Winebits 249: Amazon wine

This week, an update on the news that Amazon, the world’s largest Internet retailer, wants to get back in the wine business:

• Solving the compliance problem: Lew Perdue at Wine Industry Insight, who broke the story last week, follows up with details on how Amazon will help wineries follow the various and byzantine state direct shipping laws. Because, in order to make this work, Amazon won’t ship any wine, but will leave that – and compliance -- to the wineries. All it will do? List the wine on its website, just like any other third-party reseller. Perdue also reports that only 12 states will be part of the program; again, this makes me wonder why Amazon is bothering, since 12 isn’t a whole lot and probably won’t include New York and Pennsylvania, which are notorious for their liquor laws.

• Get those lawsuits ready: I noted yesterday that Amazon’s plan could well provoke a legal shoot-em-up, given the regulatory climate in the U.S. What I overlooked is that the beer business, which hates direct shipping the way I hate the designated hitter, has very deep pockets. Case in point is a lawsuit in which two distributors are being sued by a beer manufacturer. I don’t completely understand what the suit is about, but what’s important to note is that the beer distributor trade group is supporting the distributors: “Beer distributors are dedicated to keeping alcohol out of the hands of minors and we oppose alcohol sales on the Internet.” Hope Amazon has lots of lawyers on retainer.

• What about the locals? Stephen Eliot at Connoisseur's Guide to California Wine asks: “[H]ow this [will] impact the independent, brick-and-mortar wine retailers. I have long believed that the classic wine retailer, is among the most important and underappreciated players in real wine education. …” A good question, but probably one that won’t make much difference in the short run. Assuming Amazon gets this to work, its scope will be limited and will only include California wineries (and a limited number at that). Plus, wine is different than music or books, which are mostly Internet-only products these days and put book and music stores out of business. Can’t have a digital bottle of wine.

Comments

[Morton Leslie]

WineDirect claims to ship to 44 states and D.C. so they can certainly expand later. Also since WineDirect has a "3-tier" structure, so it's not improbable to see them adding foreign wines to the offerings. Shipping costs are the ultimate limitation just as they have been for all direct shipping.

[Jeff Siegel]

Good points all, Morton. Still, I don't see how foreign wines would be cost effective unless it's the high end stuff, and there's not enough of that to make a difference.

And I have purposely not discussed shipping costs in any of this for the very reason you mention. No one has yet figured out how to do it, and no one likely will unless their cost structure is such so that they can afford to take the loss and offer free or discounted shipping. And wine just isn't that profitable.

Dr. Vino (http://www.drvino.com/2012/10/01/amazon-wine-sequel/) asks if Amazon would include wine as part of its free shipping policy (Amazon prime and the like); that would no doubt send regulators into a feeding frenzy.

[Noblewines]

Jeff ~ I am not sure how the regulators can get involved if free shipping is offered as that is already offered within the 3-tier system from the newbies (Lot18) and the classics (Sherry-Lehmann). Shipping of wine is the key, and while digital wine is not possible, Amazon became the beast they are prior to digital books.

The costs of shipping wine is weighed down by legislation and inefficiencies, not heavy bottles... I can get free-shipping on digital books, heavy books and even a couch or appliance. Problem is that wine has to ship to a port in NJ, then a wine warehouse (Western or the such), then to a retailers place (Sherry-Lehmanns Warehouse in Brooklyn), then to the end consumer in any state including California... where a French wine could have started its journey at say a Berkley Importers. I wonder how many Union hands have touched the average wine bottle in the system?

[Jeff Siegel]

Noblewines, you can get free shipping on heavy items because the retailer takes the cost of shipping out of margin. There is more room to do that on a $1,500 computer than on a $50 bottle of wine.

In this, there is no such thing as free shipping. The consumer either pays the cost in a higher price (check out the price of pet food on Internet pet retailers -- the cost is the same whether free shipping is offered or not) or the retailer absorbs the cost of shipping as part of doing business.