Like all areas of retail, wine saw a significant shift to online purchasing during COVID-19, which is forecast to continue for the next few years. Statista forecasts that revenue from online sales of alcoholic drinks will grow at an average annual rate (CAGR) of 7.5 per cent between 2022 and 2025 to reach more than US$123 billion. Wine makes up about 15 per cent of total online alcohol sales value globally and is expected to have a slightly higher average annual growth rate of 8.3 per cent (Figure 1).
Figure 1 Global e-commerce revenue from alcoholic drinks by segment 2017–2025
Another positive trend in e-commerce is the increase in the number of users (paying customers) expected over the next three years, which is even higher than the value growth at a CAGR of 11 per cent (2022–2025). Wine has a relative strength, with the highest number of users of any alcohol segment and the highest penetration rate (percentage of the total population that purchases the product online). See Figure 2.
Figure 2 Global e-commerce users by segment 2017–2025
In Australia, wine’s advantage over other liquor categories online can be seen in IRI statistics1, which show that wine over-indexes in e-commerce, with a 38 per cent share of online sales by value, compared with 23 per cent of sales value in retail outlets. This indicates that wine purchasers either buy relatively more of their wine online compared with beer and spirits drinkers, or they buy higher value wine online than in retail outlets.
Consistent with the latter explanation, Wine Intelligence has found that regular wine drinkers across 10 out of 11 countries studied, reported spending more on a bottle of wine on average online than in a retail outlet. Only in Hong Kong was the average reported spend per bottle higher in a retail store than online.
In terms of age, not surprisingly, younger consumers are more likely to buy wine online than older consumers in most markets according to Wine Intelligence research2. In Australia, under 45s make up 61 per cent of online wine buyers compared with 46 per cent of regular wine drinkers. Online wine buyers in Australia are also more likely to be male, wealthier and more engaged with wine than the overall population of regular wine drinkers.
The importance of younger generations is also highlighted in IRI data for online grocery sales (including alcohol), which indicates that the 30–39 year-old online shopper cohort had the fastest sales growth, fastest growth in number of trips, largest proportion of repeat buyers and the highest level of, and increase in, household penetration in 20213.
The importance of investing in e-commerce
Online wine sales are dominated by the websites of the ‘big box’ retailers – particularly Dan Murphy’s, which is the largest online alcohol retailer in the world in 2022, according to Statista.
Figure 3 Top 20 global wine and liquor online retailers by revenue in 2021
Source: Statista
While these sites dominate the global picture for alcohol e-commerce, individual Australian wineries have had considerable success with their own websites since the start of the pandemic, driven by changes in consumer behaviour rather than changes in wineries’ own strategies. The combination of drinking more in the off-premise, restricted options to buy in retail outlets and wanting to ‘buy local’ to support local winemakers led to an increase of 23 per cent in online wine sales value for wineries’ own websites in 2020–21, a year when there was an overall decline in domestic sales value of 8 per cent4.
However, although the increase in e-commerce is expected to persist post-pandemic, IRI MarketEdge has noted that there will be less ‘low hanging fruit’ available in terms of migration to online spending, now that social mobility is returning to normal levels, and that realising further growth will require a lift in investment in providing a better customer experience. This is particularly important, because the growth in e-commerce is largely coming at the expense of other channels. According to IWSR, the value of wine sales globally is only expected to increase by an average of 1.4 per cent per year between now and 2025, while volume is expected to remain virtually static (CAGR of 0.3 per cent). This means that understanding the e-commerce channel and being able to maximise the opportunities it presents is important for wine businesses, in order to counteract likely declines in other channels.
In Australia, the large off-trade players (Dan Murphy’s, BWS and Liquorland) are investing substantially in their e-commerce platforms to gain and retain shoppers and offset losses in ‘bricks-and-mortar’ sales5.
Research conducted by Wine Australia found that the second most frequent reason for purchasing from a winery’s own website was ‘I started this because of COVID-19 restrictions’6. Wineries have an opportunity to retain and build on the customer base they acquired during the pandemic, but will need to invest actively to maintain them given the competition from bricks-and-mortar as well as from an increasingly crowded e-commerce universe.
IRI describe a useful framework7 for thinking about investing in improving the online consumer experience (see Figure 4).
Figure 4 The ‘6 its’ of online customer experience
Source: IRI MarketEdge
One of the biggest challenges for wineries in terms of this framework is fulfillment – i.e. delivery of the product to the customer in a timely and cost-effective manner. It requires warehousing of products near the customer, delivering a heavy and bulky product for a low enough price not to be a barrier and dealing with issues around alcohol delivery to minors.
In this area, an interesting new trend to watch is the emergence of q-commerce (quick commerce): i.e. on-demand, fast fulfillment service. This is typified in Australia by services like Uber Eats and Deliveroo, as well as a number of start-ups like Voly, Send and Milkrun. In the UK, q-commerce is gaining considerable traction. Its value is expected to double in the next two years, while ‘dark stores’8 are expected to grow from 200 to 1500 by 2030, resetting current standards for fast delivery and challenging established retail giants that find it hard to operate with this model. Robots, drones and self-driving vehicles are likely to be a big part of this picture in the future.
IWSR argues that alcohol e-commerce can in fact be divided into two distinct models: the traditional online model: ordering from websites and delivery over a timeframe of days, and the smartphone-app-based model, linked with on-demand delivery over a timeframe of hours or even minutes. Younger consumers, not surprisingly, are over-represented in the latter model. These consumers are also generally willing to pay more for convenience, specialist products and personalised service.
In Australia, only around 20 per cent of customers are currently using app-based platforms for alcohol sales9. However, according to Statista, online alcohol sales from mobile devices accounted for 70 per cent of global revenue in 2021 and are expected to reach 72 per cent by 2025 (Figure 5), making this an important area of future consideration for wineries in the e-commerce space.
Figure 5 Split between mobile and desktop for online sales
For wineries looking for information about selling wine online in the United States of America, Wine Australia has a two-part webinar series available here, which provides guidance on the US e-commerce landscape, insights on merchandising your wines for success on both mature and quickly growing platforms and tips for growing your social media audience. Many of the insights are relevant across all online markets.
1. IRI MarketEdge YE January 2022
2. Wine Intelligence Global Wine E-Commerce February 2021
3. IRI MarketEdge Australian E-Commerce Trends: Focus on FMCG April 2022
4. Wine Australia Wine Direct-to-Consumer Survey 2021 and Production, Sales and Inventory Survey 2021
5. IWSR Australia market update October 2021
6. Wine Australia Wine Channel Purchase Behaviour of Australian Wine Consumers
7. IRI MarketEdge Australian E-Commerce Trends: Focus on FMCG April 2022 (Originally from a Coles Group trading update)
8. A retail outlet or distribution centre that caters exclusively for online shopping
9. IWSR Ecommerce Strategic Study 2022