Why direct-to-shopper retailing matters

With individual small value food items, such as bread, spreads and oils, it’s very difficult to do anything other than sell into retail and work hard to influence the shopper to choose to take you home.

The amount of money that multinationals invest in their brands to keep them front of mind before entering the store, and assist shoppers choose these brands in the last six feet of the sale, is enormous. Very few medium-sized food businesses can ever compete on purchased awareness. Many are doing a good job of harnessing social media to allow truly satisfied shoppers tell others about their fine brands.

In the specialist and higher unit price end of food and beverage, specifically wine, spirits and craft beers, there is the option to harness that social media awareness into hard sales and support a direct-to-shopper retail model.

I work with small and medium-sized wine companies, so I mystery shop as many of the cellar doors in wine regions as I can.

Now I am sure you have a picture of me pleasantly relaxed being driven from cellar door to cellar door, making lots of observations on the shopper experience, and gradually forgetting it all as the afternoon turns to evening.

Well whilst I love wine, if I drink during a 12 to 15 cellar door mystery shop, my observations are not really going to do justice to my clients. However, I also love driving and riding. And there aren’t many nicer places to drive or ride than wine regions.  

I have toured and blogged my way around the Hunter, Yarra, Marlborough, Napa and Sonoma wine regions, not sampling wine but sampling direct-to-shopper retailing. Not just the cellar doors, but the coffee shops, cheese rooms, lookouts, musicians and wine club offerings across three “new world” regions. And wine clubs and direct-to-consumer for wine, craft spirits and beer has become the difference between staying in business or not.

We’ve all heard the 80/20 rule applied to most things: 80% of your business comes from 20% of your customers. Well in a medium-sized wine business, 80% of your sales do come from 20% of your largest organised retail customers. But 80% of your profit comes from the 20% of sales made directly at your cellar door or directly into the homes of wine club shoppers – 80% of a company’s profit!

No matter how many times I have looked at this equation, in three different countries, the ratio is the same. The caveat is that this is for small and medium-sized wineries; so more than 85% of the individual companies in any country’s wine industry. Once wine companies become large, their strength in distribution, investment in brand awareness and infrastructure seems to make them too ungainly to play in the direct-to-shopper model. They tend to focus all their resources on the largest 20% of retail customers, not individual shoppers.

Sometimes just knowing a ratio exists, that doing one thing a certain way in a certain industry delivers results, is enough for a business owner to hone their marketing skills in an area that matters to their business.

Kevin Moore is a retail expert and the chairman of Crossmark Asia-Pacific Holdings.