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The Merchant23 Blog

Winery-Direct: The Secret to Total Wine & More’s Success

Nov 9, 2018 12:35:14 AM / by Matthew Schrier

 

winery-direct-kings

(Left to Right) Robert and David Trone - Owners of Total Wine and More

Have you ever wondered how some companies grow sales year after year while your company's revenue remains stagnant? Everyone always wonders how Google, Amazon, and Facebook grow their users base year after year. It's not luck. They are using data driven strategies that have the best results to achieve their goals.

   

What are companies in your industry doing to set themselves apart and succeed?

 

Today we will take a look at how one of the biggest companies in the wine industry uses one little secret to propel its sales and win the game. This company is Total Wine & More and its secret is the Winery-Direct Model.  The Winery Direct model has helped Total Wine and More grow its revenue by. 


Total-wine-and-more-growth-winery-direct-method

From 2005-2010, the whole recession, they grew by 60% Think about that

 

What is winery direct?

 

Winery Direct is sourcing product directly from the suppliers. As said by Cyrill Penn, writer at Wine Buisness.com, "wholesalers clearing wine for reduced margins enables retailer to sell wines from smaller producers more profitably" Still confused? Check out this side by side comparison of the old three tier model and the new more profitable winery direct model.  Now lets check out how Total Wine and More has implemented the Winery Direct Model.

 

How does Total Wine and More implement the Winery-Direct Model? It does it by following three simple steps. 

 

1) Choose a way to buy Winery Direct Products

2) Use national brands to lure in customers, and teach staff to promote winery direct products

3) Sell Winery Direct Products! Repeat. 

 

First, find a distributor. Total Wine & More has their own network of distributors that they use. If you are a small retailer I always recommend that you use your current distributor.  However, recently, I have been flooded with questions.  What do I do if my distributor is too busy to help me clear winery direct products ? What do I do if my distributor is reluctant to clear a special wholesale wine deal that I found on www.merchant23.com? Don't worry, you don't need to sever ties with your distributor! You can just opt to use another distributor to help you clear specific products that your current distributor does not have. 
 
Sometimes it can be difficult convincing a new distributor to clear wine for a certain deal you have because you are a low volume customer and the clearing process takes too much time for the deal to be worth their while.  If this proves to be the case then use an online distribution platform like merchant23.com. They do all the work for you! 

Second, use national brands to bring customers into your store. Although, Total Wine is losing money on these national brands it is well worth the cost because it is bringing them customers. The Minnesota Municipal Beverage Association  told me that Total Wine will break even or even lose money on national brands (Jack Daniels, Smirnoff, etc.) to bring customers in. 

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Total Wine & More Loses Money on National Brands

According to the MMBA, these under utilized wines are then marked up 300-400%. Bring it in for $5 landed, sell it for $20 - and its solid wine to boot. A high quality wine, at a reasonable price point! Because its winery direct, the distributor can take a smaller margin. Multiply this nationwide with 173 stores and you can see how that 300-400% markup can pay off much...so much they can afford to break even on national products.

 

This graph displays the compounding effects of increasing your margin by merely 20%, let alone 300-400%

winery-direct-versus-tradtional-modelA simple adjustment yields lucrative results 

Third, promote your winery direct product. The best way to do this is by training your staff about the products.“Total Wine places almost as much emphasis on educating its customers as it does on educating its employees. Total Wine stores provide Friday, Saturday, and Sunday wine tastings, and many stores also provide more extensive wine classes.  Educating both employees and customers gives Total Wine an important step up in the marketplace. Retail sales associates at Total Wine walk hurriedly throughout the store constantly performing their jobs. They are always friendly, patient, and answer questions fully, but they don’t devote too much of their time to any one customer in order to allow plenty of time for all customers. In addition, Total Wine promotes its product to both new and frequent buyers through direct mail and email promotions, and uses media relations strategies to promote the opening of new stores.” (https://kreckermarketing.com/analysis-of-total-wine/Let be honest. People Love winery direct products, and with a little promotion the products almost sell themselves.  

 

Why does the Winery Direct Model work?

 

In summary the Winery-Direct Model works because of exclusivity, hight margins, and great products.  It has been such a successful program for Total Wine  that they intend to expand to "more than 2,000 Winery Direct and 900 Spirits Direct items" according to  Total Wine's Website. By Utilizing their network of distributors Total Wine & More has brought in exclusive wines at great prices. This has given them a tremendous competitive advantage that has allowed them to grow to nearly 3 billion in sales.  This is made possible because small wineries don't get picked up by distributors and they are an under utilized resource. 

 

You do not have to be a big company like Total Wine & More to take advantage of the winery direct model. Lucky for you Small retailers are using this model to grow their businesses as well. You can take advantage of the Winery-Direct Model as well by singing up today on the merchant23 platform.

 

Written by Matthew Schrier