Ep. 434 Steve Raye U.S. Market-Ready | DTC Revisited

Thanks for tuning in. I'm Steve Ray, author of How To Get US Market Ready. And in this podcast, I'm going to share with you some of the lessons I've learned from thirty years in the wine and spirits business, helping brands enter and grow in the US market. I've heard it said that experience is what you get when you don't get what you want. My goal with the book and this podcast is to share my experience and the lessons learned from it with you so you can apply those lessons and be successful in America. So let's get into it. Hi. This is Steve Ray, and I'm back talking about e commerce. In the wine and spirits industry. And I wanted to focus this segment specifically on definitions. I look at the world as e commerce as the big umbrella title of the sale and or purchase of wines and or spirits via the internet from an entity licensed to sell these products to consumers and delivered to the customer via common carrier. There are different regulations that apply to wine versus spirits versus beer. There are different regulations that apply to domestic versus imported wine. And so we've seen this, tremendous surge in development of creative innovation of companies apps, platforms, tools that have developed around the regulations that deal specifically to wine and spirits direct to consumer sales. Keep in mind that e commerce regulations also differ when sales are from a traditional retailer to a consumer in their home state, intra state, versus a different state, inter state. We have provided maps that capture the current status of regulations as of September twenty twenty, and you can find them in my log channel at bevology inc dot com. We will post these definitions and images of the maps. So let's start with traditional retailer. And by that, I mean, a brick and mortar store or the equivalent. So that could be dedicated retail stores or chains. And examples in the US include K and L in California, Bev Mo on the West Coast, Binnies in Illinois, ABC in Florida, and Total Wine, which is in, probably thirty plus markets. And then there are retail stores and chains that sell merchandise, general merchandise, in addition to wines and or spirits, which we also call FDM, food, drug, and mass merchant. Food includes groceries or supermarkets, which we use synonymously, and those include Publix, Whole Foods, Kueger, H EB, and Texas, and the like. The deep art drug is major chains like CVS and Walgreens. Mass merchants include Target and Walmart, and then lastly, club stores, such as Costco, BJ's, and Sam's Club are the big players in the United States. So when we talk about traditional Taylor we're talking about, you'll hear the terms FDM, food, drug, and mass merchant. Stores that you go into will have big displays of different wines, spirits, and depending on the state, beer. Those are traditional retailers. Now let's take a look at non traditional retailer solutions. Given the many different state regulations governing the sale of beverage alcohol, Many retailers have developed solutions that can work in one or more states. And we specify them as solutions because not all of them actually buy or own the inventory that they sell. Many are just facilitators connecting a traditional retail store with a customer, both inter and in trust state. And some examples of this, and they're all various structures, and of how they work, is drizzly and minibar delivery, where they're basically the middle man the marketplace, if you will, where customers go to those sites, and then order on those sites and get delivery from individual stores. Amazon, which is even more of a hybrid, reserve bar, which is spirits only. Vivino, which seems to be operating more as a cross between a platform like drizzly and a club like wink. But I think still very important because of their reach over twenty million people per month. And lastly, there's category of wine clubs, and they come in a couple of different flavors as well. One is Wink, w y n c, another is naked wines, another is New York Times wine club, Wall Street Journal wine club, And these things are subscription. You sign up and you get they usually curate the products, and they'll send you a sometimes a personalized version of what's available on a periodic basis, monthly quarterly, whatever it happens to be. Then the other side of wine clubs is the winery owned or managed clubs. And these are exclusive to one particular producer. As we mentioned earlier, domestic producers have the right to sell directly to consumers in maybe thirty to forty states. So, wine clubs really have two flavors. One are subscription or curated versions, and they include naked wines, Wink Winc, more traditional New York Times wine club, Wall Street Journal wine club. PBS wine club. And then the second category is winery owned or managed clubs. And these are exclusive to one particular producer. So as I mentioned earlier, This is the unique case in the United States where a domestic producer of wines, domestic winery, can sell inter state from their home state to people in other states. Without going through a distributor bypassing, if you will, the traditional three tier system. And in fact, given what's happening with COVID nineteen, we've seen a dramatic shift in most wineries because as hard as it is for imported wines to find a place on the shelf is just as hard if not harder for domestic wines to do it. And now with the permission, if you will, to sell wine and spirits in non traditional ways, this becomes a primary strategy for a lot of domestic producers. And the last one is direct to consumer, also known as d t c or d two c, direct to consumer, generally accepted to mean e commerce direct from the domestic winery to a consumer. The important thing to recognize here is domestic wineries are able to sell directly to consumers in something like thirty or forty states. And that's about the only case that I'm aware of that sort of bypasses three tier system. And when we're working with clients, a lot of them ask why? I I don't wanna give the distributor that margin. I wanna bypass the system. The answer is, basically, you can't, unless you are a domestic winery. DTC in this definition is functionally a subset of the larger heading of e commerce. It is unique and that is the only system, as I said, that can bypass the three tier system. And additionally, it is often confused and conflated with sales over the internet from a retailer. So we recommend that when you're working in the space of direct to consumer, that you make sure you, your partners, suppliers, customers, agencies, importers, distributors are all using the same definitions. And one more that I would add for a couple of reasons, one because it dominates the industry, and the second one being it is a pure play on online sales, and that's wine dot com. So I look at it. It it fits into both categories. It's more like a traditional retailer because they operate nationally. And what's hidden from consumers is all the machinations that they have to go through in order to sell directly to someone in Vermont, which would be different from selling someone in New York, which would be different selling to someone in California. In some cases, they need to have a physical warehouse in a given state as an example. But y dot com is unique among all e com retailers in that they are set up to sell in all fifty states and they own and warehouse the inventory. In some cases, the inventory isn't even owned. It's done on a virtual basis and ordered basically threw a retailer out of a distributor's inventory. Additionally, because of this, consumers receiving goods in different states, we'll see different items on offer in wine dot com. So if you're in Oklahoma, you're gonna see a certain set of products that are offered for sale that is going to be very different from what someone in California sees or someone in New York sees. And so wine dot com has done a fabulous job of really capitalizing on e commerce and refining the program to something that works very simply relatively simply or inherently simply online. And we expect that to continue. While e commerce has grown for all retailers, Wine dot com has seen their business grow. I think I saw the number two hundred and fifty three percent from April in the beginning of the coronavirus to August. This is Steve Ray saying thanks again for listening on behalf of the Italian wine podcast. This is a great headline from the newspaper, energizer bunny arrested, charged with battery.