The Winery Web Site Report

The Demise of Amazon Wine

It appears to be official that Amazon isn't going to be adding wine to the long list of things you can buy from them.

There will be lots of speculation as to why, but it all boils down to this: they couldn't figure out a way to make it work as a business.  In other words, profitable or not, there wasn't enough return in it for Amazon, relative to other choices for deploying their resources.  Given that Amazon makes its living optimizing the supply/delivery chain, this is not good news for others who think it's just a matter of a warehouse and some software to keep track of all the details.

I think Amazon probably started out by looking at doing it themselves.  At some point, they realized that a significant investment (and startup risk) was associated with that course of action.

So, they looked for someone who appeared to have a working system.  By all accounts, New Vine Logistics (NVL) was the team to beat, so they started talking to them about a partnership.

It's useful to remember that NVL already had the "sunk cost" advantage when they acquired the shipping technology of the original wine.com.  It's hard to imagine anyone building an equivalent operation cheaper.

But, it's pretty clear in hindsight that NVL wasn't making money on their existing clients, leading to the sudden closing of their doors and subsequent sale to Inertia Beverage Group.  When Amazon Wine seemed about to open for business in late 2008, I suspect that the impending launch showed Amazon that their chosen partner didn't really have the resources to scale up.  Chicken and egg?  Perhaps.  NVL needed a commitment from Amazon to get additional capital, and Amazon needed to see that NVL could handle the business before giving them a commitment.  We won't know until someone writes a book.

This is all speculation on my part, but Amazon is pretty smart, and as smart as they are, they couldn't see how to make it work, even without re-inventing the wheel and partnering with (arguably) the people with the best chance of making it work.

Tom Wark's analysis seems spot on:  the current state-based patchwork of wine regulations is a major impediment to anyone trying to centralize fulfillment.  While some are optimistic that this won't hurt wineries, it certainly doesn't improve the situation for them either.

I am not optimistic about the likelihood of change, either.  State governments want to make sure they get tax revenues from wine sales.  Middlemen have existing businesses to protect.  It seems unlikely to me that the Federal government would take action (Granholm v. Heald addressed the relevant Federal issue: states have to be consistent about the rules for in-state and out-of-state wineries).  Certainly, they have other fish to fry in the short-to-mid term.

I hope that we'll hear more from Amazon about the reason for their decision.  I'd love to hear from other people trying to solve the fulfillment problem (Copper Mountain, WTN, etc.) with their thoughts.

Wine Fulfillment Companies

What are your options now that, as the Wall Street Journal reports, "the company [New Vine Logistics] plans to shut down permanently"?

There are a number of companies involved in fulfillment for the wine industry.  Here's a partial list (alphabetical - no recommendation implied):

• Bacchus Fulfillment
• Copper Peak Logistics
• Pack 'n' Ship Direct 
• ShipCompliant (software)
• Terravant (Santa Ynez) 
• Vintage Logistics 
• VinTrust
• The Winetasting Network (WTN)
• Wineshipping.com 

If you know of others, please feel free to add them in the comments.  And here's an older Wine Business Monthly article on selecting a third-party fulfillment partner.

Lew Perdue at Wine Industry Insight has a great summary article on what went wrong at NVL.

Crisis Management

If you're one of the wineries who has shipments to customers pending at New Vine Logistics (NVL), it's a crisis for you.

What's the first thing you should do?

Communicate.

Let your affected customers know that you are aware of the problem (ideally, by phone and e-mail), and what you are doing to solve it.  Give them a way to contact you directly.  Make sure that whoever answers the phone knows about the issue and where to route calls.  Develop a set of talking points so that everyone says and does the same thing in response to an inquiry.  If you've charged their credit cards, give them a credit and let them know that you've done it (maybe not - see Larry's comment below - but if they ask for it, don't hesitate).  Put all the information on your blog and Web site.  Let them know when you'll update them again.  If you have an alternative way of getting wine to these consumers, you should act on it.

At some point, depending on how long this crisis goes on, do something unexpectedly nice for the affected customers.  I don't think a discount on more wine or free shipping is the answer, though.  Be creative: a t-shirt, a box of chocolates, some olive oil...

NVL is probably overwhelmed by calls this morning -- they're undoubtedly having trouble communicating as well.  Here's what they've communicated so far (props to Larry Chandler at OverABarrel.net). Regardless, share what you *do* know with your customers about the situation as it affects them.

The last thing you want is for a third party to negatively affect your relationship with your customers.

Any other suggestions for these wineries?  Help them out by posting a comment.

UPDATE 2009-06-02:  here's a post from Caveman Wines (a professional PR firm) with some additional recommendations: Crisis Communication and New Vine Logistics