Wine Allocation Ecommerce Pitfalls and How to Avoid Them
Preparing for the inevitable.
For the vast majority of our clients, allocations are the core of their DTC business. Over the past decade-plus supporting offerings of all shapes and sizes, we’ve learned a thing or two about many of the common pitfalls.
Sometimes they merely create annoyance, other times they snowball into chaos. The good news is that they are easy to avoid with a bit of preparation.
Your best defense against the unexpected is to not only be aware of what can happen, but be prepared when the inevitable comes calling.
Anticipate days where refunds outnumber wine sales
It’s certainly not ideal, but it happens: It’s Tuesday and your ecommerce site and brick and mortar store haven’t seen a single purchase. Rubbing salt in the wound, you have to process a few refunds due to one reason or another.
Suddenly, you’re in the red for the day. But how?
Normally credit card payment processors take payments from the day’s sales and deposit them into your wine business’s bank account the next day. But if you have a slow Tuesday where you don’t sell anything and you’re refunding some orders, your credit card processing company will pull money out of your account to remit funds to those customers.
Your problem could get even more complicated if you have certain settings that essentially lock your bank account. That’s right! There are settings in bank accounts that don’t allow automated payouts. With this setting turned on, your credit card processor could be denied from pulling any money out from your account to complete a refund, which could lead to suspension of processing activities.
To avoid seeing a negative number in your account, you can do a couple of things.
- Check your bank settings. Your accountant or representative should be able to advise you on this, depending on who you bank with. This is just part of being a savvy entrepreneur, making sure you know what settings are allowing money to flow in and out of your account based on what your credit card payment processor is trying to do.
- Have a rainy day buffer of funds available. Once that automated payout setting is confirmed, be sure to keep enough cash reserves in the bank to cover refunds, should they happen to occur on days with low to no sales. There will be high sales days and low sales days, and this is one less surprise infiltrating your operations.
Take disputed charges in stride and focus on great customer service
Whether it’s buyer’s remorse, a legitimate fraudulent transaction, or a “perceived” fraudulent order, you’re bound to deal with disputed charges from customers who want their money back. It’s never fun for anyone, but knowing what to expect can soften the blow.
The most common reasons a customer will give for a dispute are:
- Fraudulent charge
- Their order wasn’t delivered
- They previously canceled a wine club membership but were charged again
After your customer initiates the dispute, the credit card issuing bank removes the funds from your bank account, plus a chargeback fee—commonly $15. It’s then held in an escrow account (think purgatory but for money) for a review period.
It shouldn’t be a surprise, but credit card companies aren’t merchant-first, they’re customer-first. Still, as the merchant, you will have seven to twenty business days to submit evidence to fight the dispute and/or connect with the customer about resolving the issue personally. The latter is always recommended because it’s an opportunity to show excellent customer service. If, after that discussion, the customer opts to rescind the dispute with their credit card company, that can resolve the issue and get the money back into your bank account sooner.
Otherwise, if you have to submit evidence to fight the dispute, that review period by the banks can take 60 to 90 business days.
Most customers don’t know that they may not see their money back for up to four months if they end up winning the dispute. This knowledge could be enough to convince them to work it out with you directly.
Sometimes there isn’t a way to avoid disputed charges. But by crafting your messaging to reflect your desire to connect with customers and make things right, you build trust so that customers call you first when they have questions about charges to their credit card.
Damaged goods happen. Devise a shipping strategy to deal with them.
You’re shipping wine across the country. Maybe even across the globe. You can do all you can to package your product so it doesn’t get damaged, but at some point, something unfortunate is bound to happen.
Maybe it’s not a bottle that breaks, but the tough Texas heat that affects your wine so it’s undrinkable by the time it lands on your customer’s doorstep. Either way, wines will get damaged when shipped and you will not be able to recoup the cost.
There are a few things you can do to mitigate the sting that damaged goods can put on your bank account.
- The first is building loss or damaged goods into your business model and discussing the best way to record these situations for end-of-year reporting with your accountant.
- Next, understand different shipping policies for damages in transit. In some cases, one shipment could be covered up to $100 as part of your standard rates with the carrier. Since every company is different, talk to them and get a good sense of what they offer.
