Internet Web-Site Adoption: A study of 107 Victorian SME Wineries.

Carmine Sellitto[HREF1], Lecturer, School of Information Systems, Victoria University[HREF2], PO Box 14428 MCMC, Melbourne, Victoria,8001. Email: carmine.sellitto@vu.edu.au

Professor Bill Martin[HREF3], Director Research Programs, School of Business Information Technology School, RMIT University[HREF4], GPO Box 2476V, Melbourne, Victoria, 3001. Email:bill.martin@rmit.edu.au

Abstract

This paper focuses on the adoption of web sites by Victorian regional SME wineries and reports on the results of a survey that captures some of the perceptions and views of winery proprietors. Wineries indicate that their web sites are used primarily as information delivery mediums that focus not just on wine products but also on promoting tourism. Moreover, the survey uncovers an unexpectedly high degree of winery-to-winery web site links that is unusual considering the competitive nature of the industry and could be viewed as a form of reciprocity, allowing close collaboration between wineries for tourism purposes. Wineries appear to offer a high degree of online wine sales, however, electronic transactions for many are insignificant.

Introduction

The Internet has become an extremely important modern day technology for business. The Australian National Office for Information Economy (NOIE) indicates that Internet adoption by Australian business is significant, with some 65% of small and 83% of medium businesses using the Internet for business purposes (NOIE 2001a). The use and application of Internet based technologies in commerce, government and education is claimed to be undergoing extraordinary growth, with the World Wide Web said to be significantly altering the manner that traditional commerce is undertaken (Sandy and Burgess 2003). Moreover, the important question for many businesses is not whether to deploy Internet technology, but how to use the Internet as a competitive part of business strategy that complements the traditional way that they have done business (Porter 2001). The Internet for the purpose of this study is viewed as a new technological innovation with valuable and favourable characteristics. Hence, Internet adoption by wineries is viewed as being desirable, and one that adds value to winery business operations. From a rural perspective the adoption of the Internet by agribusinesses has been encouraged by both State and Federal governments, with significant benefits being documented (Papandrea and Wade 2000; State-Government-Victoria 2001). Indeed, Internet adoption by agribusiness will continue to increase worldwide (Gregor and Jones 1999; Badger 2000; Rowley 2000), and wineries that are regionally based manufacturing enterprises will not be isolated from this trend. For a wine business in regional Victoria the primary benefits can be linked firstly with overcoming the 'tyranny of distance' and secondly, having an increased number of potential clients that can be sold products (State-Government-Victoria 2001).

The Australian and Victorian Wine Industry Cluster

The Australian wine industry is as old as European white settlement. Vines were introduced to Australia as part of the plants for the new settlement scheme that was part of the First Fleet charter in 1788 (Beeston 1994). More recently the industry has undergone a major renaissance which is in part due the current world-wide consumer trend towards purchase and consumption of quality wines- which is a feature of the industry (Anderson 2000). To place the success of the industry's growth in perspective, consider that wine exports contributed some $2.1 billion to the national economy as of the end of 2002 (AWBC 2002), with wine being considered along wool and coal as important export products. The industry structure is such that the top three wine groups (Southcorp, BRL Hardy and Orlando-Wyndam) account for some 75% of the wine export value, with the top 20 controlling some 95% of the wine industry production. The total number of wineries in Australia has also grown rapidly. Since 1998 the Australian grape crush has increased some twelve fold, whilst in the same period the number of wineries has increased significantly-many of these new wineries being small in size. Small wineries in Australia have an annual grape crush of less than 1000 tonnes per annum and comprise the major number of all winemaking businesses in this country. The Victorian Wine cluster can be viewed as a microcosm of the larger national wine cluster with wineries being generally classified as small to medium (SME) size rural businesses, collectively interacting with a cluster of specific industry suppliers, wine organisations and industry distributors (ANZWD 2001). The interaction of Victorian wineries with the general wine industry is depicted in figure 1.

Because of the nature of wine distribution in Australia where the Coles Myer and Woolworths conglomerates control a significant proportion of retail outlets, the small winery by virtue of size is reliant on direct consumer marketing and sales (Lockshin 2001). In Victoria, where small, young wineries have not yet developed strong brand names, direct sales via the cellar door, mail lists and the Internet provide the only viable avenue for distribution and profitability (Goodman 2000). Use of the cellar door to achieve direct sales is only a recent practice (Hall et al. 2000) when compared to the traditional use of direct mail order catalogues to achieve wine sales to customers. Another recent practice has been the advent of Internet technologies such email and the World Wide Web, which has provided wineries a powerful avenue for the direct marketing and selling of wine (Goodman 2001; Wenn et al. 2001; Sellitto and Martin 2002).

