got me thinking, to beat Amazon the wine industry needs to look at shipping through the lens of customer experience. In the SVB webinar, I mentioned two companies doing this and thought I’d expand to focus on delivery companies that are disrupting wine by focusing on the customer first.

Solving the problem by being customer centric — VinDelivery

Here’s the problem: you live in Northern California (where 30% of all direct winery customers reside), and you buy terrific wine (Peter Michael, Ramey, Opus One, Hirsch, etc.) but the delivery experience is pretty mediocre. UPS/Fed Ex/GSOetc deliver on their schedule often in a regular truck (don’t forget NoCal gets HOT too). For the price of wine/average order size you are selling, the client experience is a pretty lackluster extension of your winery’s brand. Matt Walrath, a wine industry veteran and energetic entrepreneur that bleeds hospitality, saw that as incongruent to the way wine deliveries should happen (especially so close to home). To solve these problems Matt founded a logistics company called VinDelivery. He then proceeded to match the demands of high-end wine delivery which required him to purchase refrigerated trucks and integrate “Uber-like” technology (e.g., schedules a delivery window and notifies you when the location of the vehicle all the way through to delivery). They deliver seven days a week from 8 am to 10 pm (the customer choice), and upon delivery, they help unpack the wine and take away the packing materials for recycling. It’s a premium hospitality service for people that buy luxury wines. He sent me these two quotes that I can completely relate with –

I love the text alerts I receive from VinDelivery. We have two young children, and while delivery after 7 pm is great for us, other delivery companies ring the doorbell which makes the dogs bark and wakes up our kids. It’s a pain…but with VinDelivery, I get the notice and am outside to get our wine when they pull up. It’s definitely one for the ‘win’ column in our house. — Rob H. — Corte Madera

One of the benefits of living in Marin is our proximity to Napa and Sonoma. My wife and I are both working professionals and as we’ve gotten busier the last few years with our son’s traveling sports games on weekends, getting to wine country to pick up our shipments or even remember when they are available has been tough. We love VinDelivery as they manage all of that for us and have learned our schedules and frequently make a consolidated delivery of all our wine club and allocation releases. Rob D. — Marin

VinDelivery’s rates run $30-$50/delivery. IMHO that rate is more than reasonable for people buying thousands of dollars of wine per delivery.
One of the things I found particularly impressive with Matt was his “try before you buy” campaign. If you are in charge of a DTC program, a brand manager, or the exec/owner of a winery and you live in NoCal and are a member of a wine club, he will deliver your wine club to you for $1 per shipment. My wife and I have tried and used it for the only wine club we are members, Domaine Carneros. Every shipment has been perfect and “Uber-like” in communications, and to know when the truck was going to arrive.

It’s always nice to also hear from a winery client, so Matt provided this quote from Sophie Gray of Sophie James Wine Co.

We recently launched our wine club and were too small for most fulfillment houses to work with us. I had been doing all the deliveries in the Bay Area myself until a few of my members in Marin turned us on to VinDelivery. With the refrigerated trucks, I knew I had nothing to worry about as related to temperatures and our wine. I also loved that Matt was strongly referred by friends… and what sealed the deal was that Matt agreed to stick with our signature special packaging which included a flower on each wine box upon delivery. Matt is just lovely and an absolute pleasure to work with. We are so happy with VinDelivery!

Solving the problem of the quality of wine — Premium Wine Delivery

Texas is also one of the country’s biggest DTC wine markets (approximately 8%). But when Texas is hot, it’s scorching. And when it’s cold, it’s freezing. Co-founder and CMO Melanie Ofenloch (aka wine blogger www.dallaswinechick.com) receives about a thousand bottles of wine per year and has experienced all of the same consumer pains described above. To better understand the problem CEO Marcin Cwian delivered packages for FedEx and Amazon. The horror stories of cooked wine, broken boxes, and delivery problems that Premium Wine Delivery shared with me, would haunt a wine lover for years. So, like VinDelivery, Premium Wine Delivery was founded with a strong focus on assuring that wine would be safe from heat, cold, sleet, snow, etc. As you would expect with the weather in TX, they too focus on refrigeration and technology to create a superior delivery experience. They also add insurance for all packages to ensure they protect all packages. But they went a step further by solving the Summer hold problem in Texas for all wineries by adding a competitively priced, (door-to-door), temperature controlled, shipping option where wineries have traditionally held off shipping to avoid heat damage. Premium Wine Delivery also allows a winery to control the entire wine logistics chain by using an Amazon-like delivery platform with real-time tracking, live updates, and notifications — providing visibility throughout the whole process and delivers on evenings and weekends. While the company began in Texas, there is a plan for expansion to other states in the future.

