Wine Flash Sale, Reflecting Logic and Dispute in Price Fighting
Write | WBO Team
Translate and Edit | WBO Jessie
Flash Sale originated in the United States a few years ago. It was defined as “providing consumers with a limited number of goods at the maximum discount, purchasing within a time limit, and off shelves immediately after deadline”.
However, the word “Flash Sale” is more directly used in wine industry. Today, when the tax on wine is very high, Flash Sale platform provides consumers with the opportunity to buy wine at a price close to international retail sales.
The quantity of Flash Sale are generally more than a dozen to hundreds, and the total amount is insufficient to impact the market.
In order to ensure the competitiveness of the product price outside the flash sale market, vintners will sell the product at a discount by market promotion during the flash sale period. After the promoting activity, the price will be kept confidential so as not to affect the pricing of the distribution channel of the importer.
At present, the popular websites for wine flash sale include wineyun.com and weekly wine recommendation of TasteSpirit.com.
Flash Sale platform wineyun.com has become a very popular wechat-marketing platform in wine industry since the year of 2010. Hou Ming, co-founder of Vinhoo, disclosed to the author that since Vinhoo starts from wine media, it already had a wine communication circle online in 2004.
During the past ten years, it has developed a large number of loyal users, mostly wine lovers, who have a great pursuit of high-quality wine. Nearly half of users have purchased wine on their flash sale platform, and tens of thousands of users have been active.
The Magazine TasteSpirit also starts from wine media and WSET wine education. Since its inception, the magazine has not only attracted a group of loyal readers, but also a continuous joining of students and customers.
For these platforms that already have large-scale consumer base, even if each purchase volume is small, it can reach considerable sales volume in total.
According to WBO observation, senior users of flash sale platforms usually compare price of the platforms with WS international average price, which is much lower than the retail price that supermarkets or wine stores give.
Hou pointed out that flash sale groups are very sensitive to wine prices, and a little higher price will keep such consumers away. Therefore, the profit of flash sale is much lower than that of traditional channels. When some super low price wines were used to attracting consumers, the price is even close to FOB price.
However, Hou Ming is not too worried about the impact of low retail prices on traditional channels, mainly for the following reasons:
First of all, the differences between customers of flash sale platform and customers of distribution channels: most customers of flash sale are wine enthusiasts, who usually do not care much about brand awareness of the wine but rather pursue the quality of wine itself.
Some even deliberately seek out distinct wines that are hard to find on the market. They usually want to taste fine wines of the world, with the purpose of drinking new and unique, so their purchase volume is just in single digits.
“Customers who go to distributors seldom buy wines on our platform.” Hou said that many customers who buy flash products are engaged in wine industry. If there is an excellent new wine on sold, these consumers will play an important role of word-of-mouth promotion.
Secondly, different SKUs have different positioning: An importer usually has many products in stock, and sales channels can be different. For a large importer, flash sale is a “non-mainstream”channel for distribution. Sales orders have no significant impact on the overall sales volume, even if the price is low, it will not affect the sales of other products.
WBO knows from many importers and distributors that many brands agents are not exclusive in channels, and willing to cooperate with flash sale platforms, although the gross profit is relatively low.
A Penfold dealer disclosed that the company's core products have a stable source of customers, ensuring basic sales. Other non-core brand sales channels can be more diversified.
Due to the limited influence of flash sale, consumers are concentrated in the professional level, which basically has no impact on other sales. At present, due to the general depression of the market economy, many customers who take wine as luxury goods will reduce their expenditure in this regard, “It seems that importers earned high gross profit, but the actual turnover is slow, the volume is not large either. Short, frequent, fast is the only way I can survive now.”the dealer said. And some flash sale platforms just meet this demand.
By contrast, some brand owners are skeptical about flash sale. A representative of a well-known winery said he could not accept that price of flash sale platform was lower than their online retail price. He pointed out: “Our customers have certain loyalty to our brands, and they don't care too much about the price. Most of the consumers of flash sale have no brand loyalty. Low price on flash sale platform will not help in brand promotion.
For most traditional distributors, flash sale is still a minority model of selling wines. Most flash sale platforms are updated once every week or two, which is far from meeting the sales requirements of distributors.
According to WBO observation, although the number of flash sale can reach 50-200 bottles for each time, the mainstream price is in the range of 200-500 RMB, which is not the average price that the mass consumers are willing to accept. Therefore, in order to attract consumers and quickly withdraw capitals, many flash sale platforms have introduced similar pre-sale methods to attract consumers and lower prices.