Innovation

How Woodford Reserve tapped a growing luxury goods e-commerce market

The bourbon distillery is making moves in online sales, while also testing data-driven customer experiences.

How does a 206-year-old bourbon distillery move into the 21st century? With a strong e-commerce strategy, and experiments in facial recognition technology, augmented reality (AR), and virtual reality (VR).

Woodford Reserve Distillery began operations in 1812 in Versailles, Kentucky. The site, now considered a National Historic Landmark, crafts Woodford Reserve Distiller's Select, the Official Bourbon of the Kentucky Derby. Woodford also is the only distillery to use the copper pot still and triple distillation process to make bourbon today, according to the company.

Woodford's IT department is constantly evaluating the latest in digital technology that can help better connect with customers and boost the brand, according to Woodford's manager of innovative solutions Michael Eichberger. That currently includes augmented and virtual reality, facial recognition, and new communication methods, but company policy does not allow him to get into more details.

SEE: IT leader's guide to achieving digital transformation (Tech Pro Research)

"The key is to find digital innovation that stays in line with our brand essence and history, speaks to our consumers, and is simply an extension or a connector of everything we are already doing and plan to do," Eichberger said.

To that end, the company is making investments in e-commerce and mobile to offer customers a new way to purchase alcohol, as well as improve to improve their experience with the brand through collecting their data.

"The whole world is moving toward mobile," said Woodford Reserve digital manager Kiernan Leonard. "It only made sense to move our efforts to a medium where our consumers are spending most of their time."

For example, a tasting app teaches users how to train their bourbon palette to identify the flavors in Woodford Reserve products, by using certain foods that interact with your taste buds on a molecular level. For example, sipping Woodford Reserve after eating a piece of aged parmesan cheese allows the bourbon to take on a soft, woody character, which teaches the taster about the properties Woodford Reserve inherits from the maturation process in oak barrels, Leonard said.

Digital also affords the greatest reach when getting in front of a targeted consumer, Leonard said. "We know exactly who is spending time with our content, with the added benefit of real-time analytics, which allows us to tweak messages mid-campaign if we have to," she added.

As of this writing, only 19 US states legally allow alcohol delivery. However, new legislation is always on the horizon. But even in those states where alcohol delivery is legal, it's still not as popular as purchasing in-store.

"Right now e-commerce is still very small, but it's quickly growing, and we're paying attention," Leonard said. "We're learning as much as we can about consumers who are purchasing their alcohol online and getting to know their shopping habits, because it's the only way we'll know how to effectively reach them in the future."

SEE: How Sephora is leveraging AR and AI to transform retail and help customers buy cosmetics (TechRepublic)

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Image: Woodford Reserve

The opportunities and challenges of selling luxury goods online

E-commerce has exploded since the early days of Amazon's book sales, said Forrester senior analyst Ananda Chakravarty. Food products, including alcohol, have been increasing slowly in online sales. The challenge with alcohol, other than restrictive state laws, is packaging a fragile product. However, that's obviously not an insurmountable problem, Chakravarty said.

Most people purchase goods both online and offline, Chakravarty said. But even when people shop in stores, they are often influenced by the online channel. "They are doing their research up front online to find out more about the products they're buying," Chakravarty said. "By the time they get into the store, they're pulling out their smartphones and comparing prices. If the product information is available online, people will find it and try to compare."

Over time, we can expect to see more e-commerce adoption, as well as more interplay between online and offline shopping environments, Chakravarty said. "It's an artificial boundary," he added.

"There's no company in the world that's not thinking about some aspect of digital transformation, and e-commerce is part of it," said Gene Alvarez, managing vice president at Gartner.

The alcohol industry has been selling online for quite some time, but it is not the lion's share of the business, Alvarez said. "It is very hard for an alcohol company to become a pure play, web-only business," he added, due in part to the state laws and age requirements involved. However, e-commerce enables beverage companies to gather information directly from customers that they would normally miss out on when products are sold in a store or in a bar.

