Amazon Ready to Finally Launch Wine Business

Discussion
Sep 11, 2008

By George Anderson

Back in March, a Financial Times article reported that Amazon.com was getting ready to enter into the wine business. The move was being made despite numerous regulatory obstacles that complicate the process such as requirements that the company open distribution centers in 10 states that mandate a physical presence to be in the business.

Now, according to reports, Amazon is ready to begin selling U.S. wines early next month.

Napa Valley Vintner, a nonprofit association that represents vintners in California’s wine growing region, is working with members interested in selling their wines through Amazon.

“They have been working for a while on this wine project. Now they are signing up the wineries,” Terry Hall, communications director for Napa Valley Vintner, told Reuters. “They’re fast-tracking it right now.”

“They (Amazon) are really looking to be the go-to Web site for wine sales,” he told CNET News.

Amazon is working with New Vine Logistics, a Napa, California firm that will help it fulfill orders to 45 states.

Annual consumption of wine has risen for 14 consecutive years and sales were between $30 billion and $32 billion last year, according to Barbara Insel, president of Stonebridge Research Group.

Discussion Question: Will Amazon change the dynamics of wine sales? Will it be able to do for wine what it did for books? What challenges will it face?

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15 Comments on "Amazon Ready to Finally Launch Wine Business"


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Jonathan Marek
Guest
13 years 8 months ago

No, it won’t change the dynamics of selling wine, but it might be a small and profitable sector for Amazon. As a consumer, though, I think this is potentially cool. Right now, wine gets sold on the back of ridiculous ratings from Parker, Wine Spectator, et al. If Amazon’s ratings can democratize information about wine–the way it has, for me, about everything from books to vacuum cleaners to TVs–then this could be a great way to get more value per dollar I spend on wine. I certainly support that!

Phil Rubin
Guest
Phil Rubin
13 years 8 months ago

As I’ve mentioned here, with Jeff Bezos obsessively focused on his customers (a good thing), AMZN will do extremely well here as long as the regulatory barriers continue to erode.

Wine is a category where relevance can go to new heights. AMZN’s ability to track customer purchase and browsing behavior, make recommendations and provide reviews (as well as opportunities for customers to make recommendations) will be industry changing.

While it won’t take all the business from local merchants, including big chains like Costco (who does a really good job in the category), AMZN will grow the category significantly and be successful in the process. Personally, I can’t wait!

Anne Howe
Guest
13 years 8 months ago

I think this is a great expansion to the Amazon business model, and I would try it. There are some new wines I have tried and loved, but then I cannot find them again on subsequent visits to the same markets. It’s frustrating because I don’t have or want to make the time to go hunting down wines every week. If I could get them via Amazon I’d buy some of my new favorites six to twelve at a time. I like the time savings it offers and am willing to pay the shipping, (hoping it’s not too high) and that it will roughly equate to what kind of “value” I put on my time.

My only question is about fuel consumption for all the shipping. I would want them to be transparent about how they plan to minimize transporting costs in this model. I would be willing to have a slower delivery time to help minimize fuel use overall if they had that option.

Marc Gordon
Guest
Marc Gordon
13 years 8 months ago

To me, this is a really big unknown. While wine sales have gone up, I wonder if people are simply drinking more wine or if new people are becoming wine drinkers. The next would be whether wine drinkers in general would buy wine over the internet.

As a wine drinker, I can tell you that most of the time I purchase a bottle, it’s to bring as a gift. There’s no way I’m going to wait for a bottle to be delivered. As for personal purchases, I happen to like seeing what’s on the shelves combined with the ability to take it with me.

It will be interesting to see how the buying habits of current drinkers change (or not) with the advent of Amazon.

Ed Dennis
Guest
Ed Dennis
13 years 8 months ago

Another brilliant move by Amazon. Currently almost every boutique winery in the USA maintains a web site to sell their produce by mail. Each is at a different address, has different systems, etc.

I really don’t think Amazon is looking to introduce its own label. I think Amazon is interested in consolidating all of these web sites onto Amazon. One system that can offer each vintner an international presence at much less that their current cost. A familiar system that processes orders but allows each the ability to sell their own product. Amazon again leverages it’s system to provide a service for wineries/retailers with an efficiency they could not possibly realize by continuing to handle this internally.

Additionally, by having Amazon handle this business, you can bet that systems will be in place that shield any winery from lawsuit for violating state and local laws.

