Five Things The DTC Numbers Tell Us

If you're a data junky, you're going to love this.  And if you want a glimpse into the future of retail wine shopping, you'll enjoy it, too.  Because numbers tell a story - and this is some story.

A $20 wine bought at retail was probably sold by the winery to a wholesaler for less than $10.  So, if the winery can bypass the three tier supply chain and keep that extra $10, well, hell yeah - they want as much of that action as possible.  In industry parlance, that's known as the direct to consumer (D2C) channel.

The annual Direct To Consumer report was just published and, as in years past, it makes for interesting reading.  Produced by Wines and Vines and ShipCompliant, the report is a comprehensive breakdown of wine that gets shipped from wineries' warehouses to consumers' doorsteps.  This can be intriguing stuff if you look at trends (again, data heads rejoice), but what's most relevant is what implications can be inferred from the data.

Some of the highlights from the report:
  • A total of 4.29 million cases of wine worth $1.97 billion was shipped in 2015
  • Since 2010 sales have grown by 66%
  • The average price per bottle was over $38
  • 74% of these sales come from wineries producing more than 5,000 cases per year 
Wow.  Those are some stats.  And if you scratch beneath the surface and dig into the data a bit, some inferences can be made.  Here are just five:
  1. First, these stats are for the D2C market only.  My brother-in-law's yearly order from Vincent Arroyo in Calistoga is included in these numbers.  But D2C does not include sales of wine via online retailers (, Garagiste, B-21, Empire Wine, etc.) speculated to be significantly greater.  
  2. Much of the growth in the market is coming from the lower price segment   This could be a function of low oil prices making shipping a lower portion of total cost, or it could be that there are new, less spendy shoppers coming into the channel.  This second possibility poses real downstream impact.  Younger people buying more inexpensive wine online.
  3. I'm not sure how big or popular a winery has to be before being widely distributed, but some (probably large) proportion of the wineries accounting for the D2C numbers are shipping to both consumers and wholesalers in the same states.  Put differently, wineries are competing with their distribution partners.  Hmmm.  Things could get awkward in the supply chain if the wholesalers figure out who, how much, and where.
  4. All this growth has coincided with a period when household income in the US has been stagnant.  What would/will the growth look like when wages are growing? 
  5. Finally, virtually all of these sales are coming at the expense of local retailers.  Is that a bad thing?  It sure is if you're a retailer.  But as a consumer, should you care?  Well, project this growth a little further and we edge ever closer to the extinction of the independent retail shop.
What can we expect to see in 2016 and beyond?  More growth as barriers to D2C shipping continue to fall, as consumers grow increasingly frustrated with the antiquated retail shopping experience, and as wineries invest more into direct to consumer marketing.