Australian online beverage supplier Digital Wine Ventures (ASX: DW8) has processed the first wave of orders from paying customers via its cloud-based wine distribution business WineDepot launched in September.
The company said it would issue its first invoices to WineDepot customers this month and expects to commence generating revenue this quarter.
WineDepot has been described as a “breakthrough platform” offering a vertically-integrated trading, order management and logistics service to connect producers directly with consumers in a global market space worth an estimated $1 billion per year.
The business generates a number of revenue streams per case of wine (depending on volume and size) by providing the wine industry with an end-to-end supply chain solution which includes fulfilment, storage and surcharge fees.
It currently has over 200 suppliers signed up to commercial agreements on its smart logistics platform and is able to deliver same day orders under a partnership agreement with Australia Post.
Chief executive officer Dean Taylor said new sources of revenue will evolve with the company’s growth.
“Right now, our primary source of revenue is from logistics fees which are entirely volume-driven,” he said.
“The next phase of the platform will be to establish a business-to-business marketplace [which will allow us to] also generate value-driven trading fees where WineDepot retains a percentage of the overall transaction value.”
While trading fees are expected to become the company’s largest and most profitable revenue stream, it is currently focused on acquiring suppliers and generating cashflow to reinvest into the establishment of the marketplace.
“Our revenue and profitability is directly linked to the number of suppliers, products and orders processed every day and we are experiencing growth across all of these metrics,” he said.
WineDepot will eventually be expanded into other key markets for Australian wine such as China, Canada, Hong Kong, Singapore, New Zealand and the US and UK.
Digital Wine Ventures had confirmed the amount of orders being processed through WineDepot’s network of local “depots” is steadily increasing as more commercial customers sign up to take advantage of same and next day delivery to extend their pre-Christmas selling period.
Each depot holds a broad range of inventory, but only in limited quantities.
To maintain sufficient stock cover, the depots are replenished on a regular basis using artificial intelligence and other predictive software.
“The lead-up to Christmas is traditionally a bumper sales period, with an enormous volume of goods sold online,” Mr Taylor said.
“The increased volume creates a backlog for freight networks, forcing retailers to publish cut-off dates – sometimes weeks ahead of Christmas – to guarantee that purchases are delivered on time.”
Early cut-offs mean some online retailers – especially those in the liquor sector – end up missing out on millions of dollars in sales each year.
“Our local depot model gives customers the ability to continue taking orders until two days before Christmas with the confidence they can be delivered on time.
“It allows them to increase their sales and provide a better customer experience over the festive season and we expect this will become our key selling point in the future.”