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10.23.2009

Did You Hear That Sound? Wine Retailers Sigh in Relief

Wine retailers all across the country, and especially online today breathed a big sigh of relief. Probably more than a few of them are popping corks in celebration.

Why? The Wall Street Journal reported today that Amazon.Com officially announced that it has canceled plans to sell wine online.

The announcement more than a year ago that the online retail giant was moving into the wine business sent small shock waves through the wine retail industry both good and bad. Online retailers nervously fingered their Ethernet cables, and wineries optimistically looked forward to another channel to help them deal with a dysfunctional distribution system.

The plans were grand, and for a while it seemed Amazon was going to do things right. They even reached out to little old me (and a lot of other content providers, presumably) and began discussions about what kind of relationship, if any, might be mutually beneficial.

But apparently there were many a slip twixt the cup and the lip on this one. After aggressively announcing the program, not much seemed to happen. For a long time. And then, the fulfillment partner that Amazon selected turned belly up almost overnight. While I can't believe that it was the primary reason, the implosion of New Vine Logistics may have been the final straw that turned the grand plans into the failed experiment that was announced today.

And yes, this may suggest that the hard times for the U.S wine industry are far from over.

Comments (22)

10.24.09 at 8:02 AM

Another great blog, and one that begs the question as to what the heck IS going on in the wine retail industry in general . . .

There certainly are larger retailers that are taking advantage of the downturn in the economy - Total Wine appears to be one of them, opening up stores in CA and AZ at a pace not far off from Starbucks (or at least the way Starbucks USED TO) . . .

And then there's the 'one a day' online retailers that offer a deal a day - and many of these 'deals' are pretty incredible . . . Even Gary V has gotten into the game with his cinderellawine sight . . .

It is a bummer that Amazon could not make this work - I believe it would have been good for the entire industry, forcing some online retailers to step up their game, especially with shipping issues, and would have forced brick and mortar shops to look at ways to differentiate their offerings . . .

What now? What next? In any down economoy, opportunities exist . . . and I would not doubt something else will come of this . . . just not sure what that will be . . .

Cheers!

Larry Schaffer

matt allen wrote:
10.24.09 at 8:32 AM

These days, I am thrilled by the novelty of finding a quality bookstore where soemone actually knows about the books and has a hand in selecting them. Many of these stores were driven under by the Amazon. I am sure that many of the wine retailers would have been driven under as well. I can't say that I would be willing to forego the chance to browse through a quality wine shop for the abundance of selection on Amazon.
On the other hand, I do not miss the blockbusters and cling tightly to my Netflix subscription. So, if Amazon is only replacing the costco's and grocery stores and not our specialty shops, then I am sorry that we lost them.

10.24.09 at 9:09 AM

There are other new options for wineries and importers to more cost effectively reach consumers than the traditional 3-tier system. Vinfolio's new Marketplace (full disclosure, I'm CEO of Vinfolio) does so and with what I think includes many advantages over the Amazon approach (other than the fact that nobody can match the customer base stats of Amazon).

Dylan wrote:
10.24.09 at 10:01 AM

I would have appreciated Amazon's presence in the market for the same reason Larry mentioned. It would force everyone else to step up their own practices and find a way to innovate beyond it or lose. Not to mention, who knows what kind of movement it would have created for direct to consumer shipping legislation.

10.25.09 at 11:42 AM

Amazon may have srirred innovation, but like all big players Amazon demanded wineries to sell to them at levels lower than the wineries sell to thier own distributors. How does the small hand-crafted wine producer stay in business when everyone in the tiered system makes more off the wine then the producer?

John Skupny wrote:
10.25.09 at 9:23 PM

Friends don't let friends get consumed by Amazon. It is a small step for largekind, a giant step for smallkind. no malice intended, just a feeling and reaction.

Anthony wrote:
10.26.09 at 12:03 AM

I think it is good news for people selling wine on line at the moment, but I can't see it lasting forever. We all have to face the reality of a changing retail climate, and consumer habits. And places like Amazon also open up the market to many people in smaller towns and rural areas where there aren't any great wine shops. So there is good and bad there to me.

I can tell you what is happening here in Italy - there is so much wine I expect the rivers to run red soon. Harvest has just ended in Tuscany, all the cellars are full of bottled 07, the 08 is in storage, and the 09 is in the fermenting tanks - with no where to go. Due to improved technique, cheap credit that let anyone who wanted to get new equipment or vineyards, etc. etc. etc. we have TOO MUCH WINE IN THE WORLD! It is great for consumers, but there will be many people belly up in all sectors of the industry before this is over. I can't tell you how many negative anecdotes I have heard in the last couple of weeks -

Michael wrote:
10.26.09 at 9:44 AM

This is the ABC putting another nail in the coffin of the US artisanal wine business. While some may be happy to see Amazon thwarted, thousands of small wine brands are struggling with growing inventory and negative cash flow. And 2010 is going to be worse. So as the ABC threatens/shuts down the marketplaces that would help the small producer (who lack marketing dollars and reach), we'll see a large number of failures and small quality-oriented growers will get consolidated into the big guys as they no longer have a market to sell to. But consumers will still demand boutique wines and that will be filled by a flood of new imports coming into the US market.

This anti-winery, anti-grower, anti-consumer and frankly anti-American destruction is way, way more scary than what happens with Amazon.

Alder wrote:
10.26.09 at 9:51 AM

Michael,

Not entirely sure how you see the ABC fitting into this. Amazon suspended its operations of its own volition, not because of some regulatory action or threat of one.

10.26.09 at 9:53 AM

I had heard the ABC had a role too. The issue is this "marketing agent" concept which they issued an advisory about a few months ago.