Various authors suggest that the wine industry in general, and small wineries in particular, can benefit from the adoption of Internet technologies- be it for marketing, communication or for electronic commerce activities (Goodman 2000; Major 2000; Mueller and Stricker 2000). Because of the substantial taxation benefits that wineries can achieve via direct cellar door sales or mail order- the use of email and the winery web site has been viewed as an alternative and important distribution channel for small wineries (Sellitto and Martin 2002).

The Internet can be a powerful medium to undertake permission marketing (Godin 1999) - permission marketing being the practice whereby a customer gives consent to a company to send them promotional product material. For small wineries that have traditionally used and are experienced with direct customer marketing and sales activities, the use of the Internet and particularly a winery web site provides an ideal substitute for existing direct permission-marketing based operations.

This paper forms part of on-going research that examines how wineries are using the Internet and focuses on winery web site adoption. Wineries in Victoria have been selected as the study group because Victoria has the greatest number of wineries in the country, with a substantial proportion of these wineries being small to medium size businesses (SMEs). Moreover, unlike other SME web site studies that evaluate web pages in laboratory conditions by the researcher, this study captures winery owners perceptions of how they view benefits and features of their web sites.

Methodology

The study was conducted with assistance from the Victorian Wine Industry Association (VWIA). The VWIA is an organisation that has close links with the Federal and Victorian Governments and the Australian Wine and Brandy Corporation and provided a covering letter for a postal survey sent to 360 non-subsidiary wineries. Completed questionnaires were obtained from 107 wineries representing a 30% response rate. The questionnaire asked wineries to select from a list of options and indicate which were the important features found on their web site. The web site feature list was drawn from the literature and provision was made to capture additional winery owner comments through an open-ended question. Results that relate to a winery's web site use are presented in this paper.

Classification of wineries into business size is based on annual grape crush, a method that the Australian wine industry uses; a large winery is one crushing more than 1000 tonnes per annum, a medium size winery between 250-999 tonnes, and a small or boutique winery less than 249 tonnes a year. Micro wineries, which are very small businesses, and are based on a 'lifestyle' philosophy, crush less than 20 tonnes of grapes per annum (ACIL 2002).

Results

Winery web site features

Winery web sites can provide various types of information (Alpin 1999; Goodman 2000; Major 2000; Stricker et al. 2001). The information features of winery web sites uncovered in the survey now discussed.

Winery web site information

Basic information about the winery (96.6%) and product information relating to wines made (94.9%) were the most common features that wineries included on their web site. A relatively high proportion of wineries (64.4%) included regional information about where the winery was located, whilst some 44.1% provide information on the making of wine (viticulture). Reviews about wines were a feature of 33.9% of winery sites, whilst only 13.5% of wineries had a frequently asked questions (FAQs) section on their site.

All web sites include some form of basic information about the business and products or services being offered. Wenn et al. (2001) assert that it is reasonably inexpensive to provide basic information about the winery on a web-site- information that may include vintage notes, wine-tasting notes and information about the location of the winery. Traditionally published wine literature has a major disadvantage over the electronically available information- traditionally published information is often out-dated as soon as it reaches the bookshop (Birch et al. 2000). Wine reviews are an important promotional tool for wineries that need to be cleverly included on the web site as part of a business marketing strategy (Goodman 1999). In Australia the great diversity of wines- with some 10,000 different types- makes differentiating between them a complex and difficult task (Lockshin 2001). Gomez-Limon and San Martin (2001) indicate that customers are increasingly demanding more information in order to understand wine products a little better and may become an important element in persuading them to purchase the wine, especially after tasting. Major (2000) suggests that quality online wine information and images can become an important source for a journalist writing a wine commentary or review. Consequently, the high information content feature of winery web sites determined from this study tends to indicate that the winery operators are using their web sites as information delivery channels and may be assisting them in providing relevant and up to date promotional information for their constituent audience.

Web site marketing

The use of the web to potentially establish a two-way transaction and communication process between a business and its customers has been referred to as interactive marketing (Godin 1999; Godin and Peppers 1999; O'Brien 2001). The Web has altered the way that traditional marketing is undertaken. Instead of a business generating marketing and promotional material that it wants to send to its customers, the web has allowed the same company to deliver only information that users ask for. The basic concept and aims behind interactive marketing is for business customers-both existing and potential- to actively engage in a proactive process of seeking information before they purchase a product or service. A subset activity of interactive marketing that has used the dual communication facility of the web is permission marketing. Permission marketing refers to the phenomenon where people first give permission to a business or organisation before they are sent promotional material for a product or service- the web has been shown to be ideally suited for this type of activity (Godin 1999).

