New Digital Platforms Connect the Tiers

September 27, 2017

Transformative technology has been bringing old-world industries into the digital age with ever-increasing fervor, and several web-based technology offerings are making an attempt to update the wine industry and help with—or even upend—the historic three-tier system.

This is certainly not the first time internet technology has attempted to recreate the realities of wine sales. Debuting in 1994, Virtual Vineyards (now Wine.com) was one of the world’s first e-commerce websites. More recently, an over-ripe harvest of off-price flash websites such as Invino and Wines Til Sold Out have popped up and garnered venture capital to move excess wine inventory directly to consumers.

But this new crop of digital players is focused on wine wholesale, the channel connecting wine brands to distributors and even directly to restaurants, bars and retailers. In internet-speak, these technology services are known as “platforms” or  “marketplaces,” websites that connect buyers and sellers in a two-sided exchange to facilitate or execute transactions. In common parlance they are connection companies.

In an era of ever-consolidating distribution power across larger players, and an ever-increasing number of competitive wine brands vying for attention, these connection companies offer discovery and distribution alternatives for both buyers and sellers that are willing to try their new models. They focus not on circumventing the traditional channels but on augmenting them—or better, enabling them through technology meant to eliminate friction, increase discoverability and generally ease the work required to transact in the wholesale wine space.

Marketplace models in other industries vary online, so it’s no surprise that the generally new connection companies reviewed here have found different approaches to solve the same problem. One, LibDib, is a licensed distributor in its own right, allowing wine brands to list their products for sale directly to restaurants, bars and retailers in New York and California. Two others, Beverage Media and SevenFifty, act as portals for price discovery to enable retailers and restaurants to search across multiple distributors to find products within their specifications and then place orders routed to those distributors. We talked to all three players, and here’s what we learned.

Beverage Media New York, N.Y.
CEO: Jason Glasser

VP e-commerce: Ian Griffith
Marketplace offers 70,000 SKUs

Beverage Media has been around since Prohibition, primarily as a publisher of trade journals in the price-posting market in the northeast United States. While it’s the only company reviewed here that isn’t a startup, the digital marketplace portion of the business is relatively new. The company has “had an e-commerce website for about 20 years,” says Ian Griffith, vice president of e-commerce, which has “been upgraded over time.” The marketplace has seen “increased adoption in the past five years.” Griffith says during the past year, $350 million worth of orders went through the platform in New York, New Jersey and Connecticut. Beverage Media lists multiple distributors’ products and adds content around listings so buyers can make better purchase decisions. “Search is a key piece,” says Griffith, “so when people search and can’t spell, they find what they want anyway.” The focus is large distributors; in New York, the firm works with 70 distributors, including No. 1 Southern Glazer’s, and offers 70,000 SKUs. Visitors can also place orders across multiple distributors in one master order form. The orders are then passed to the various distributors, properly formatted so they can go straight into their order system, and trigger an order confirmation with delivery timing. The company’s central marketplace is available in six states with multiple distributors’ products, while in some other markets Beverage Media provides its technology for individual distributors to post on their own digital sites. Distributors pay a fee, while wineries supply content to enhance their listings, including setting up APIs or emails to provide regular feeds of product content to keep their listings up to date. “Hundreds of distributors are using our content to support their efforts online,” says Griffith, “on the marketplace, on their own efforts, and through hundreds of retailers as well.”