Again, it’s always nice to hear a customer quote:
“Texas weather extremes result in problems with quality wine delivery. We want to purchase wines domestically year round, not just Spring and Fall,” said Michelle Williams, Influential Wine Writer, and Editor of Rocking Red Blog. “We used Premium Wine Delivery in May for the first time. The wines arrived on time and in excellent condition — each bottle cool to the touch. We believe Premium Wine Delivery will allow us to have wines shipped to our home on our schedule regardless of the weather. This company is now our preferred means of wine delivery.”

Their delivery rates are approximately $70/package.

Solving the missed delivery — Buurb

Not everyone wants specialized delivery. Using a common carrier is okay for so many regular consumers. Chris Hens finally got tired of the annoying yellow tag and founded Buurb. You know the one: “Adult signature required.” Not only for wine but for all those other packages where you’ve just missed the delivery driver. Don’t forget the expensive package left on the porch that vanishes at some point from the time it is delivered and by the time you get home. Or the awesome Xbox package that is left out in the rain. Chris decided to build Buurb which allows you to choose “trusted neighbors.” It reroutes all these packages to these neighbors, so you can allow them to receive them on your behalf and tip them if you’d like. I know I have fantastic neighbors that I’d send packages to if I could avoid any of these issues. Buurb is still in early stages but an attractive solution to an age-old delivery problem.

Solving the International — Gliding Eagle

10%-35% of people that visit wine country are international. Marque brands like Opus One, Kieu Hoang, Kenzo, Joseph Phelps, Cakebread, Mondavi, Kosta Browne and many more draw foreign visitors that want to buy the wine. Shipping wine DTC is already challenging but shipping wine DTIC (Direct to International Consumer) is exponentially more challenging. On top of all the other risks there is counterfeit, lost wines, etc., etc. So many tiers of regulation and importation friction that it is almost a miracle to get wine to someone in another country. But consumers in countries like China, and others, want US wines too. Jack Duan and Adam Ivor have been working on this solution for years to help wineries expand their customer footprint from a US-centric base to be able to service people all over the world through their international DTC shipping company Gliding Eagle. Through a combination of partnerships and technology (QR codes coupled with blockchain), they protect and track every individual bottle every step of the way. Moreover, their tracking technologies (QR codes) are simultaneously used to translate the product/brand specifics to people in multiple different languages. Finally, to ensure wineries keep long-term relationships, he’s built measurement and segmentation tools that merely give clients the ability to segment and reconnect with customers throughout the year. They are working on enabling international wine club and international e-commerce offerings this year as well.

Solving the Supply Chain — Copper Peak Logistics

Featuring unique solutions without recognizing the incumbent third party logistic companies which sought to solve the original consumer problem, getting wine from wine country to consumers in their home. These fulfillment houses have worked for decades trying to streamline this process. They have both succeeded and failed in trying to accomplish these goals. Sometimes by being ahead of the curve, sometimes by forgetting that wineries and consumers want excellent service. I didn’t have time to interview all of them about the ways they are matching consumer needs (they can comment below). However, I did have a chance to catch up with David Dobrow and Milton Cornwell of Copper Peak Logistics. One of the first group of fulfillment companies in the wine category, they have been both leaders and observers of the space. While the four companies I listed above have exciting and innovative methods to help solve the customer problem let’s not forget that the old guard solves a crucial problem; seamlessly and effectively handling the customers that don’t/won’t use those services above to get them their wine fast and cost-effective. It’s in that arena where we are seeing them work harder to innovate by operating as that key intermediary to mitigate price and consistent delivery. In the case of Copper Peak, they’ve chosen to focus on limiting their customer footprint and provide better service to an exact customer profile. This way they can over-deliver on service and focus on getting the right rates and best experience by working with the common carriers. They are solving the customer need by streamlining the currently delivery chain. It’s even in their slogan, “Craftmanship Fulfillment.”

Only by looking at how we differentiate to solve real customer problems and creating asymmetrical customer-centric strategies, even at premium costs, will we able to compete against the Amazon effect.