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Insights

10/12/2019

What Retailers Are Looking for From Their Distributors and Importers

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Insights into what retailers look for from the distributors and importers - by Dan Sullivan, Wine Director of Super Buy-Rite.

For distributors and importers, it’s important to be able to view the U.S. wine and spirits market from the perspective of the retailer. As Dan Sullivan, Wine Director of Super Buy-Rite, points out, the continued existence of the three-tier system in the United States means that retailers, distributors, and importers need to be working together as partners. With that in mind, Sullivan provides insights into a few of the best practices that can help bring distributors and importers closer to their retail partners.

First and most importantly, says Sullivan, it’s important for retailers to feel like they are engaged in a real partnership with their distributors. It starts with all the little details – such as being punctual for meetings and making appointments, rather than just showing up with a lot of different products to sample. During these sales meetings, says Sullivan, retailers are looking for new opportunities that might not be available to everyone else – such as access to a hot product, the last chance to buy in on a product with low inventory, or products that are in a fast-growing or emerging market category. Even a quick heads up that “inventory is getting low” is much appreciated by any retailer, especially one with a large customer base where inventory planning is critical.

According to Sullivan, it’s also important for distributors and importers to coordinate in-store tastings. Many distributors say they will do this, notes Sullivan, but many never do. When you do an in-store tasting, it communicates a lot to the retailer. It shows them that you stand behind a certain brand and that you are willing to put in the commitment to move that product. Tastings are so important for retailers, says Sullivan, because they are very effective at getting customers to step outside of their comfort zones. A customer who only buys Cabernet Sauvignon, for example, might decide to experiment with another red wine varietal if the in-store tasting team is very passionate about their wines.

Communication is the key to a strong partnership between retailers and distributors, says Sullivan. It’s important to keep the line of communication open, even if it’s simple details like updates on changing price points or vintages. This gives the retailer an opportunity to pass on that information to its own customer base. Customers, for example, don’t want to walk into a retail store and find that the wine that they have always purchased for under $10 has suddenly been marked up to the next pricing tier.

Of course, financial metrics also play an important role in the relationship between importers, distributors, and retailers. One key metric involves the quality/price ratio. Customers need to feel like they are getting value for their purchase. They will visit the same retailer over and over again if they feel that the retailer consistently over-delivers. The best reaction that you can get from customers, says Sullivan, is, “Wow! I would have paid more for that wine…” It doesn’t matter if a wine costs $5 or a wine costs $100, says Sullivan. Value is very much front-and-center with almost every customer. Thus, value has to be a very real consideration when presenting a portfolio of products to any retailer. Can you consistently deliver value? The third and final financial metric is profitability. “It doesn’t matter how good the product is,” says Sullivan, “if you can’t keep the lights on.” Thus, consideration of profitability and profit margins has to be reflected in the pricing of products.

Taking a long-term outlook, Sullivan says that changes to the traditional three-tier distribution system in the United States are coming much sooner than anyone anticipated. The entire direct to consumer (DTC) trend, for example, has fundamentally changed the role of distributors. If consumers can get their product direct from a winery or distillery, what is the value of the distributor?

Moreover, Sullivan suggests that Amazon is eyeing a much larger role in the wine and spirits industry. The first foray of Amazon into the market, of course, was the company’s acquisition of Whole Foods Market. Now, it’s possible to walk into a Whole Foods and buy wines and spirits, many of them private label. So what happens when Amazon opens other types of grocery stores or convenience stores, all of them selling alcohol beverages? And what happens if it becomes possible to buy direct from Amazon.com? As Sullivan notes, Amazon already has a massive warehouse and distribution network, so any changes to Amazon’s role in the marketplace will surely have an impact on distribution.

In terms of what works best in selling more wines, Sullivan is quick to point out the role of in-store tastings and reviews from well-known wine critics. As an example, he points to wine critic Eric Asimov. Any type of wine review from Asimov along the lines of “10 wines under $20” will have a huge impact on driving sales volume, says Sullivan.  He also notes the importance of keeping markups to a minimum. “Markups are tricky,” says Sullivan. They really only work if you have exclusivity with a certain product. Otherwise, you are going to lose customers to other retailers.

By keeping these best practices in mind, says Sullivan, it’s possible to create very effective relationships and partnerships with retailers. All it takes is understanding what motivates retailers, and how they are trying to provide optimal value to their customers.