CLUBS VS SUBS

LET’S DISCUSS IF IT IS TIME TO MOVE YOUR WINE CLUB TO A SUBSCRIPTION.

Unless you’ve lived in your cellar for the past five years, you’ve noticed we live in a subscription economy. We have subscriptions for food, clothing, pets, razors, socks, movies, sports, makeup, and almost anything. You name it, and there is a box that can be delivered with options on your schedule.

How sustainable is this trend? Will we forever be ordering small packages in bright boxes with sample sizes, or is this just a fad? And is the decrease in wine clubs part of it?

WHAT IS A WINE CLUB?

Let’s start by defining a wine club. This recurring sales model provides wineries with a direct channel to reach high-value consumers and bypass traditional distribution channels. They are structured to offer repeat customers a winery-curated selection of wines at a small discount delivered to their homes monthly or quarterly. Key prospects for club membership are customers who have purchased multiple times at a winery and have some affection for the wines and brand. Clubs are typically free to join, and the benefits of being a club member include a discount on wines (typically ten to twenty percent), first access to new releases of wines, and invitations to events. Some wineries will have special seating areas or experiences for participants, and members are encouraged to visit the tasting room for complimentary activities.

In 2022, the Silicon Valley Bank report noted that the average winery gets 24% of its sales from wine clubs. Wineries cling to this model because they can better control their brand messaging, pricing, and customer experience while capturing more sales value. It is also a bankable recurring revenue stream with projectable inventory depilation. Repeat purchases typically offset the discount. Most clubs have an average membership tenure of over two years, and club members almost always have a higher-than-average lifetime value. Wine clubs are historically the largest part of a winery’s DTC playbook. As such, wineries protect this loyal customer base fiercely.

Using a dating analogy, wine club relationships are married. This channel buys the most expensive magnums and enjoys the most elaborate experiences. Club members routinely plan vacations around their wineries and even go on extended cruises or world wine trips with clubs. Club members have been known to spend hundreds of thousands of dollars at one winery and have been members for 10+ years. Wineries, in turn, are expected to know the intimate details of these very high-value contacts. Many club managers have club members’ contact information on their cell phones, with preferences, birthdates, children, pets, and personal information. Some are trusted to have the card on file with blanket approval for purchases or arrangements. These trusted face-to-face relationships take years to forge and are rooted in trust and familiarity.

Wine Clubs have worked perfectly over the past 20 years for Baby Boomers in the loyalty phase of their relationship with wineries and don’t mind handing over their credit card for randomly selected wines shipped to them at a future unknown date. The consistency, VIP status, discount, and comfort of guaranteed access to wines they’ve endorsed, check all their boxes for dependability and responsible accumulation. Wine clubs have been developed around and for Baby Boomer pressure points.

WHAT’S THE PROBLEM?

But to any consumer under 40, this model is frustratingly rigid. Consumers who grew up with the internet are accustomed to variety, transparency, and immediate access with no strings attached. To withhold these basic qualities will not fly with them. Moreover, younger consumers don’t want the same wine delivered periodically. They grew up with the internet and know what it is to have options, so their goal is not to decide on a favorite and stick with it. Instead, they live in a perpetual state of trial.

The long process of waiting on some allocation lists isn’t appealing to them, either. Baby boomers equate loyalty point tiers based on spending, passwords to hidden website pages, and private access to winery areas as luxurious and aspirational. Millennials see one-click orders, open company values, and delivery within 30 minutes as luxury and desirable.

So, what will happen to wine clubs? Are wineries doomed to lose 24% of their sales? If done right, the goal should be to evolve them into subscription models. And, no, that isn’t just semantics.

WHAT IS A SUBSCRIPTION?

Subscription models are different from Wine Clubs because they place control of the relationship in the customers’ hands. Typically, all interactions are online so that they can be managed anytime and anywhere. Many have apps. The consumer signs up and chooses frequency and dollar amount. The focus is on new brands and products, typically highlighted with in-the-box collateral containing stories about the new items.

Subscriptions have become popular in the last half-decade, with young urbanites 25-44 years old leading the charge. Skimgroup reports that 48% of Millennials have four or more subscriptions. Why? 80% of those polled said subscription boxes made their lives easier, and 74% said it was because they liked to try new things. 55% replied that they joined so they didn’t need to go out to get the items. Those answers make it easy to see why the current club model of complex offers, repeated products, and on-site visits will soon be extinct.

