The Subscription Economy and the Evolving Wine Buyer
As we discussed in our previous post, subscription-based eCommerce, or as wineries know it—the wine club model—is growing rapidly. DTC sales are making up a substantial portion of sales for small to medium wineries. While the wine industry has been leveraging this model for over a decade, now isn’t the time to sit back, relax, and leave things on autopilot. The wine buyer is evolving and it’s important to keep up. Subscription options have expanded beyond wine to anything from charcuterie to beauty products and pet treats. Those who invest in satisfying the evolving subscription consumer will survive.
But before you go ahead and “invest”, let’s explore this whole subscription model idea and who its buyers are.
You Know It's Here to Stay if it Has a Nickname
The subscription commerce model has become so commonplace that it has earned its own nickname: “subcom”. Like anything, there are pros and cons to subcom. In the pros column, successful subscription businesses have more predictable inventory to control, which results in reduced spending, increased retention, and a healthier profit margin. The catch is that it can be more challenging to attract first-time customers and some retailers have difficulty in overseeing gross product quality on a larger scale. But, even with those drawbacks, the healthy retention rate makes it all worth it. Or as AllThingsD puts it, “...these businesses have great retention, with roughly 50 percent of each dollar retaining in perpetuity."
According to the Huffington Post, “Up to 41% of retail revenue in the U.S. comes from repeat purchasers, who represent only 8% of all visitors.” Translation: you can drive almost 50 percent of your business without having to acquire new customers. But if you’re going to capitalize on this model, you need be looking ahead as the customer has new expectations.
How Is the Wine Buyer Evolving?
To prepare for the future, wine producers should monitor how the wine buyer is evolving. Those who are paying attention to Gen Xers and Millennials have the chance to win big in the long term. Baby Boomers may still be the largest consumer group for wine, but all signs point to younger generations for future sales. According to The State of the Wine Industry 2017, “The Gen X cohort will surpass the baby boomers around 2021 to become the largest fine wine consumer demographic in the United States. Five years later, by 2026, millennials will surpass Gen Xers to become the largest fine wine–consuming cohort.”
This younger generation is also the same shopper who seeks out subscription opportunities with the brands they love. According to Hitwise, the average subcom shopper is in the 25 - 44 age bracket, is female, and has higher income and education.
The big question is how to change your strategy to win customers in these younger demographics. More tech-savvy generations expect more from their favorite wine brands and clubs. They’re looking for a people-first, user-friendly experience with only a few steps, and the right amount of personalization.
So How Do You Connect to This Evolving Customer?
Personalize Their Experience
Personalization has become a staple in subcom marketing across all industries, and Gen X and Millennials have come to expect it. If the customer has indicated that they only like red wine, they feel like your business is disconnected if you send them a promotion for white wine. Encourage your customers to share their preferences so you can customize their experience.
Not only does this benefit the customer, but it also gives you valuable data on your customers to guide you in planning for future promotions, products, and in-person events.
For more personalization tips, read Boost eCommerce Sales with Personalization and Automation.
Provide a Human Touch
Your customers are humans, and they want to be treated like it. With proper segmentation you can address their needs without overwhelming your business with constant one-on-one outreach. With the right eCommerce platform, like VineSpring, you can automate personal touches like a birthday email with a special promotion or identify your best customers and send them a more personalized thank you or discount.
Don't Skimp on the User Experience
We can’t talk about eCommerce and connecting with your customer without addressing the online user experience. As I discussed in The Subscription Model is Great for Business, the experience your website, eCommerce system, and email marketing provides is a critical piece to your sales success. Even in just the last ten years, eCommerce as a whole has made leaps and bounds to improve the customer experience. Younger generations don’t have the patience for slow-loading pages, complicated interfaces, or poorly presented online stores. If you want them to join your wine club, they need to understand what you’re selling in seconds.
Millennials and Gen Xers also need to be able to access your site from any of their devices. Sites that aren’t optimized for mobile will suffer. These customers use their mobile devices just like they use their desktop computers and the technology that brands employ, outside of the wine industry, are defining higher consumer expectations. A frustrating mobile experience is becoming a deal-breaker. Make sure you are using a site and an eCommerce platform that ensures your webstore looks and functions great no matter the screen size.
For more info, download the Complete UX Guide for Wineries.
Tell Them Who You Are
Your wine club members are part of your club because they have a connection to your brand. Whether it started in your tasting room or over a bottle shared with friends, they have a positive memory or had a great experience related to your wine, your brand, your people.
Keep that in mind as you build your site and set up your eCommerce system. The more you can create moments of delight and connection, the better. The way to do that is to showcase who you are and what your wine represents and make your communication personal. This approach shows that you care and prolongs that special experience that keeps your club members connected to your winery. I promise, this will pay off. When your customer feels loved by a brand, they become brand advocates, which is one of the best forms of marketing you could ask for.
Prepare for the Future
Gen X and Millennial wine buyers will soon surpass the Baby Boomers. These younger generations expect your online store and wine club to be an extension of your tasting room. Investing in the strategy and structure of your online presence paves the way for future sales and customer retention.
For more information on the technology powering subscription models, read out article Investing in Technology for the Future of Subscriptions.