Direct-to-consumer wine ecommerce in the global wine industry: Why do some countries lag in adoption?

Transcription

1 Direct-to-consumer wine ecommerce in the global wine industry: Why do some countries lag in adoption? American Association of Wine Economists 7 th Annual Conference June 27 Stellenbosch, South Africa

2 Introduction Matthew Protti CEO BlackSquare Inc.

3 Who is BlackSquare? BlackSquare is a leader in SaaS ecommerce for the global wine and spirits industry. Blackboxx, our product, is a revolutionary way of selling wine online, direct to consumers.

4 What is Direct to Consumer (DTC) wine ecommerce? Why do some countries lag in adoption?

5 DTC? Growing fast, but not as fast in the wine industry as in other global industries Music, Books, Clothes have revolutionized.

6 DTC? Scalable & Profitable Net margins are 0.5x 2.0x higher vs. other channels (retail, bulk, trade) Source: Australian Vintage, 2012 Annual Report, Segmented Revenue breakout, BlackSquare Inc.

7 Profitable Typical Example DTC Winery Produces Wine Mark-up Wholesaler / Distributor Mark-up Retail / Restaurant Mark-up 20-75% Consumer Some feedback Some feedback Some feedback Winery Produces Wine Consumer Direct feedback Sales Costs < 10% all-in

8 DTC? Logistically challenging

9 Changes Incredible growth changing a traditional industry A revolution in demographics and behavior of consumers Regulatory changes country specific Technology adoption both by producers and consumers Mobile purchasing

10 Mobile is on fire! Our first-hand Canadian wine ecommerce experience: Mobile traffic % % % and rising Mobile transactions 2011 vs up 2.5x 2012 vs up 4.7x Source: WineCollective Inc.

11 Where is DTC wine ecommerce popular? Global interest. But the U.S. leads dramatically in DTC adoption. Napa, alone, makes up 49% of all U.S. shipments sent out. Source: ShipCompliant, Direct-to-Consumer 2012 Shipping Report, Page 10 - Page 16

12 How does Canada stack up as a market for DTC wine ecommerce? Markets Qualitative Quantitative Countries Regulatory Logistical Retail Taxation Suitability Tech Adoption Canada Complex Large Country - Complex Fragmented Monopoly High 0/4 Adopting But why then is it already well along the DTC wine ecommerce adoption curve? Source: BlackSquare Inc.

13 Markets are not homogenous Markets Qualitative Quantitative Countries Regulatory Logistical Retail Taxation Suitability Tech Adoption Canada Complex Large Country - Complex Fragmented Monopoly High 0/4 Adopting United States Complex Large Country - Complex Competitive Low/Med 2/4 Advanced Australia Liberal Large Country - Simple Duopoly/Oligopoly Med/High 2.5/4 Lagging New Zealand Liberal Small Country - Simple Duopoly/Oligopoly Medium 3/4 Lagging Hong Kong Liberal Small Country - Simple Competitive None 4/4 Adopting China Mixed Large Country - Complex Competitive/Mixed Medium 1.5/4 Adopting E.U. Mixed Large Region - Complex Competitive Med/High 2/4 Advanced These categories are qualitative, based on BlackSquare and third party research into ease of doing wine-related business. Quantitative tech adoption is based on transactions within the industry. Source: BlackSquare Inc.

14 Wine-Specific Ecommerce Technology Availability (SaaS or Other) Tech Quantitative Qualitative Countries Availability Tech Adoption Suitability Canada Medium Adopting 0/4 United States High Advanced 2/4 Australia Medium Lagging 2.5/4 New Zealand Low Lagging 3/4 Hong Kong Medium Adopting 4/4 China Low Adopting 1.5/4 E.U. High Advanced 2/4 Wine-specific ecommerce tools lead to increasing adoption. Qualitative market suitability is a secondary consideration. Source: BlackSquare Inc.

15 3 Types of Wine Ecomm Ad hoc, Recurring, Targeted

16 Ad hoc 1st generation ecommerce technology (circa ) Ultra competitive, price is king (deal hunters!) Each order is unique Little information Generic ecomm carts, non-wine related

17 Recurring New tech (2009 present) Experience-driven, you re joining a club (subscription) Done right (i.e. US markets) = 70%- 90% of total ecommerce revenue Batch processing vs. snowflake Wine, being a consumable, is the perfect recurring product Source: BlackSquare Inc., Denner Vineyards Wine Industry Conference 2011, page 4

18 Targeted Add-on purchases Preferred and special customers Give members a reason to transact online

19 The path seems clear Consumer demand Leads to: Wine education Recurring ecomm Lagging Adoption? Tasting experience

20 The main growth over the next decade will come from a growing habit of buying wine online. Wine Intelligence report, 2012

21 Change = Danger + Opportunity There is unprecedented change in the retail landscape of wine...those with a strong online offering are benefitting the most...getting the right quantity & quality of winerelated information to consumers is a challenge CEO - Wine Intelligence, London April 24th, 2013

22 Value to producers Magnify tasting room s presence & reach Increase margin Control - prices & brand Future-proof Reach new customers 24/7

23 Value to Customers Authentic engagement Convenience VIP treatment Cool factor

24 Logistics Batch processing Integration with shipment carriers directly Ship often (gets easier) Think about the customer experience Optimize for buyer

25 Tying it all together One person owns DTC and links it all together Unique, memorable experiences Knowledge & analytics A wine specific tool is necessary

26 Technologies for the wine industry haven t kept pace with demand A flurry of technological innovation occurred in Producers interested in DTC are offered suboptimal solutions Generic ecommerce applications do not handle wine industry needs

27 Why do generic ecommerce applications fail the wine industry? No wine specific support (varietals, vintages, images) Lack of knowledge about what wine consumers value Recurring ecommerce is proven to be superior for DTC, yet generic applications do not offer support Many custom solutions (i.e. Magento) require large capital expenditures up front

28 Why SaaS?

29 SAAS tactics Economies-of-scale from aggregating customers via the network onto a uniform infrastructure Turns a capital expense (software) into a variable cost. Leverage technology to spare human capital (automate) Pay for what you need Learn how to sell product online from experts

30 Conclusions Wine markets are highly variable Incorrect assumptions by tech service providers continue: If you build it they will come. Producers looking at DTC should focus on recurring ecommerce and custom-built wine ecommerce solutions Countries lag in DTC ecommerce adoption because they aren t presented with the appropriate tools