Amazon Launches Wine Sales Site

Web retail giant partners with U.S. wineries; rival Wine.com launches a competing site
Nov 8, 2012

Amazon has launched its long-rumored wine marketplace, offering just more than a thousand wines from several dozen wineries across the United States. That may be a modest start, but wine consumers and industry members are very curious about how the Internet retail giant's effort will fare and whether it will have a long-term impact on selling wine.

The new Amazon Wine portal allows consumers to sidestep the wholesale middleman by buying wine directly from wineries. Producers already available on the site include Gloria Ferrer, Margerum, Francis Ford Coppola and Flora Springs from California and Fox Run from New York’s Finger Lakes.

While Amazon draws more than 100 million unique visitors a year, before winemakers and consumers get too excited, it’s important to note that orders placed through Amazon face the same well-established interstate shipping limitations. If a state doesn’t allow outside wine shipments or a winery doesn't ship to that particular state, Amazon can’t fix that.

For consumers, the online experience is no different than buying a book or laptop. Amazon processes the order, calculates the cost, shipping and other fees and then bills your credit card. The difference with the new portal is that the winery takes it from there, packing and shipping the wine and ensuring that all laws are complied with. The program is different from wine that is already being sold through Amazon by third-party wine retailers.

One of the main benefactors of the Amazon deal could be small wineries that have little to no distribution around the nation. It could also help more established wineries looking for more visibility. “The ability to reach the consumer directly is the wave of the future,” said Stacy Bennett, vice president of digital marketing at J Vineyards in Sonoma County and a former Amazon executive. “Sales are not really our primary goal. It’s more about brand awareness.”

Mike Reynolds, president of Kathryn Hall winery in Napa Valley, shared a similar view. “This is about reaching a customer base we haven’t reached before. There’s a group of consumers out there who buy most of their stuff from Amazon.”

Web retailer Wine.com this week unveiled a similar direct-to-consumer program called Wine.Com Marketplace. Established in 1998, Wine.com is based in Northern California and already ships about 2.5 million bottles a year to 40 states, either directly or through wholesaler partners. The new site will let them also sell directly from wineries to consumers in 20 states. CEO Rich Bergsund said one of the goals is to focus on small producers with limited distribution, large-format bottles and wines sold only in winery tasting rooms.

There are two key differences between the Amazon and Wine.com projects. Amazon’s direct-to-consumer program includes only domestic wines, while Wine.com also works with importers that have California wholesale licenses. “For us, imports are already half of what we sell online,” Bergsund said. Unlike Amazon, Wine.com handles all of the shipping, logistics and legal compliance for wineries.

Consumers will pay various shipping fees—currently discounted at $9.99 for a six-pack at Amazon compared to $23.20 at Wine.com—but the cost to wineries is more complicated. Wine.com, according to Bergsund, charges producers a typical retailer markup of about one third.

While Amazon officials declined comment, company documents obtained by Wine Spectator break winery costs down: a $40 monthly subscription fee, a fee of $49 for every $350 in sales, plus a 15 percent commission or referral fee. Not exactly a bargain, but as Reynolds put it, “We felt it made sense for us.”

While so far only a handful of wineries have signed up with either Amazon or Wine.com, clearly vintners are curious and keeping an eye on the future.

After all, this isn’t the first time Amazon made a big move into wine. The Seattle-based company’s first attempt was in 2000 when it invested $30 million in a failed wine venture with Wineshopper.com, which did not survive the dot-com bust. In 2009, Amazon pulled the plug on plans to launch a new website devoted exclusively to wine, concerned that the regulatory barriers against shipping alcoholic beverages within the United States were too prohibitive.

The third time might be the charm.

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