Wines & Vines

February 2018 WINES&VINES 71 BUSINESS But when club members have the option to build their shipments, they tend to order more and stay club members longer even if they don't take full advantage of custom or- ders. "We're reacting to consumer trends and preferences," Agger said. Once an order is complete and double checked, it's loaded on to trucks for ship- ment. WineDirect operates a hub in Califor- nia's Central Coast to serve its clients there and another fulfillment center in Ohio. The added reach ensures it can fill 90% of all U.S. orders by ground shipment within 48 hours. The company employs 120 full-time workers in American Canyon and 122 more at its other facilities. Many mergers in the making The company that would become WineDirect was initially founded as Inertia Beverage Group by Paul Mabray in 2003. By 2009, the start-up was able to secure enough capital to acquire a fulfillment company in an auction; New Vine Logistics, one of Amazon's early wine ventures, had been left flailing since the web giant pulled the plug. Mabray would soon leave to launch social media-monitoring platform VinTank, and former DHL executive Joe Waechter took over as CEO and president in 2010. IBG changed its name to WineDirect and signed a licensing deal with the fast-growing e- commerce firm Vin65, which was based in British Columbia. Two years later, in June 2012, WineDi- rect acquired Vin65 outright as well as an- other fulfillment firm, WTN Services, from 1-800-Flowers. After that deal, WineDirect also acquired Elypsis Winery from Admiral IT. Elypsis built enterprise resourcing plan- ning (or ERP) software as well as point-of- s a l e ( P O S ) a n d c u s t o m e r r e s o u r c e management software for the wine industry. That deal bolstered WineDirect's winery services package. Then, in 2015, Sovos Compliance pur- chased WineDirect's compliance division. Sovos already owned ShipCompliant, and that meant all of Vin65's clients now were working with ShipCompliant. Vin65 founder Andrew Kamphuis announced his departure in 2015, staying on through the final integra- tion as a consultant. WineDirect has more than 1,800 winery customers, and most of those are utilizing the company's e-commerce services. It's here where Agger sees future growth and continu- ing challenges. According to the latest Wines Vines Analyt- ics Wine Industry Metrics report, direct-to- consumer (DtC) sales in November were 26% higher than in 2016. November's total sales of $417 million and sales volume of more than 800,000 cases are both all-time highs. But as DtC and online wine sales continue to grow, consumers expect more and more of the DtC wine experience. Deliveries need to be fast, shipping costs low, and consumers are starting to expect easy orders via smartphone or tablet. "That bar is just continually being pushed higher," Agger said. Confident in online marketplaces To that end, WineDirect has pursued partner- ships with online retailers to create more wine marketplaces for consumers to find wine. This comes as the Amazon wine market- place is set to shut down by the new year. Agger said if one were to ask 100 wineries about the Amazon market, more than 90 would say it wasn't worth it for them, but one or two wineries were making millions in revenue. Those wineries need a replacement, and WineDirect is betting they can find one with new options such as eBay and Vivino or the online "stores" of loyalty programs. In February 2017, WineDirect and eBay announced a partnership to offer more of WineDirect's customers' wine on the online auction and retail site. Vivino launched as a wine-recommendation app that draws on data from its 27 million users. The San Fran- cisco-based company was launched by Dan- ish tech entrepreneurs Heini Zachariassen and Theis Sondergaard, who joined in 2010. The app has about 5.5 million users in the United States. The company's customers upload scanned labels, reviews and wine ratings with nearly 500 million scanned labels, 8.8 million wines and more than 201,00 wineries according to the company's website. In April 2016, Vivino launched an online market that sells wines based on user reviews and from 500 merchant partners. These part- ner companies process orders through Vivino's checkout system that is designed to provide a "two-click" sales experience. The company's new "premium" service includes free shipping and represents its lat- est effort to tap into the potential of the U.S. DtC market. Agger fully expects Amazon to be back in the wine game soon and said the company has always done well finding ways to achieving success for multiple parts of its operations. "You can look at everything they do, and there's multiple benefits," he said. Following the acquisition of Whole Foods, Agger expects that pattern to continue with wine, possibly getting folded into the grocery delivery service Amazon Prime Fresh or with online sales and in-store pickup. "They're just hacking away at grocery, over and over again." The Amazon market may be shutting, but Agger is confident that several other mar- kets will prove to viable places for wineries to find online success. "Wineries will be able to pick what works for their overall brand strategy." KEY POINTS The new WineDirect fulfillment center in Napa County handles DtC shipments for more than 200 winery clients. WineDirect also supports the e-commerce operations of more than 1,800 wineries. Following a string of other mergers, Vin65 and WineDirect are now fully integrated. The new building is located in American Canyon, Calif., and covers nearly 260,000 square feet.

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