Posted on | June 25, 2013
Written by | Ian Griffith
In his classic text on the history of California wine, Leon Adams described the cycles of boom and bust that characterized the early days of that state’s budding wine industry. Sometimes it feels like he might as well have been discussing the options for selling wine online for retail stores. Recent changes in the available marketing options for wine stores have some wondering if recent years were part a boom cycle that is coming to an end.
Last summer Google pulled the plug on free traffic from their shopping feed service and converted it to a paid service now called Google Shopping. The larger problem was that alcohol ads were banned while Google worked on rolling out their new program. In April this year the advertising ban was lifted, but not completely. Wine stores must identify their selections as “non-family-safe” which severely limits the available traffic. So far Google Shopping has not produced the expected results, however it is likely they will continue to tinker with and improve their policy towards wine.
The impact of Google’s alcohol ban was lessened by the success of a powerful new advertising option from Amazon. While it was not free, Amazon traffic had a high conversion rate and stores found it a profitable replacement. Then in early June this year, Amazon canceled its Product Ads program on wine, beer and spirits. Now wine on Amazon’s website is only sold on behalf of wineries using a marketing agent business model that, while popular in California, has been heavily scrutinized by the NY State Liquor Authority. Fees for the “Selling on Amazon” program can run a winery as much as 35% of their margin, a price structure that doesn’t work for retail stores.
With Amazon out of the picture and Google’s feed traffic still “missing in action” retailers are casting about for new sources of referral traffic. A review of affected websites on the Bevsites eCommerce platform shows the value of building your web business around a broad base of traffic sources. The impact of losing this business from Amazon ranges from a drop of only 2% of sales to a high of 78% of sales. With all their eggs in one basket the stores at the upper end of this range have experienced a bust and need to work on replacing the traffic from Amazon.
It is worth noting that while Amazon delivered a healthy conversion rate on its traffic, stores found it challenging to build repeat business from these customers; their loyalty really remained with Amazon. As always stores need to follow up on any advertising with email marketing that reaches for that second sale. Without those repeat sales the average lifetime value of an Amazon customer is less interesting than a new customer that might cost more to acquire but is a candidate for additional business.
There are other sources of traffic for stores that like to use shopping feeds, they may not be as sexy as Amazon but they represent the slow and steady growth of a business around customers you can keep. Building a diverse portfolio of marketing options will protect your store from the recurring boom and bust cycle of marketing wine online.
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