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ANATOMY OF A DECISION

Choosing  to  Support  the  Direct-­‐to-­‐Consumer    Wine  Business  with  WineDirect  

Published: January 2016 Report Number: A0210

Analyst: Hyoun Park, Chief Research Officer

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What You Need To Know The combination of operational and compliance challenges for the wine industry traditionally forces providers to choose a variety of unrelated solutions in multiple areas to support business activities. These areas include customer relationship management, point of sale, onsite sales, ecommerce, wine clubs, marketing, resource management, logistics, and fulfillment across the full range of direct-to-consumer wine activities. In this context, Blue Hill explored the decision-making process involved in choosing WineDirect to solve one or more of these problems as an end-to-end solution.

The wine industry has traditionally been an agricultural industry dependent on small-scale, artisanal, and local distribution capabilities. However, in recent years, vineyards and wine producers have sought to take advantage of the nascent direct-to-consumer market, which Blue Hill estimates only represents three to four percent of retail wine sales at this point. As a result, there is a massive greenfield opportunity for the wine industry to directly own the customer experience and handle direct fulfillment. This route leads to a more personalized engagement, and eliminates intermediaries associated with marketing, logistics, profit, and end-user relationships.

From a sales perspective, wine providers must think both about retail point-of-sale solutions as well as ecommerce solutions associated with each brand. To support closer customer relations, wine providers need a customized customer management solution to support wine clubs and personalized offers. These orders and offers also must be regionally compliant with each state’s particular rules regarding wine delivery over specific timeframes. Once a customer has made an order, the wine request needs to be properly fulfilled through scalable logistics throughout its distribution. Finally, the wine order must be successfully tracked and delivered as it goes from a fulfillment warehouse to its ultimate destination.

AT  A  GLANCE  

About  This  Report  

This  report  explores  the  decision  making  process  associated  with  purchasing  WineDirect,  an  end-­‐to-­‐end  ecommerce  and  logistics  platform  customized  for  the  wine  industry.  

Clients  Interviewed  

Miryam  Chae  –  Constellation  Brands  

Angela  Hernandez  –  Lede  Family  Wines  

Key  Recommendations  

WineDirect  provides  value  both  as  an  end-­‐to-­‐end  solution  and  as  a  modular  addition  to  provide  a  consistent  version  of  the  truth  across  wine  operations.  

WineDirect’s  data-­‐driven  logistics  and  out-­‐of-­‐the-­‐box  ecommerce  and  wine  club  solutions  have  proven  especially  valuable  to  clients  interviewed  by  Blue  Hill  Research.  

 

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ANATOMY OF A DECISION

WineDirect as a Wine Industry Platform WineDirect is an ecommerce, logistics, and online sales solution centered on supporting vineyards, wineries, and wine retailers focused on direct-to-consumer sales. The value of these services, which can be provided either on a standalone basis or as an integrated platform, comes from supporting the wine industry, which faces very specific governance, legislation, and compliance issues that are unique and differentiated from general commerce and the food and beverage industry.

Initially founded in 2005 as IBG (Inertia Beverage Group) to support direct-to-customer sales, WineDirect has augmented these capabilities through the acquisition of multiple companies that provided additional functionality. For instance, in 2011, WineDirect gained logistics capabilities from 1-800-FLOWERS’ WTN Services, which focused on winery marketing and fulfillment services. In 2012, WineDirect acquired Vin65 to provide website and ecommerce capabilities to augment existing telesales, club management, customer management, and marketing capabilities. In 2013, WineDirect bought Elypsis to support point-of-sales, customer relations, enterprise resource planning, and accounting functions. In addition, WineDirect has pursued its own organic development of logistics, compliance, ecommerce, and marketing functionality to further advance its capabilities.

As of 2016, WineDirect provides a wine industry technology enablement platform that includes logistics, ecommerce, point-of-sales, outbound sales, loyalty programs, wine club, RF-enabled fulfillment, and a distribution model supporting fulfillment both from California for West Coast orders and from Ohio to support East Coast orders to reduce the cost of shipping. Because this approach is data-driven, WineDirect has also invested in security measures such as maintaining SSAE 16 Data Security Standards and PCI Level 2 certification for online credit.

Organizations Interviewed To support this research, Blue Hill spoke with WineDirect and with two direct-to-consumer wine providers that chose WineDirect to support aspects of their marketing, commerce, and logistics: Constellation Brands and Lede Family Wines. Blue Hill did so to better understand the challenges of direct-to-consumer business in the wine industry, and the need for a client and logistics management solution specifically modelled on said industry.

