When it comes to entering the Chinese market, the traditional path for foreign winemakers has been to link up with big importers and distributors such as ASC Fine Wines or Summergate. Until recently, the logic was clear: only these importers and distributors have the necessary marketing and distribution muscle to get wines into retail stores, as well as into restaurants and bars. But there is another option growing in popularity: the direct-to-consumer (DTC) route that bypasses these big importers entirely.

The classic B2C e-commerce model

In the classic DTC model, winemakers distribute their wines to big Internet retailers like JingDong (JD.com), Tmall, Yihaodian (YHD.com) or Taobao, which then take care of all the merchandising and logistics. When online consumers purchase these wines, the wines are simply loaded from the storage warehouse, put onto trucks with other items from an order, and then shipped to the consumer. Hence the term “direct-to-consumer” – from the perspective of a Chinese consumer in Beijing or Shanghai, the wine appears to be shipped directly to them from the wine company itself.

And, indeed, if you look at some of the most popular B2C e-commerce sites, you can see exactly how easy it is to find wines from around the world. At the same time as you are buying clothing items online, you can also add a bottle of wine. On the JD.com site, for example, you can type in “Cabernet Sauvignon” (a favorite with Chinese wine drinkers) and immediately see pages upon pages of wines, as well as dedicated storefronts for some of the biggest wine brands in the world, including Penfolds, Yellow Tail, Casillero del Diablo and Lafite. In the United States, it would be much as if you could order wine directly from Amazon.com while shopping online.

There are a number of advantages here for foreign winemakers. For one, you don’t have to worry about distribution to brick-and-mortar storefronts. Theoretically, a Chinese consumer in any part of mainland China could order your wine, and all of the shipping logistics and fulfilment is then up to JingDong or Tmall. On the flip side, of course, it’s hard to stand out in a sea of products from so many different consumer sectors. Other than creating a branded shopping portal right on a site like Tmall (as Australian winemakers have done), how exactly are you supposed to let consumers find you online?

The dedicated wine-only B2C model

To solve this problem, wine-only B2C platforms such as YesMyWine and Vinehoo have emerged. YesMyWine, which got its start selling wine over the phone to Chinese consumers, now acts as a B2C platform for imported wines. In 2014, the company sold 7 million bottles of wine. Moreover, YesMyWine has hedged its bets by also offering a flagship store on generic online retail sites like JD.com. The increase has been annual increases of nearly 50% in overall sales volume, driven by growing Chinese consumer demand for wine.

The advantage of a wine-only DTC model is that you don’t have to cut through the clutter that you find on other e-commerce sites. As a result, sites like YesMyWine feel much more like a “wine community” or a “wine social network” than a pure play e-commerce site. One mantra of YesMyWine is “education first, sales follow.” This means the site is filled with educational videos, information about wine tastings, and details about online wine communities. The perfect customer, according to interviews with one YesMyWine executive, is a young, Internet-savvy 28-year-old who is just now transitioning to wine from beer or baijiu.

Vinehoo has a streamlined search interface where it is very easy to search for wines. Vinehoo styles itself as a social network for wine connoisseurs as much as a B2C wine e-commerce play. As a result, there are features available on Vinehoo such as “Flash Purchases,” in which wine consumers can team up to get the best possible price on a wine purchase.

China’s unique O2O model

If you read any research report on the Chinese wine industry, you’re likely to encounter the term “O2O,” which stands for “Online to Offline.” This is a model in which restaurants and retail shops can set up a dedicated counter at their brick-and-mortar location in order to sell wines sourced from an online wine retailer such as YesMyWine.

YesMyWine, for example, refers to this as their “direct sales partner initiative.” It is viewed as a way of giving restaurants and shops much greater access to top-quality, affordably priced wines. Over 1,000 restaurants in Shanghai, for example, now use the O2O model from YesMyWine in order to offer customers high-quality wines at a reasonable price. Historically, Chinese restaurants have not emphasized wine sales, and have not educated consumers about proper food-and-wine pairings. The O2O model, then, is a unique way to transfer the online experience to a physical, brick-and-mortar location.

Social media

Finally, no discussion of the DTC route can be complete without a mention of the need for all wine brands to create a digital media presence. This means interacting with Chinese consumers across social media (such as by leveraging Weibo or WeChat), and by making mobile a key part of any marketing initiatives. YesMyWine, for example, has noted that the company now gets just as many visitors from mobile devices as from desktop computers.

Thus, just as the world’s biggest brands routinely set up Facebook, Twitter and Instagram accounts in order to appeal to wine drinkers online (and preferably, young millennial Internet users), they are now setting up accounts on all of the top Chinese social media sites and experimenting with new advertising options to build overall consumer awareness and drive users to specific e-commerce platforms.

The future of the DTC model in China

There are two good reasons why the DTC model has grown in popularity over the past decade. The first one is obvious – the Chinese Internet is now thriving and dynamic, and long ago surpassed the U.S. Internet in terms of overall users. The second reason is not so obvious – traditional import and distribution models are not nearly as efficient as they might appear on the surface. For example, if you are not working with one of the Top 10 largest importers, you might be surprised to find out that warehouses are not climate controlled, or that trucks are not refrigerated. Moreover, you might be surprised to find out that the current incentive structure for distributors now favours low-cost, high-volume wines rather than high-cost, low-volume wines.

As a result, the DTC model offers a great alternative. With DTC e-commerce retailers, you don’t have to worry about all the distribution issues. And you don’t have to worry about getting your wines into stores across China. You do, however, have to focus much more of your effort on building your overall digital presence, so that when Chinese consumers do head over to a site like Tmall, they are already familiar with your products and overall brand image.