Subscription selling is not like selling to a wine club. First of all, it is not face-to-face. A subscription manager will not intimately know the people they are selling to. They will be names on a shipping manifest. The manager will focus on trends, variety, fun collaterals, and packaging that can make each box opening Instagram-worthy. The more exciting and interactive the manager can make each shipment, the longer the customer will stay in the subscription program. Aim for fresh takes on tasting notes and brand information and lean heavily into visuals and stories instead of words and data.

Do not expect a subscription customer to stay as long as a club member. It’s all about trial, right? This is the biggest difference between subscriptions and clubs: Subscriptions are at the other end of the funnel – they are an introductory tool. Expect consumers will want to move on once they’ve tried your wines and figured out your vibe. But churn can be mediated with many opportunities to share their experience and bonus incentives if they sign up friends. Remember, this group likes to share the good news, so give them the tools to spread the word. And that intrinsic curiosity which causes one member to move along will bring two more to sign up.

IS A SUBSCRIPTION RIGHT FOR YOU?

There are a few things that will have to happen for the subscription sales channel to become a mainstay in wine marketing:

• • Wineries need to consider subscription models useful in the initial trial phase, not replacing clubs in the loyalty phase. As a salesperson, you would never come out of the gate with a wine club offer as it is now. That would be like walking up to someone you don’t know at a party and asking them to marry you. It’s too much of a commitment. But subscription models are less cemented in routine. If a wine club is a marriage, the subscription model is speed dating. You can try wines for a while and then move on. It is the perfect introduction to a brand. This sounds simple, but the entire sales process is different. Online ads targeted to new customers will be for trial subscriptions. If someone doesn’t want to buy wine, a salesperson could offer them a subscription to try the wines instead. It’s a different way of thinking for most wineries.
   
  • Technology needs to catch up. If we were selling t-shirts today, there would be a multitude of plug-ins and templates for us to set up a recurring sales model on an e-commerce site. But, because we’re talking about a controlled substance, we must involve compliance, and our websites have limited online subscription choices. Right now, only Commerce7 and Shopify/Drinks offer the customization, but others are in development, and this will not be an issue for long. But as a whole, technology has been slow to respond to this usability shift.
   
  • Fulfillment needs to step up. Amazon has taught us all that we want 2-day shipping for free on everything. Wine is fragile and heavy and susceptible to heat and cold issues. This is unavoidable, but consumers’ standards are set, and other subscription services have extremely fast turnarounds. Large clubs like Winc are handling the volume, but to the average small winey, the logistics of giving a choice and cadence control over to the customer is a logistical nightmare.
   
  • Since subscriptions are virtual, the companies that offer them have no brick-and-mortar overhead. They put all their money and attention toward delighting the consumer with bright, cheerful curated boxes and providing excellent, fast, seamless customer service. Most wineries have spent years perfecting their tasting room hospitality service, not their shipping and remote customer service. We pack wine in plain boxes and call UPS and call it a day. These new consumers care about what the box looks like, what surprised are included inside, how well the delivery is managed/communicated, and how easy it is to return, refund, or change their minds. These are not qualities that the wine industry typically excels.
   

To be clear: If you successfully work out the logistics of a subscription, we do not recommend migrating your club over to it. Your Baby Boomer customers have done their research, spent a lot of money, and are perfectly happy being first in line to get all your new releases in their wine clubs. You want to offer a subscription in addition to the wine club. Position the subscription as a virtual sale to states outside of your tasting room or as a gift for tasting room fans to give their family and friends back home. Think through what you can do virtually to connect with these customers, even if only for six months or a year. Subscriptions are a complementary tool to get in front of people not standing at your tasting bar and a platform to communicate all you can about your brand story and wines. Overall, wine clubs in the past have effectively disrupted the DTC wine market by offering consumers a convenient and personalized way to discover and enjoy wines while providing wineries with a direct sales channel and a means to build customer loyalty. As the target audience of wine clubs continues to diminish and technology enables choice, we can expect subscriptions to play an increasingly influential role in shaping the future of the wine industry. It is crucial for wineries to start thinking of these trial subscription models in parallel to clubs so that as the balance of visitors and customers changes, they can keep that 25% of their business healthy.