Internet retail giant Amazon.com’s decision last week to pull the plug on its plan to sell wine online has left consumers and many wineries in a lurch. While company officials aren’t offering explanations or details, timing certainly wasn’t in Amazon’s favor.
In an e-mail sent last Friday and obtained by Wine Spectator, a senior account manager informed wineries that had signed up for the program that, "We have recently decided not to resume shipping. As you know, we were excited to work with you to build the AmazonWine business. For that reason, this was a very tough choice for us." Amazon spokesperson Tracy Ogden confirmed that the company was not moving forward with the wine program but declined further comment.
"There were probably a variety of reasons, with the risks outweighing the benefits," said winemaker Adam Lee, who explored the Amazon program to sell his Siduri and Novy wine brands but never signed on.
Things were rocky from the start. Amazon's plans became public in September 2008 in the middle of the financial crisis. The company hoped to be selling wine within a month, but delays soon popped up. Then in May, New Vine Logistics, the Napa-based company that Amazon tapped to fulfill its wine orders, almost went into bankruptcy.
Sources in the industry tell Wine Spectator that, after exploring the hurdles with the long-established regulatory barriers against shipping alcoholic beverages within the United States, Amazon decided that its time and money were best spent on other projects. The company had hoped to avoid the tangle of state regulations by simply facilitating sales and having wineries and New Vine handle logistics, but it became unclear whether that model would work.
The company certainly invested effort, reaching out to sign partners and testing a prototype. Twisted Oak winery in the Sierra Foothills was one of the first on board. Owner Jeffrey Stai said, "They definitely put an investment into the development." Amazon had a working model online, which Stai described as "attractive" and "advanced."
Napa Valley Vintners hosted several informational workshops to educate its members about Amazon, and NVV communications director Terry Hall said the company was "only in the testing phase," and while the logistics may have been too much to handle, Amazon may again attempt to launch a program in the future. "They are still trying to figure it out," Hall said.
Amazon was test-shipping wine earlier this year and was scheduled to expand the trial run the same week that New Vine Logistics unexpectedly closed its doors. An industry source said that New Vine, "was undercapitalized relative to its strategy and vision," and while expanding to meet the potential logistical demands of Amazon, it took on more debt than it could handle.
Most of New Vine's assets were acquired by Inertia Beverage Group and CEO Ted Jansen said its contract with Amazon ended with the previous owners. For now, he said, his company is focusing on expanding its existing base of wineries and other industry customers, but does not rule out the possibility of working with Amazon or other broad-based consumer websites in the future.
This was Amazon's second failed attempt to sell wine online. In 2000, it invested $30 million in Wineshopper.com, but another financial crisis, the dot-com bust, intervened. Wineshopper was forced to merge with another online retailer, Wine.com, but the combined company went bankrupt and was sold in 2001. (Wine.com continues to operate with new owners.)
In making its pitch to the wine industry, Amazon officials often said that of all the products the website doesn't carry, wine is among the most frequent queries on the website's search engine. But while the demand may be there, the cost and headaches of navigating the myriad shipping laws in 50 states may not be worth it.
Even California, the heart of the nation's industry, muddied the waters in June when the state’s Alcohol Beverage Control issued an advisory warning wineries that it was a violation of California state law to sell wine through third parties—websites, catalogs, etc.—unless those businesses also have a license to sell alcohol. That law could make it even more complicated and confusing than ever to ship wine.
Amazon may be biding its time, waiting for another company to lay the ground or for shipping regulations to ease, or perhaps this time it's out for good. Only Amazon can say, and nobody there is talking.