More Musings On Amazon.com Wine Sales

A few days back, I posted about Amazon's entry into both delivery and online sales of wine.  "Agent Red" of The Wine Spies left this comment on one of the posts:

Are wine retailers worried about Amazon's foray into wine? Personally, I am not, but I would love to hear the opinions of others. From my point of view, our value proposition is so vastly different from that of Amazon that I do not view them as competition at all.

Although my original post focused on the impact of Amazon on wineries, it will be interesting to see how retailers (online and offline) are affected as well.  Since all 2006 Acme Winery Chardonnay is the same thing (allowing for storage and transportation issues), will people still buy from the winery or a retailer if they can get it cheaper on Amazon?  Obviously, wines not available at Amazon will be a different matter. 

In the Amazon program (as currently understood), wineries set their price and Amazon pays them 50% of that amount per sale.  So, the winery has control of the price that Amazon charges.  Will wineries discount in order to get volume via Amazon?

For retailers, it will be an issue of service and convenience.  Shoppers have shown that they will cheerfully migrate to online ordering when retailers don't provide value (in terms of service, convenience, or experience) for the price they charge.  Their one clear advantage is being able to taste wines at retail.

It appears that Amazon is willing to take relatively small quantities of wine (at least at the outset), allowing smaller producers to participate.  For savvy consumers, Amazon will have to demonstrate that they take good care of the wines.

Regardless, since Amazon e-commerce is so familiar and easy, wineries and retailers will have to step up their e-commerce game to compete.

(Note that Amazon recently rolled out Checkout by Amazon and Amazon Simple Pay, both of which are explained on the Amazon Payments site, and both of which are worth a look to see if either makes sense to incorporate in your existing winery e-commerce system.)

Comments

[el jefe]

hi Mike - There's a local meeting with an Amazon rep at 10AM tomorrow. If I can get out of jury duty today, I get to go! Wish me luck!

I have an email from NVL offering a new fulfillment service to 45 states with full compliance services. If Amazon is using NVL, and NVL is able to ship to 45 states now, then Amazon will give me direct consumer access to states I can't afford to access now. If that is the case, and I get paid FOB (or close enough) this would appear to be a great deal for any small winery.

Assume the best and I will report back tomorrow ;)

[el jefe]

OK, so I am reporting back Sunday (just back from a very successful two-day tasting event with the TAPAS organization.)

Pretty much everything has been covered by other comments in the several posts on this. They are going for smaller wineries, and the wines will sell for a minimum of $12. The winery commits to selling the wine, Amazon comes and picks up the wine and deals with everything else - including compliance paperwork, shipping problems, etc.

Fans of the Amazon Prime program will be pleased to know that Prime will also apply to wine shipping - and only a two-bottle minumum order!

It won't be 45 states but rather 27 states in the initial rollout. One possible barrier to entry for some wineries is that the winery must pay all regulatory fees for label registration in those 27 states (Amazon estimates that to be about $400 per label.) That is a startup cost and the yearly renewals will be less. Amazon does the paperwork. Note also that if a winery is already registered in a state, another registration must be done since it is a new 3-tier path. And, a winery must commit to all states that Amazon will ship to - you can't pick and choose states.