Online beverage supplier Digital Wine Ventures (ASX: DW8) has partnered with Multi Service Pty Ltd, a global business-to-business (B2B) payment solutions provider to offer Credit-as-a-Service (CaaS) to users of WineDepot’s direct-to-trade marketplace when it launches later this year.
WineDepot is a cloud-based Software-as-a-Service technology platform that promotes direct-to-market sales and smart logistics, allowing for expedited delivery, greater pick-and-mix choices and lower associated costs.
The company is the cornerstone investment of Digital Wine Ventures and aims to disrupt the $300 billion global wine supply chain.
With the new deal, Multi Service will be responsible for managing all invoicing, collection and fraud detection processes, and will assume risk and recourse while guaranteeing payment for WineDepot, similar to what Afterpay (ASX: APT) offers users.
Digital Wine chief executive officer Dean Taylor said the introduction of CaaS provides WineDepot with an additional revenue stream while reducing administration costs, making the proposition “very attractive” to suppliers and trade buyers.
“Given the challenges Australian wineries have been through over the last six months, I expect wine producers in particular will find the ability to accelerate their cash cycle flow and reduce account administration, collection and recovery costs for a small fee very attractive,” he said.
The hospitality industry relies heavily on generous terms provided by wine and alcohol suppliers, but it is not uncommon for suppliers to wait up to 180 days to be paid in full.
It is expected the provision of CaaS with guaranteed and accelerated payment terms will appeal to suppliers and trade buyers, whose cashflows have been under pressure since COVID-19 restrictions forced restaurants and hospitality venues to close.
With the ability to approve credit lines of up to $250,000 in less than 30 seconds, Mr Taylor said the initiative would breathe life back to Australia’s $5.3 billion wholesale liquor market.
“To help the industry get back on its feet, we will be offering suppliers that use our direct-to-consumer marketplace the ability to receive cleared funds within as little as 48 hours of each sale,” he said.
“Stacked on top of all the other benefits our platform offers, I have no doubt that suppliers will find this optional service to be very attractive,” Mr Taylor added.
The new system will also eliminate the need for trade buyers to open and manage accounts with various suppliers on different trading terms.
“Instead they will be able to purchase everything they need through a single order, on a single invoice, which is received in a single delivery and settled with single payment, 30 days from the end of each month,” Mr Taylor said.
In July, Digital Wine Ventures closed a $6.15 million capital raising to fund WineDepot’s expansion through the direct-to-trade marketplace, which will allow restaurants, hotels, bars and bottle shops to support wine producers by purchasing via their unique vineyard-to-venue ordering solution.
Traditionally, wholesale liquor markets are serviced by distributors, which charge between 35% and 50% of the wholesale price, leaving little profit for the producer.
Direct-to-trade will allow local and international producers to service the market for a fraction of the traditional cost, encouraging them to share some of the margin that is saved with the trade buyers by offering discounts for loyalty and early payment.
Mr Taylor believes the initiative could not have come along at a better time.
“COVID-19 has driven millions of consumers online across almost every product category including wine,” he said.
“Direct-to-trade will provide wine and other beverage producers with a simple, cost-effective and highly-scalable platform to reach and transact with thousands of trade buyers.”
He said the initiative is similar in design to direct-to-consumer sales channels and will become a more profitable route to market for producers.