Michael wrote:
10.26.09 at 11:04 AM

ABC had a HUGE role. The whole "marketing agent" bit was intentionally worded ambiguously with an implicit threat that if Amazon were to be successful, the ABC could pull the rug out from under them at will.

It's not like NVL is the only entity that has pallet racking, an air conditioner and warehouse management software. Amazon could partner with a number of others - hell, they could probably sneeze out a world class fulfillment infrastructure.

I really know it sounds a bit Chicken Little-ish, but there is a domino effect in the works that will be all too clear in a couple of years. I guess on the upside it will get rid of all of those high alcohol wines!

John Skupny wrote:
10.27.09 at 12:12 AM

The macro problem was likely the issue of the day pertaining to much more than just the Amazon in the room; 'who was/is holding the inventory?'.. That old fuzzy 'Title' issue... likely to make the ABC jittery and therefore Amazon, because they did not want to own any inventory....

Tom wrote:
10.28.09 at 5:53 AM

I have an internet retail wine shop in DC and am also my own importer (something DC allows) -- the only way I have been able to compete with the explosion of wine shops here in DC is by having product no one else carries, then having tightly-targeted marketing and ultra-convenient delivery.

In my experience, unless people know me they're reluctant to buy wines online they haven't tried before. They would walk into a wine shop, pick up the same bottle, talk to the owner (who knows less about the wine than the information I provide on the website) and buy that bottle because of the personal interaction. While all the logistics were certainly problematic for Amazon, I think that New Vine's going under gave them the opportunity to do the math. Unless they were going to really compete on price and offer free shipping they weren't going to supplant other internet retailers, and they wouldn't get the impulse buyers either. Wine stores aren't like book stores -- and you can resell a used book if you don't like it or don't want to keep it.

Anthony wrote:
10.28.09 at 6:28 AM

Tom I don't mean to sound harsh, but if you think Amazon is about selling books in 2009/10 you are a little behind the curve :)

More than half of Amazon sales are from third parties - and the book revenue is a tiny piece of their puzzle.

In an "up" economy Amazon pulls this off. There are all kinds of justifications now as to why it didn't happen, but it would have 3 or 4 years ago without question if they were ready.

Tom wrote:
10.28.09 at 6:44 AM

Anthony, my point was that wine, unlike nearly everything else Amazon sells, isn't something you can resell if you don't like it. Third party sales or not. Also that wine buying is different than other commodities -- and people who read this blog are different than the average wine buyer. Amazon approached me to be an importer and was relatively generous in payment and in terms of the amount of inventory they were willing to keep and a pickup schedule for reorders. So perhaps they were squeezing New Vine and not the importers. I think you're right that they'd have gone ahead 3 years ago but it still would have been a difficult thing to do, and New Vine's demise underscored it.

10.28.09 at 6:47 AM

Actually, Anthony, you can certainly resell wine if you don't like it (or for other reasons like profit taking). The bulk of Vinfolio's business is built on secondary market wine sales, including our recent Marketplace launch.

Anthony wrote:
10.28.09 at 9:49 AM

Tom - "buying (wine) is different" - I totally agree. I am sure if Amazon got into this it was going to be big name and big volume (at least that is where they would have been projecting to make their money). But as Steve says, you can resell it (although I don't think what Steve is mentioning is viable in commercial amounts, but for individuals).

I can only imagine how hard it is to sell wine online that no one knows about. Yet I am committed to trying :)
My angle will be to hopefully sell wine that has at least a small following from people who know it already.

10.28.09 at 10:04 AM

Steve is dead on: the main reason Amazon pulled out is the Industry Advisory issued by the Californian ABC in June 09. They would have challenged Amazon's concept of staying clear of title and ownership of the wines while being the most visible brand in marketing the wines as the "web operator". Amazon was not willing to risk their booming biz for what could have become a prolonged legal fight about these issues. And they were not prepared to change a key element of their biz model (consignment or fee based sales) to one that most everybody in the online wine sales practices, namely to produce or purchase wine first and then sell what you own. The ABC's interests for putting up their stance are quite simple: generation and control of a major flow of taxes. cheers -frank

Tommy Ronquillo wrote:
10.29.09 at 11:21 AM

Well said Frank

KGlass wrote:
11.06.09 at 11:46 PM

Frank has it right: Amazon pulled out because of a ruling by California ABC that effectively made their online sales illegal. (This was pushed by the wholesaler's lobby to protect their hegemony, as expected.) Next to fall from this legal gambit: Wine Access, Wines-til-sold-out, Garagiste, et. al.

Before you bemoan that this is just anti-competitive, note that all these online hawkers are screwing down producers 'til they scream. By effectively destroying margins for small producers (they can't be bothered with big brands, over whom they have no power), these e-sellers are killing off the most creative segment of the industry. So they're doing no favors to real wine-lovers.

04.14.14 at 2:57 PM

Missions for t?e various princes ?re also good ideas.
K?ep ?n mind thaqt establishing ?ou? market takes time;
and if ?ou fail too deliver t?? products o? time, yyou w?ll lose your
business integrity. Lastt Wednesday, t?e Lottery Commmission announced t?? winning Powerball ?umbers for
a $550 million jackpot.

mlm leads wrote:
04.14.14 at 6:53 PM

When a user cliks the link, t?ey will get s?nt to the vendor's website, passing ?our
affiliate ID s? yo? can g?t the refereal ?n a purchase.

?ight now, you could be g?ving ?wa? t? some?ne els?
all, or most of, your sales. On top of this, chain link fences are les? expensive t??n other
alternatives, so y?u a?? ?ble to save a considerable ?mount of
mony during thee installatin process.

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