May 14th, 2012
Editor’s Note: The following post is part of our series on the Third Party Providers
“A compliant and effective e-commerce sales platform [is] now in place and available. There is a Fifth Column of wine sales now…The evolution and momentum of the Fifth Column of wine sales leads us to believe the genie is finally out of the bottle and there is no putting it back for state-to-state and direct wine e-commerce.”
The historical metaphor of the “Fifth Column” is new to the world of wine marketing. As used by Rob McMillan and the authors of Silicon Valley Bank’s recent “State of the Wine Industry” report, it is a reference to the Spanish Civil War of the 1930s and the idea that “an ad-hoc group of loyalists emerging from within the city [of Madrid] who would rise up against the incumbent order”. Silicon Valley Bank uses the term to refer to a “group of wine businesses partnering with producers to sell direct”.
The Silicon Valley Bank report is referring to various companies in the wine industry that have been founded to support direct to consumer sales such as logistics, compliance, third party marketers and others companies that, taken together, provide suppliers with a support system for getting wine into the hands of consumers across the country.
From our perspective, another way of understanding the “Fifth Column” is the recognition that after many fits and start, innovations, failures, successes and the introduction of new technologies, the wine industry now has new paths to market by which new and old customers can be cultivated with confidence. We view the emergence of compliantly operating third party marketers as the final piece of the “fifth column” puzzle.
The first glimpse of the real value that third party marketers provide to the direct-to-consumer market came during the recent recession when these talented marketers were able to use private or “flash” sales, membership platforms and outstandingly executed e-mail marketing campaigns to help suppliers move through distressed inventory during a decline in demand. Third party marketers played a key role putting suppliers’ wines in front of motivated consumers.
While some people have predicted either the end of the road for these marketers as inventory has dried up and the recession wanes, or the end of firms that focus on discounting, we believe that the third party marketer is here to stay and will continue to play an important role not only in giving suppliers a new path to market, but in introducing brands to new customers.
Third party marketers, flash sites, and email marketers in a number of industries continue to thrive. In large part this is occurring because consumers have become accustomed to using these services and appear to be quite comfortable with either encountering singular products on a daily basis or allowing the products to “come to them” via trusted vendors and marketers. We see the same thing happening in the wine consumer world.
In fact, we are convinced that 2012 is the year that third party wine marketers will demonstrate not only their staying power but also their long term importance to the wine consumer and wine supplier that they bring together. We recommend that everyone working in the direct-to-consumer channel carefully read the new Silicon Valley Bank “State of the Industry” report with particular focus on their understanding of the “Fifth Column”. It explains what we are seeing put into practice: The formalization of a new channel to successfully cultivate new customers and sell more wine.