Are you changing as fast as the industry around you?
By Richard Siddle
How many times have you been along to an industry conference and heard this pearl of wisdom? “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”
Jack Welch is probably more famous for uttering that immortal line than he ever was being chief executive of General Electric.
But as business sayings go it is unlikely to ever go out of fashion as it pretty much nails whatever successful business is trying to achieve.
Or at least should be trying to. Keeping ahead of all the changes taking part in their industry.
But apply this logic to many aspects of the global wine industry then it quickly comes unstuck. Particularly when you look at the strategies of so many of the world’s biggest wine buyers that continue to put low prices and promotions before anything else.
It does not seem to matter how much the rest of the industry cries out to them to change their ways. For them to look at the long-term sustainability of the whole industry, where everyone gets a fair, profitable price for the grapes they are growing, processing and selling, all the way down the supply chain.
So if the major wine buyers – and we’re talking the big retail chains and on-trade operators here – are not going to change the way they work any time soon, then it is up to the suppliers, the importers and the producers that work with them to start changing even more how they work.
The events of the last 18 months, where grape shortages the world over has put even more pressure on that supply chain, has only helped speed that process up.
Everywhere you look wine businesses are changing their business models to cope with the very different dynamics of the wine market they serve.
No longer can they be classified as simply a “supermarket supplier” or an “on-trade distributor”.
The way wine is now being bought and sold is moving a lot quicker than the traditional distribution routes that wine companies use to bring their wine to market.
As we all start looking to use our smartphones, interactive apps, and even voice search devices like Amazon Alexa or Echo in our homes to buy more goods and services, then suppliers and producers need to be doing far more to make sure their wines are available and can be bought through all these new retail channels and the platforms behind them.
It means wine suppliers and producers need to stop looking at the industry as a series of vertical routes to market. Be it supermarkets, convenience chains, discounters, online retailers, wine clubs, subscriptions sites or price comparison apps.
That’s the old way of doing things where you could be a specialist producer, or supplier ,of a certain kind of wine, at a particular price, for a seemingly never changing sector of the market.
Well think again. We now need to consider the world to be flat. Horizontal in fact. Where all those channels don’t just work in perfect isolation, but are increasingly, for many operators, becoming the sum of what they do. The more channels they are in, the more likely they are to succeed.
It’s where a business like Amazon, with its new bricks and mortar stores, can now effectively claim to be in all those channels all at the same time. It’s not alone. Major chains like Wal-Mart in the US, Carrefour and Tesco in Europe, Woolworths in Australia are all involved in trials or full on roll outs into multi-channel retailing.
The rules and regulations of how they trade have all been torn up.
Just as you can buy your dinner hopping on to the bus on the way, and arrange to have it delivered within a 15 minute time window at an address that is not even yours, then wine companies need to find more ways where they too can offer, sell and deliver their wines in equally convenient ways.
Going direct
We are hearing a lot more in the market about the great DTC opportunity. Direct to consumer. But for the most part we are still very much at the talking stage.
For unless you are set up as a standalone DTC business it is hard under the agreed perceived ways of doing business for a wine supplier or producer to do things differently.
To suddenly announce you are going to cut out the traditional routes to market that have been serving you well for decades and go and do it all for yourself is a big pill to swallow, for you and your customers.
But let’s not forget our friend Jack Welch. The biggest change in our business is not happening in it, it’s taking place outside. With the consumer.
The average wine buyer does not care a jot about how you have always done business, about your great channel management retail strategies. The fact you have wines that you only sell in retail, and would never end up on a wine list. Really? Why?
Consumers now have the ability to go out and look for wines they specifically like, from producers they may have personally visited, and expect to have them delivered to wherever they may be in a matter of minutes.
More and more wine companies are changing their business models to try and do that. Or at least some of it.
After all it’s no different to how we buy our own groceries, order goods online, and expect them to be where we want, when we want. So why should wine be any different?
If you don’t believe me – believe Jack Welch.