Readers Weigh in on Virtual Distribution Concept

March 30, 2017

Dear Client:

Last week LibDib, the virtual distributor startup from California,
garnered quite a buzz in both trade and mainstream publications
[see WSD 03-22-2017]. Since then, we’ve received some interesting
commentary from our readers, who largely seem intrigued by the
concept but intend to wait it out and see how things progress.

CAN IT CO-EXIST? Our reader Truth Squad agreed that yes, this
concept can co-exist within the current alcohol structure, but A) it
will be for smaller niche items, and B) it won’t be easy to scale
nationwide. In their own words:

. “Increasingly, the big distributors are being forced to sign into
long term contracts with their suppliers ….. which means that
the big distributors become more focused on financial
management than on salesmanship,” says a supplier exec. “So
there is definitely an opportunity for a smaller alternative
distributor ….. and more importantly, a more efficient route to
market (physically delivering the products).”

“It seems like a concept that could have some legs to cover the
‘niche’ items that no larger wholesaler wants to spend time on.
I get 2—3 emails a day from small wineries looking for help to
distribute (they think we are a distributor) this would fit their
needs in many cases,” says one industry exec.

“I think this will be a real challenge. It will work for certain
entrenched brands (like those that go direct here in CA), but I
am not sure it will take off. It is a lot of money to pay, without
feet on the street, and when you add in delivery costs. In
addition, if you have distribution in a state, and they find out
you are going around them, they will make this a real
problem,” says another exec.

WOULD YOU USE IT? Our Truth Squad was split on whether they
would consider using it. One supplier exec says “no,” adding it’s
probably beneficial for small brands, but “without any real
commercial structure all the onus to drive sales will be on the brand
itself.”

Another exec says it isn’t applicable to his current business, but if
he was a retailer, he would “check it out for sure,” adding “I would
be concerned about logistics and how much I get charged for
shipping each time I order.”

The trick will be to “create a good enough portfolio to attract buyers
consistently – meaning have a really great selection, so it would
depend on whether they attract enough interesting producers to
make it memorable and engaging for buyers,” he says.

If you want to keep the conversation going, send your thoughts to
emily_@winespiritsdaily.com. We could use some insight from a
distributor point of view.

Source:

Wine&SpiritsDaily-LibDibSecondStory