Gene Detroyer
Guest
13 years 8 months ago
This is an interesting one. In the few minutes since reading the topic, I have contradicted my own conclusions several times. I believe there are several elements in the enjoyment of wine that go beyond vintage and grape. The first is discovery. Especially, if the wine is wonderful and inexpensive. Discovery comes from that wine tasting experience, the suggestion of the sommelier at a restaurant or the recommendation of the owner of your favorite wine shop. The next element is the collegiality of wine. That would be the dialogue with the store owner, participants at dinner party or with friends about a wine experience. The last element is the wine itself. Finding something you like and experiencing it again and again. I believe it would be difficult for Amazon to approach the discovery experience. There is an immediacy of experience that doesn’t exist. Certainly, the internet is a place for collegiality. There are hundreds of wine blogs and Amazon should make an interactive blog part of their wine section. I believe it would have to… Read more »
Max Goldberg
Guest
13 years 8 months ago

I believe this will change the dynamic of wine sales. It should bring a broader selection of wine than can commonly be found at retail. It will offer the ease of delivery. And hopefully, its volume will allow savings for consumers.

Doron Levy
Guest
Doron Levy
13 years 8 months ago

Amazon will sell wine, no doubt. Can they offer the same customer experience as say, a winery or a specialty wine store? The answer is no.

I myself am just getting into wines and I find it is the shopping experience that draws me to it. Being able to ask questions, tasting, getting opinions, etc, all add up to the wine shopping experience. If I know what I want and Amazon offers it a good price, I will purchase. I believe wine lovers are in it for the experience as well and that is what completes a nice bottle of Cakebread 1991.

W. Frank Dell II, CMC
Guest
13 years 8 months ago

The wine business has three types of buyers. The first and largest on a transaction basis is the one or two bottle buyer. The second type is the mixed case buyer. The third is the full case buyer.

Assuming Amazon has solved the legal problems, except for in the state that operates their own liquor stores, this should be successful for them. The one and two bottle buyer is unlikely to trade up to case buying unless there is no convenient store nearby or they live in the Bible Belt and don’t want to be seen in the store. The mixed and full case buyers are the most likely to use Amazon. The reason is the ability to buy California wines not available locally. This is where Amazon will take market share away from the local store.

Camille P. Schuster, Ph.D.
Guest
13 years 8 months ago

Changing the dynamics of the wine business will depend upon how much wine is sold through Amazon. Given the history of Amazon’s project, it is reasonable to think that they know many of their consumers do purchase wine and are likely to use this service. Perceptions are that Amazon charges lower prices so people will be interested. If the scale works then Amazon may well change the dynamics of the business.

Dan Desmarais
Guest
Dan Desmarais
13 years 8 months ago

I think this is a brilliant move. It will extend Amazon to repeat purchases at a huge level.

This will drive their intelligence for “other people buying this also bought….”

Now it will be “People who bought one bottle came back for a case!”

$$$

Joel Warady
Guest
Joel Warady
13 years 8 months ago

Never underestimate the power of Amazon. They will be able to boost sales for small vineyards that up until now might not have been able to get proper exposure. Their customer reviews are a perfect vehicle to have wine lovers share their own experiences with specific wines that they love. And they will be very aggressive with their pricing.

I think that Amazon will make a HUGE impact for the wine lover, and collector. The person that buys one bottle per week is not going to be Amazon’s customer. On the other hand, I can envision Amazon shipping cases of fine wines across country, and taking a once unknown label and turning it into a household name. At least in households where wine is consumed on a regular basis.

Bernice Hurst
Guest
13 years 8 months ago

So many favorable comments here that I nearly didn’t jump in but I would like to add one new thought. Online wine sales have been thriving in the UK since online sales began. Many of them build loyalty–and make themselves indispensable to their customers–by offering good, reliable tasting notes and wines that are not widely available elsewhere. Although they are only allowed to sell by the case, the opportunity to have mixed cases and either choose your own combination or try a recommended combination has been pretty popular and successful. If anyone in the US can make a go of such an offer, it’s got to be Amazon.

Robert Straub
Guest
Robert Straub
13 years 8 months ago

Amazon is just one of many companies, including Costco, that are fighting an uphill battle against archaic state and local laws put in place years ago to protect the monopolies of local distributors. Forget about banning cigarette sales in San Francisco pharmacies–the spiderweb of laws that inhibit true competition in this category truly are anti-free market.

Brad Asmus
Guest
Brad Asmus
13 years 8 months ago

There is a sea change in consumer behavior in the wine market. Millenials are taking to wine in unprecedented numbers with a new view of the market. They’re not satisfied with typical supermarket selections and are eager to try new things. They especially like to discover wines from the small producers who never make it to the shelves of most wine shops or supermarkets, and they’re perfectly happy to make those discoveries on the Internet.

Enter Amazon with it’s trusted distribution system. It could turn out that the biggest beneficiaries of Amazon’s plans are the small producers who today can’t even get the big distributors to handle their wines. Suddenly, they’ve got access to a powerful national marketplace.

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