- Additional shipping insurance is another route to consider. While you may want peace of mind by paying for it, it’s also possible you’ll pay more in premiums than you would from taking a few damaged goods as a loss.
Knowing your customer base and product inventory can help you plan for shipping woes. For instance, if you know you’re going to ship a high volume of rare, expensive, hard to replace wines, shipping insurance from your carrier or a third party may make sense. Or perhaps you want to consider shipping methods that employ temperature controlled zone jumping and ice packs. Either way, checking in with multiple shipping companies can open up possibilities.
Be proactive in getting your wine customers’ correct information
Declined credit cards or rerouting shipments in transit are time consuming to fix. Usually, these occur when your wine club charges payments and members haven’t updated their credit card information or submitted a new shipping address until it’s too late.
Luckily, there are tactics you can employ to reduce these occurrences.
Before running a wine club batch or launching an allocation offering, send out a notification, advising members to review and update payment information and shipping addresses in their accounts.
In this industry, we all know wine requires an adult signature, and with that, many carriers require the shipper (i.e. you) to update the address on your customer’s package once it is in transit. Your customer can’t do this themselves, which means you’re on the hook.
Friendly, proactive communication can go a long way in avoiding these time-draining hassles.
Strategize your wine brand’s shipping costs and offerings
An elevated shipping cost is consistently a top reason customers don’t complete a purchase online. If it is not the top reason, it is certainly on the podium. And that’s not just the wine world — it’s every industry. So how are you going to compete in a market where shipping costs for wine are inescapably high due to package volume and product weight?
It is best to calculate your costs, review your marketing options, and (before your website goes live) determine how to avoid drop-offs at checkout due to shipping. All of this without affecting your margins, by the way.
Don’t worry. You have options. To figure out what the best option is for your brand, consider the following:
- Based on the rates you’re getting from the fulfillment center or carrier, can you blend those costs into the overall cost of your wines?
- Can you afford to offer an ongoing discount for larger volume orders?
- What’s more cost effective: moving the volume of the wines or recouping all of your shipping costs?
- Do you offer free ground shipping but charge for overnight or expedited orders?
Play with your business model and shipping strategy by thinking about different scenarios. Could you offer to ship at the same price for one to three bottles, four to six bottles, and seven to 12 bottles? Customers may find that rounding up the number of bottles in the order will be more enticing by lowering the per bottle price of the overall shipment.
While shipping rates can fluctuate, it’s best to work out your shipping cost strategy before you launch your website. That way, you have a better chance of making everybody happy from the get-go and can establish expectations early.
Know what your wine competitors are releasing and when
It’s always good to be aware of what your competitors are up to and knowing their release schedules to plan for your own offerings or club shipments can be helpful.
If you release, say, a Russian River Pinot Noir after many wineries from the same region released theirs, your sales may take a dip. Your customer base may have already spent their wine budget with your competitors.
You want to make sure you’re releasing vintages or club offerings at a time when your customers will be eager for them, not after they’ve loaded up a big round of orders from several other wineries.
To avoid a similar situation, do your research by keeping tabs on what your competitors plan to release and when. You can easily do this by signing up for their mailing lists, getting a hold of marketing collateral, or even joining other clubs.
Passionate wine collectors and casual drinkers are members of more than one wine club, which raises the stakes for strategic releases and offerings.
Get ahead of legal compliance issues
Legal complexities abound in the wine industry, and shipping your wine is no exception. It’s not exciting to think about, true. But neglect it too long and you might get into unnecessary trouble.
Consider how you’re going to handle shipping out of state, licensing for shipping alcohol to numerous states all with different requirements, compliance laws, tax collection, and remittance.
If any of these sound out of your league, don’t worry. Find a tax, compliance, and accounting consultant who can give you great advice; there are plenty.
Plus, the sooner you can effectively unlock all of the reciprocal shipping states, the better. There may come a day when your newest vintage receives a great score and you get a mention in a viral blog post or shoutout on Twitter. With that, if new buyers seek out your wines, but they live in states you haven’t opened up for shipping, it could result in lost opportunities. You never want to overlook those rare moments to get your wines into a larger expanse of collectors’ hands — and in turn, their friend’s glasses!