Constellation Brands includes a wide variety of luxury wine brands such as Robert Mondavi, Clos du Bois, Dreaming Tree, Mount Veeder, Wild Horse, Franciscan, Ravenswood, and Simi. To support this portfolio of brands, Constellation supports seven separate wine clubs and 11 ecommerce sites. For this report, Blue Hill interviewed Miryam Chae, director of direct-to-consumer marketing at Constellation, who had previous experience in supporting a set of disparate technologies for logistics, fulfillment, and customer support, and had already conducted a comprehensive RFP for solutions. As a result, she was familiar with the solution landscape, and wanted to avoid a similar experience at Constellation.

Did  You  Know?  

Cliff  Lede  needed  a  system  to  keep  track  of  the  specific  plantings  associated  with  each  soil  type  and  level  of  sun  exposure.  To  do  so,  he  created  “Rock  Blocks,”  which  are  vineyard  plantings  named  after  specific  rock  songs  and  albums  beloved  by  owner  Cliff  Lede,  including  names  such  as  “My  Generation”  and  “Dark  Side  of  the  Moon.”  

 

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ANATOMY OF A DECISION

Lede Family Wines focuses on providing vintages from vetted estate vineyards, including the flagship Cabernet Sauvignon, Poetry. For this report, Blue Hill interviewed Angela Hernandez, the wine club and logistics manager tasked with optimizing the Lede Family Wine delivery and club experiences.

Both of these wine providers have a variety of premium wines that they provide directly to customers. In seeking to better manage the wide variety of business activities associated with selling wine, they found both that administering a variety of different and siloed systems made management more difficult, and that standard industry solutions for tasks such as customer relations were not sufficient to manage the complexities of the direct-to-consumer wine industry.

Key Challenges Both vendors described the need to better support online transactions, loyalty programs, and wine clubs as a top reason to move to a new technology solution to support their customers. With a direct-to-consumer approach, both interviewees stated that a static system that provided basic customer contact information could not effectively support ongoing relationships, rapid response, and delivery issues associated with the holistic on-site, online, and telephone sales channels used to order and fulfill consumer orders.

For example, Constellation Brands was using Oracle OnDemand as its customer relationship management (CRM) system, but the wine provider found that OnDemand struggled to support automated marketing that was easy to administer on an ongoing basis. Based on experience and the desire to create a more integrated environment to manage their brands and customers, Constellation conducted due diligence across a wide variety of technologies to find a data-driven solution that could support a vast array of functions and effectively integrate with existing technologies.

A key concern mentioned by WineDirect clients was that many potential technology solutions claimed to support order or subscription management, based on the ability to process a transaction, but found that technologies that had no dedicated focus on the wine industry lacked an understanding of the direct mail and compliance issues that wine delivery based on a state-by-state basis must deal with, as well as the stringent penalties for non-compliance. To avoid the risk of losing a wine license for the entire state, these providers required an order management system that could effectively handle the order correctly.

Interviewees also identified the stated need for an order fulfillment solution that was both data-driven and could scale via automation. Constellation had considered Wineshipping, and found that vendor to be effective, but not efficient in supporting orders. For instance, there were multiple people on the floor double-checking the same process that WineDirect was able to manage with a single person. Constellation had concerns regarding the

When I started looking for solutions, I tested every solution under the sun for fulfillment, logistics, websites, but everything was disparate and segregated. And nothing worked as a complete customer database across our operations.

Miryam Chae Director of DTC

Constellation Brands

 

 

 

 

 

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scalability of this approach to administer the volume of orders that Constellation sought to manage. In comparison, Constellation saw that WineDirect’s approach allowed for the mechanical scanning and labelling of each bottle to support logistical and supply chain concerns.

Constellation has chosen to retain a separate vendor for compliance because it seeks to keep order and compliance information separate, and maintains a separate point of sale system because the operational challenge of supporting POS change management is not sufficient to warrant a change at this time. Because of WineDirect’s modularity and integration capabilities, Constellation is able to support these solutions without the same degree of difficulty associated with having a wide variety of siloed solutions running across all of a wine provider’s challenges.

Implementation Experiences and Challenges Clients found the purchase and implementation for WineDirect to be relatively fast, as implementations moved from initial contract to completion in a matter of three to four months with the only hangups being related to poor legacy data.

WineDirect’s clients used the solution’s out-of-the-box ecommerce product to support individualized microsites, as well as mobile-optimized sites provided at no extra cost. Although WineDirect now also supports responsive websites, the pricing at the time was attractive in that WineDirect was not needlessly double-charging to support a future of mobile ecommerce that has increasingly become the norm.

