A new group of middlemen is rapidly emerging in the U.S. wine business, using “flash-deal,” Groupon-like tactics to connect wine lovers with wineries and brands at ultra-discounted prices.
They’ve earned the moniker of “flash-deal sites,” a play on their business-model of blasting offers several times a week to their email subscribers. The deals last for 24 to 72 hours, highlighting wines sold at up to a 70% discount.
New York-based Lot 18 is seen as one of the “big boys,” after having pulled in $50 million from venture-capitalists. Another is Sonoma, Calif.-based Invino , which has also reportedly raised an undisclosed sum to support its growing business.
Chicago-based Winestyr , launched in January of this year, and aims to get to $1.75 million by year end.
So why are these businesses seeing such growth? With the economic downturn, shipping laws favorably changing and shifts in consumer-purchasing habits, Web-wine purveyors have finally been able to seek a stake in the $32 billion U.S. wine market.
According to WinesVinesDATA, for the 12 months ended in April, there have been over 4,200 offers from the nine major flash sellers, with Invino, Wines Til Sold Out and Lot 18 accounting for 63% of those deals. Click here to see the Wines & Vines data.
The average price per bottle was $27.61 for the 12-month period, meaning a 40% discount off the winery retail price. Napa and Sonoma wines dominated the deals put forth, with the 2007 vintage ranking as the most offered.
Click here for the full article from Market Watch.
Let’s get this out of the way very quickly: I’m not a fan of wine flash-deal sites.
No-doubt that as a consumer, these websites are great! What’s not to love about them? Sleek design, bargain-basement prices and a chance get your hands on wines that you wouldn’t have otherwise thought to purchase.
I’ve worked directly with Groupon, LivingSocial and a number of other “daily deal” websites (in a restaurant capacity), and I’ve seen the damage that they can do to a brand. I don’t blame the websites! Full credit to them, business is business!
Wine daily-deal websites represent a great way for wineries to off-load their products very quickly and get a rapid influx of cash, but what-of the damage that’s being done to the long-term reputation of a winery? How likely are customers to return and purchase the same wine at full-price, when they bought the last vintage at half-price?
I’m going to stick my neck out here and say this: Wine flash-deal websites are still in their infancy, in much the same position as Groupon and LivingSocial were 3-4 years ago. They were new and cool and sexy, with businesses climbing over each other to get on-board. Now that these websites have started maturing, and businesses have seen their “return” (or lack there-of) they’ve started witnessing the customer’s reluctance to pay full price.
In the not too distant future, winery participation in these heavily discounted websites will be viewed as a sure sign that the winery is financially struggling and having a hard time moving their product.