Interactive marketing activity is practiced by 49.2% wineries and is in the form of permission marketing that extends an invitation to the web site visitor to join a mailing list. Mailing lists are the mainstay of wineries- particularly smaller ones- consequently it is not surprising that these wineries are utilising the web to enlarge the listing of names to which they can send promotional material such as wine catalogues, newsletters, and special offers. As reported by Tetteh and Burn (2001) a mailing list can be used for promoting wine brand loyalty. In the process of collecting customer details for mailing lists, wineries are inadvertently collecting customer information that allows them to potentially engage in customised electronic dealings with customers (Burgess and Schrauder 1999). According to Major (2000), this form of permission marketing is conducive to the collection of an invaluable set of email addresses- allowing the wineries to build an electronic marketing database. Major further alludes to the supplementing of these web collected email addresses with those gathered at the cellar door. Goodman (2001) concurs with Major and also favours the collection email addresses as an integral strategy for an efficient and effective marketing strategy for small wineries.

Interactive marketing on the web is not all uni-directional, as implied by the infamous B2C acronym metaphor- the notion of information transmission from the business to the consumer can also occur in reverse . The ability of wineries to collect, gather and display (promote) complimentary customer comments and responses can be achieved through the FAQ's page on the web site. Mustaffa and Beaumont (2000), on the basis of their Australian SME studies, suggest that a web site FAQ's page can allow a business to tailor products/services to customers and can be used to receive timely feedback. As indicated, only 13.5% of wineries had a FAQ's section on their web site. This relatively low number may indicate that wineries have not considered or offered the opportunity for their customers to give feedback. It has been suggested that the FAQ's section of a web site adds value to business presence on the Internet by being utilised as a product support feature (Burgess and Schrauder 1999), and to receive timely customer feedback (Mustaffa and Beaumont 2000)- features that would be relatively easy to implement with customers providing most of the information.

A more passive but important form of marketing is the provision of an online newsletter for all web visitors. An on-line newsletter was provided by 30.5% of wineries. Wenn et al. (2001) proposed that many wineries publish their newsletter online to keep enthusiasts informed of the latest developments in aspects of their business, and suggest that the newsletter is a vehicle for engaging drinkers in the wine community. The availability of an online newsletter is also a cost saving measure for wineries, acting as a potential substitute for traditional mail out (Major 2000).

Winery hypertext linkages

Some 35.6% of wineries had links that directed their web site visitors to other winery web sites, and 25.4% of wineries had information on their sites about the distributors of their wines. In view of the extremely competitive environment in which wineries operate, especially when it comes to wine sales, it is surprising that a relatively large number of wineries would provide the opportunity to redirect visitors on their web site to a competitor's site. This paradox may suggest that the use of the web by wineries is not primarily to sell to customers, but to be used as a promotional tool to foster regional synergies between groups of wineries for tourism purposes. Tetteh and Burn (2001) propose a virtual alliance model that views the Internet as a format that allows small businesses to participate as an alliance of autonomous entities both online and in the physical world. Part of the alliance model strategy is to view the linkages established between businesses as a cost effective and collaborative medium- where businesses work together, sharing resources and collaborating for mutual benefits and enhancing the value chain. The linking to other local web sites may be a deliberate marketing strategy as suggested by Papandrea and Wade (2000), who indicated that the rationale behind off-site links is to provide a service to a winery's customer and, hopefully, other sites will be encouraged to link back to the winery- providing greater exposure for the winery and wine brands. The linkages observed in this study, tends to support the above authors, however the high degree of winery-to winery web site linkages noted from the survey should be viewed as a form of business reciprocity amongst regional wineries allowing them to draw mutual benefits, particularly benefits that may stem from shared regional tourism objectives.

Further analysis of survey data allowed a comparison between wineries that offered tourism activities and Internet adoption. The results indicate that wineries that have tourism facilities and are connected to the Internet (53.9%) greatly exceeded the number of wineries that offer tourism facilities and are non-Internet adopters (22.7%)- this is an outcome of more than two to one in favour of Internet adopters.

The wine industry has been closely linked with tourism and State Governments have actively promoted wine-tourism to foster regional development (Morris and King 1998). Diversification into wine-tourism is an important business practice that may also be a reason for numerous local web site links. Many wine-tourists generally plan day trips to wine regions and involve visits to a several wineries in that region- the Victorian wine tourist on average visits 3.7 wineries every trip (VWTC 2001a). Information for planning these day trips constitutes an important component of the wine-tourists strategy and it has been shown that 7-10% of visitors gain this information from a web-site (VWTC 2000; VWTC 2001a). Thus, it could be suggested that the numerous web links to other near-by winery sites is a strategy that encourages visitations to a group of wineries located in one region- a strategy that fosters wine tourism. This suggestion concurs with Mitchell and Hall's (Mitchell and Hall 2000) observation that the Internet is an informative and stimulating tool that provides a network of information on a wide variety of wine tourism issues for the consumer, tourism operators and the wineries themselves. Moreover, the survey results indicate that 15.3% of winery web sites provided for some form of online booking of either restaurant or accommodation tending to further suggest that the winery web site has a quasi-tourist function associated with it.