The biggest challenge that clients faced were with their own data that had been imported from multiple sources or from personnel who had input inaccurate data at some point, such as a customer named “Tour Bus” or a customer phone number of “555-555-5555.” To support these inevitable challenges in shifting from ad-hoc to governed data inputs, clients found that WineDirect’s focus on data integrity and data quality helped the wine provider to cleanse data during the implementation process. In particular, clients pointed out WineDirect’s focus on cleansing and optimizing data to provide additional value.

Results The greatest value noted by clients from WineDirect implementation was the ability to support scalable logistics and face difficult challenges with a no-nonsense approach rather than worrying about blame or shame. Clients pointed out that this approach was in contrast to multiple previous vendors who either would provide no immediate response or an inaccurate response to supporting complex challenges or identifying process breakdowns.

By moving to WineDirect, clients saw improvements in their community building. After moving to this solution, clients were able to start automating action emails, such as wishing a customer a happy birthday, or to provide wine club anniversary offerings without additional customization or manual updates. In addition, these clients were able to support more nuanced incentives and promotions through WineDirect’s “carrot” engine.

 

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Constellation, in particular, was able to use WineDirect to support Star Shipping, a program where Constellation Brands offers unlimited shipping across nine different wineries and wine shops for an annual membership fee of $99, similar to Amazon Prime. By scaling logistics and delivery capabilities, and having confidence in the capabilities of its provider, Constellation Brands was able to take this next step to support customers making frequent purchases of its premium products.

Figure 1: Representative Wineries Supported by Star Shipping

Source:   Blue   Hill   Research,   January   2016  

Recommendations Based on discussions with both WineDirect and WineDirect clients, Blue Hill Research provides the following recommendations.

WineDirect should be considered as an end-to-end solution from purchase to delivery. Over the past several years, WineDirect has taken both an end-to-end approach to building a wine commerce platform as well as a data-oriented approach to support automation, compliance, and scalability of operations.

Vineyards seeking to develop a direct-to-consumer pipeline should consider WineDirect as a solution that can quickly support ecommerce, point-of-sale solutions, telesales, and wine club communities through a single solution that provides visibility to all customer interactions.

 

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ANATOMY OF A DECISION

Consider WineDirect to provide modular business solutions for wine providers that have specific point of sale, CRM, or compliance solutions that cannot be removed. Blue Hill saw very different approaches to using WineDirect based on whether clients and stakeholders had started with a more data-driven approach, community-driven approach, financial approach, or logistical approach, each of which is handled through a different set of modules and functionalities. Because WineDirect has been built both to be a platform and to support integration with other standard systems, WineDirect can be used by wine providers seeking to fill multiple gaps across commerce, marketing, logistics, and delivery.

WineDirect’s combination of standard capabilities for ecommerce, logistics, bi-coastal distribution, and delivery were seen as helpful, although clients would like WineDirect to take further advantage of these capabilities to help support same-day or next-day shipping and match the demands being placed on the wine industry by general retailers such as Amazon.

Conclusion The business of wine has traditionally been very focused on agricultural and artisanal skill with less focus on the logistics, online collaboration, data, and delivery associated with today’s Amazon-based direct-to-consumer expectations. WineDirect clients have increased both the volume and quality of interactions with consumers by converting to a technology solution that can provide greater visibility to buyer preferences. In addition, by adopting this technology and delivery platform, WineDirect clients have also been able to create new products based on the improved business capabilities with the assurance that data will also be secure and compliant to the extent that these safeguards are necessary for the client.

Based on these findings, Blue Hill believes that WineDirect has a unique opportunity in the wine industry to support a rapid expansion of direct-to-consumer wine purchases. By bringing all core commerce and delivery functions into a single platform, and supporting the flexibility and reality of a wine market where specific point technology solutions may be entrenched or difficult to replace, WineDirect allows a wide variety of providers in the wine industry to support the emerging business model of direct-to-consumer sales.

ABOUT THE AUTHOR

Hyoun Park Chief Research Officer

Hyoun Park is the Chief Research Officer of Blue Hill Research, where he oversees day-to-day research operations, delivery, and methodology focused on vendor and technology selection. In addition, Park covers analytics and enterprise mobility technologies as a noted advisor, social influencer, and practitioner. Park has been named as a top 10 Big Data, analytics, and mobility influencer including quotes in USA Today, the Los Angeles Times, and a wide variety of industry media sources. Over the past 20 years, Park has been on the cutting edge of web, social, cloud, and mobile technologies in both startup and enterprise roles. Park holds a Masters of Business Administration from Boston University, and graduated with a Bachelor of Arts in Women’s and Gender Studies from Amherst College.

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