SevenFifty New York, N.Y.
Co-Founder and CEO: Aaron Sherman
Claims 50,000 buyers on the platform

Aaron Sherman, co-founder and CEO of SevenFifty, says: “The easiest way to think about us is a two-sided marketplace between alcohol retailers and distributors in the U.S.”  The company takes raw data from distributors’ systems and creates a standardized data set. The product data is then embellished with content and marketing material. “For the first time, people are able to say what they want across lots of fields, enter their ZIP code and only see things distributable to them.” Buyers select products they want, and their orders are forwarded to the relevant sales reps by the software system. “Putting orders in (via the platform) doesn’t change the way people order,” Sherman says. “It’s not e-commerce, it’s a more accurate way of communicating to sales reps online.”  Distributors are the primary source of revenue. SevenFifty works with 900 distributors across the U.S., according to Sherman, “from one-person teams to Breakthru Beverage Group and Republic National. All the big guys except Southern.” Smaller distributors get exposure, while larger distributors benefit from the ease with which customers can reach them through the marketplace. SevenFifty claims 50,000 buyers on the platform and 100,000 trade professionals in their network, which Sherman calls “by far the largest” that exists online. Suppliers can also sign up to use the system, update content and do research. Rates start at $25 per month. The platform is free to use for restaurants, bars and retailers. Sherman was previously a wine buyer, while his co-founders came from experience in distribution and technology. They started SevenFifty in September 2011, launched in New York in January 2012, and are now in ”about 36 states,” according to Sherman. “We’ll probably open the remaining ones next year.” Both SevenFifty and Beverage Media stressed the importance of the distributor sales rep in conjunction with their systems. SevenFifty built customer relationship management (CRM) tools using its data set to allow reps to manage relationships better, creating sales collateral and educational content. Beverage Media noted the importance of having an order already formatted in the system so a rep merely needs to approve it, thereby saving meaningful time, particularly at the hectic end-of-day rush. Both allow reps to access their orders from the road via their digital devices. Both firms also provide paid access to their data sets to suppliers seeking a better regional or national view of their position or competition in a market or market data in general. Wines & Vines also offers a data service, the Distributor Market Service, which contains more than 1,400 North American distributors and 1,850 distributor contacts, with more than 3,400 unique wineries linked to a distributor portfolio.

LibDib San Jose, Calif.
Founder and CEO: Cheryl Murphy Durzy
Cites 100 suppliers, 600 products, 400 buyers

Cheryl Murphy Durzy founded LibDib (short for Liberation Distribution Inc.) after becoming frustrated by the challenges of gaining distributors’ attention and distribution for her family’s specialty California brand Clos la Chance. “Nobody is taking on new brands right now due to the consolidation,” Durzy says. She launched LibDib, a licensed digital distributor, as the answer. “Now they have a platform: small-production products with the back end of a big distributor. It also helps independent retailers differentiate themselves by carrying craft, which is what the market wants.” LibDib allows craft brands that aren’t big enough to gain the attention of distributors or even marketing companies to post their own materials and manage their brands while having the resources of a distributor (in this case a digital distributor) to ensure their product can be delivered to the end clients. Retailers and restaurants searching for craft products to distinguish themselves benefit from new vendors and online ordering. “You have all these suppliers that are growing, and lots of independent restaurants and retailers looking to distinguish themselves with craft products,” Durzy says. “They get stuck in between with the three-tier system.” LibDib launched in March in California and New York. It covers wine, beer and spirits in California, and wine and spirits in New York. In just three months, the company recruited more than 100 suppliers, more than 600 products and “well over 200 buyers in each market.” Durzy explains, “My goal is 50 states.” The LibDib business model is to make money as a distributor while charging less than traditional distributors by leveraging technology. When a wholesale buyer places an order, LibDib notifies the winery, which ships the wine. LibDib takes payment from the buyer and remits to the supplier. They charge no fees for being on the platform and make their money through the sales margin, which is currently 15% for wine. Of course, digital distribution is not a panacea. As with traditional businesses selling to distributors or marketing companies, producers need to build their brand demand. “I’m not out there dragging the bag,” says Durzy, “I’m enabling. You still need to sell your product.” Durzy wants to empower small producers to compete. “I’ve been living this problem for 20 years….I wanted to change the world!” Technology has certainly changed the world of many industries before ours. Perhaps one or more of these three players will change the world of wine.

Source:

https://www.winesandvines.com/features/article/189100/New-Digital-Platforms-Connect-the-Tiers