Not only did wineries link their web sites to other wineries they also provided information (25.4%) about the distributors of their wines. Maintaining good relationships with distributors is important and essential marketing strategy (Goodman 2001). Wineries by incorporating distributor and retailer details on their web site are promoting other outlets that are selling their wine- paradoxically some of the retailers will have their own online distribution web sites from which customers can buy the same wine as available on the winery web site.

Winery e-commerce activity: Sales on the Web

Some of 35 (66.8%) of the 54 wineries with a web site made provision for selling wine on their site. The result, suggesting that 64.8% of wineries are providing for selling wine on their web site, tends to indicate that this is an important feature- especially considering that Internet wine sales can attract up to a 29% tax rebate as a direct sale to the public. However, such a result gives no indication of the sales volume directly attributable to wine being sold via the web site. The survey also sought to determine what proportion of wine web sales were representative of a wineries annual sales figure. The results of wine sales sold online as a proportion of total annual wine sales are depicted in Table 3.

The results indicate that wineries are achieving a low level of sales from their web sites. A good proportion of wineries (15.3%) that have a web site offering customers the opportunities to purchase online are not making any wine sales, whilst a substantial number of wineries (48.7%) indicate that their online sales are negligible at less than 1%. Consequently, although many wineries are offering wine for sale on their web site, the findings of this research suggest that a critical mass for sales volume does not appear to have been reached at this point in time. This finding tends to contradict the suggestion of Alpin (1999), who alluded to wine being one of the product classes best suited to being purchased online. This finding also counters the assertion that Wenn et al. (2001) make in their study of Australian wine web sites, that these businesses establish a web site to assist with sales. On the other hand these findings appear to support Major's (2000) suggestion that wine sales on the Internet have limited potential, where he indicated that although food and beverages accounted for a substantial proportion of retail trade, this group of products were only traded in minor amounts online. Major also suggested Australian wineries that offer online sales could jeopardise relationships with a their distributor, retailer and stockist- relationships that may have taken years to establish. Goodman (2001) also refers to the controversy of wineries selling online where he suggests the issue of avoiding conflicts with distributors as being integral to a winery's online selling strategy. Goodman goes on to also suggest that the SME winery is not in a position to sell a large number of wine cases on the Internet. Because case lots of wine are relatively expensive, and also because of the limited appeal of this type of purchasing style to the consumer he asserts that online sales are restrictive.

It has been suggested that the relationships between distribution chain entities would become obsolete as the popularity of the Internet and e-commerce allowed market intermediaries to be made redundant or be disintermediated (Tapscott 1996). A more realistic appraisal of the function of these intermediate businesses in the distribution supply chain is that their roles have been redefined and in some instances new intermediaries have emerged (NOIE 2001c). The apparent failure to date of direct on-line sales by wineries tends to suggest that disintermediation of the wine distribution chain has not occurred and ironically in some instances these wine distributors themselves are using the Internet as another medium for distribution (Stenning and Lockshin 2001; Stricker, Mueller et al. 2001).

Conclusion

This paper reports ongoing research into SME wineries in Victoria with the endeavour to develop an Internet best practice model that can be used by wineries to refine some of their business operations. The results presented in the paper where undertaken by survey of Victorian winery owners and focused on web site adoption. The results reveal that not all wineries have adopted a web site, whilst for those that have, some 41.7% offer consumers the opportunity to purchase online from their site. Although many wineries are offering a web site sales facilities very few are engaging in significant ecommerce when compared to other traditional distribution channels.

Winery web sites appear to be a key channel for wineries to deliver information to their constituent audience, information that relates to both wine products and the winery ambience which is not inconsistent with other general findings on web site adoption. Winery web sites, however, appear to also focus on information for the education of the general consumer community and also specific interactive marketing using newsletters. Moreover, contrary to basic business acumen, many wineries are linking to competitor winery sites indicating the collaborative nature of their industry and a web site strategy that appears to aim at fostering regional tourism.

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Hypertext References

HREF1

http://Carmine Sellitto

HREF2

http://www.vu.edu.au/

HREF3

http://Bill Martin

HREF4

http://www.rmit.edu.au

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