Wine E-Commerce Boon May Bring More Flash Sales
May 05, 2020
As U.S. wine consumers flock to e-commerce retailers and winery websites to purchase wine for home delivery, they may soon start finding more of their favorite brands for sale at discount prices at resurgent “flash” reseller websites.
According to data by Nielsen, e-commerce sales for alcohol have grown 234% compared to the previous year and the dollar value and number of items per order has also grown significantly.
Flash websites differ from other online retailers in that they offer wines at discount prices for a limited amount of time. These sales windows can range from a few hours to few days. Several sprang into existence during the economic downturn of the Great Recession.
Wines Vines Analytics https://winesvinesanalytics.com/ (WVA) began tracking offers by such websites in 2011 and saw offer activity steadily rise year after year until 2015 when the monthly number of offers began to decline steadily.
At the time, excess inventory from the recession had been exhausted, wineries had stable to growing demand from wholesale and on-premise accounts and could enjoy margins from their own direct-to-consumer sales. A few of the leading websites, however, had attracted a loyal following among consumers and steady sources of wines to keep offers going.
Those companies now stand to benefit from a tremendous amount of wine that had been allocated to the on-premise segment prior to the COVID-19 crisis.
Last Bottle Wines based in Napa, Calif., has become a leader in the segment and offers a wine a day. A recent offer was for 2016 The Royal Bull, which is a red blend from Washington state and was available at $22 or a discount of nearly 50% from the wine’s retail price, according to the company. Last Bottle Wines recently acquired Invino, which typically made the most flash offers in a month,when offer activity was being tracked by Wines Vines Analytics as part of the regular Wine Industry Metrics.
Consumer demand ‘insane’
When WVA was tracking flash websites, offer activity ranged from a couple of hundred to more than 1,000 a month. WVA tracked offers by 17 websites but the majority of offers came from Invino, Wines Til Sold Out (WTSO), Lot 18 and a few others.
Just after shelter-in-place orders took effect in the Bay Area, Last Bottle held a promotional event dubbed Marathon Madness on March 30 in which more than 700 wines were offered for sale. The event had been planned prior to the COVID-19 crisis and was similar to another event in December in which the company claims to have sold 58,000 bottles of wine in 48 hours with one wine selling for $3,000.
Stefan Blicker is part owner of Last Bottle Wines https://lastbottlewines.com/ and its new website First Bottle Wines https://www.firstbottlewines.com/, and said demand had been “insane” with more than 20,000 orders in the first day.
He said interest from parties looking to sell wine to the website had also skyrocketed. “Yes. Lots, from every channel. Wineries, distributors, importers and negoce from Europe. Way more than we could absorb,” he said of companies looking to sell wine to the website. “Wines that were always allocated and we could not get, are open. Wines we offered a certain price on three months ago that were rejected, now they are saying ‘sure.’”
Even as a few U.S. states begin to try and re-open their economies, the on-premise sector will remain shut down in most of the major wine markets. Even if all markets were open, it’s doubtful consumers will be in a rush to crowd restaurants and bars.
Consumers have instead been more than willing to purchase wine online, with all major internet retailers reporting double digit wine sales increases and winery shipments increasing 30% by volume and totaling more than $423 million in March, according to WVA/Sovos ShipCompliant data.
So while there may be an abundance of wine that needs to be sold quickly as in 2009, there are many more options through which to do so then compared to a decade ago.
WTSO legal fight settled
As the number of flash offers began to decline last decade, some websites pivoted to new business models. Lot 18 began to develop its own brands and adopted a wine club model.
WTSO ended up in a legal dispute when it was hit with a class action lawsuit by customers who alleged it acted deceptively by touting big savings on retail prices when the brands had never been on the retail market. Plaintifs in the case alleged, WTSO had developed the brands with bulk wine.
WTSO denied the allegations but eventually came to a proposed legal compromise in which it admitted no liability or wrong-doing and agreed to a settlement worth nearly $13 million in September 2017.
That settlement, however, left one of the individuals who initiated the class action lawsuit unsatisfied because of the large amount allocated for attorney fees. “The WTSO settlement came across our radar and we agreed to represent a class member who wanted to object,” said Adam Schulman an attorney with the Center for Class Action Fairness.
The case also came to the attention of the U.S. Department of Justice and 19 attorney generals who all argued the settlement paid attorneys at the expense of the plaintiffs.
U.S. District Judge Renée Marie Bumb reviewed and ultimately rejected a re-negotiated settlement worth more than $10 million in June 2018.
“After judge Bumb rejected the parties’ renegotiated class settlement, they decided to give up on the class action part of the settlement,” Schulman said in an email. “They reached a settlement but only on behalf of the individual plaintiffs and the defendant.”
Any WTSO customers who purchased wines during the time period, which was the focus of the lawsuit, retain any claims for damages but Schulman said his client no longer could object to any settlements. “Because the settlement was only on an individual basis, our client no longer had a right to objection and the parties no longer needed to get the approval of the court.”