"Many are finding a way to sell online in order to get information about customers directly, as well as feedback, participation in loyalty programs, and even participation in communities around their beverage, which gives them more insight into what their customers like," Alvarez said. "Consumer product companies have recognized that they can build direct relationships with their customers when they sell online."

SEE: Hiring kit: Digital campaign manager (Tech Pro Research)

Woodford's partnerships with e-commerce companies

To better reach customers online, Woodford partnered with e-commerce companies Drizly, ReserveBar, and Amazon. Ads appeared on Hulu for the first time in fall 2017.

"We're dipping our toe just to find out who the consumers are that are using these services, so we can better understand how to reach them in the future," Leonard said.

Drizly is an alcohol e-commerce marketplace that offers one-hour wine, beer, and liquor delivery in 70 US cities. It aggregates alcohol from different local stores and allows a customer to select where they would like to purchase from, as well as if they prefer in-store pickup, one-hour delivery, regular shipping, or gift shipping.

Drizly's demographic tends to be tech-forward millennials with a high net income—a key target demographic for Woodford Reserve. "We partnered with them during a holiday time period and brought to light that Woodford is a great holiday gift," said Taylor Burton, vice president of strategic partnerships at Drizly. "And from a convenience factor, we can get to the end consumer however that buyer of the product would like."

E-commerce offers customers a more personalized experience than walking into a brick-and-mortar store, Burton said. "That's really the advantage we're bringing to our retail network. We're allowing the aisles to shift and change based off of what that consumer has purchased in the past, so that shopping experience feels more customized," he added.

The alcohol e-commerce space remains very small: In the US, only about 0.5% of total alcohol sales occur online, Burton said, due in large part to state regulations.

"We're about seven years behind traditional e-commerce, so we're not reinventing the wheel," Burton said. "We get to learn from our predecessors and really follow that roadmap."

E-commerce also allows companies to collect all data involved in a transaction, Burton said. "The entire path to purchase can be captured digitally, so that suppliers can enter themselves into those conversations earlier in the decision tree," he added, "which ultimately will help everyone sell more product."

Tips on digital transformation and e-commerce strategies

Woodford's IT department has been instrumental in analyzing innovative ways to improve the brand's presence online and in bars. As of this writing, one project currently in development is a system to determine if a consumer is of legal drinking using facial recognition technology.

IT also goes to marketing and brand teams with new technologies that may improve business. "They are not fully integrated into brand strategy, but they do know the types of things that we are looking for, and the types of things that could be useful to us," Leonard said. "For example, the camera technology that identifies a consumer's age is something the marketing side would never have even thought existed. Now we're using it in beta modes across the US."

The key to a digital transformation is to first articulate "Why?" Eichberger said. That includes asking questions such as, "Why do we want to transform in the first place? Where is the value? What will it look like for the consumer and the brand? How will it benefit both?"

After this phase, the IT partnership can begin to look at technologies to support the vision. "If a new technology fits, have a process for further piloting and implementation," Eichberger said. "If the idea is good enough, typically budgets work themselves out, and a lot of times it's a combined brand and IT pool of funds. After all, we are on the same team working for the same thing."

Be proactive in finding new ways to reach your customers, but don't get caught up in flashy new technology that may not fit your business, Leonard said. "Find what's already working for you and your brand, and look for ways you can evolve it," she added.

In creating an e-commerce strategy, you must create a vision for the overall customer experience, and ask what role your website or app will play, Alvarez said. Then, you need to set a goal for what percent of sales the company wants to come through online versus in-store channels.

"We are moving to a world of customer experiences, where experiences are what drives markets," Alvarez said. "The alcohol industry needs to understand what role their website or app will play in the experience of the customer."

Also see

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Image: Woodford Reserve

About Alison DeNisco Rayome

Alison DeNisco Rayome is a Staff Writer for TechRepublic. She covers CXO, cybersecurity, and the convergence of tech and the workplace.

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