Will Amazon Do For Wine What It Has Done For Books?

It isn’t exactly breaking news that Amazon is contemplating this move.  They have tried this before.  You may or may not recall their failed bid at the online wine market back in 2005 where they simply funneled traffic to wine.com, and even before that a direct investment of over $30 million dollars into wineshopper.com.  So it isn’t as if they have ever given up on this endeavor.

They recently hired a Senior Wine Buyer who comes from Wente and Deluca with a background in Marketing.  The goal is to develop the Earth’s largest selection of wine.

With the logistical management and shipping prowess already a proven winner, throw in the Kindle, and you can only imagine the pervasiveness of Amazon’s market share on the world of wine.  And with a buying power that may come close to that of Costco, many retailers are pretty nervous about the outcome.

The Kindle actually makes a real threat in my mind.  Imagine it, a constantly updated inventory of the largest selection in the world, at what will no doubt be one of the best prices in the world, add to that Amazon’s penchant for discounted to free shipping, and I can only imagine the woes this will mean to retailers.  Gone are the days of a wine shop owner groaning at the sight of a customer clutching their Wine Spectator buyer’s guide, now the heartache will be a Kindle-toting buyer with the ability to comparison shop right in your face, in your own shop.

Ugh.

But that is what is going to happen.  Though Amazon is pretty tight-lipped about their wine program at this point, you can’t help but make the connection to a device like the Kindle.  Add to that core functionality the ability to subscribe to countless blogs, magazines, and publications that will focus on wine, and you will have 1) a well armed consumer, and 2) a threat to regional wine sales.

Why a threat?  I think we all know what Amazon is banking on here.  They already see that an entity such as wine.com can navigate the maze of state to state alcohol and shipping laws, and you know that Amazon has a pretty good network of “fulfillment centers” that ship from various locations around the country.  But the real bit of “bankability” comes in the hope of organizations such as freethegrapes.org who are championing the cause for standardized wine shipping laws that will allows consumers easier access to the wines they want.

However, there will be trepidation.  Some of the smaller boutique brands as well as those who have forged hard-fought long-standing relationships with retailers across the country will be shy about handing over palette loads of their wine at what will be a discounted price for Amazon and run the risk of isolating/insulting their retailers who have supported them over the years. 

We see this kind of behavior with Costco today.  Costco seeks smaller off the beaten path brands and asks for pretty large drops in relation to what the winery can produce.  Often times the winery will politely decline, citing low case production, but this is more often done via a sense of preservation:  if you give all of your retail allocation to Costco in a given state, not even all, just any appreciable amount, all of your other retailers will see the ads and worse, hear the moans from their customers regarding wine being sold at a price that quite frankly, no smaller retailer can touch.  So expect some of this to stand in the way of Amazon’s quest for the best wineries in the world.

As far as the collector, my guess is this will exactly what wine.com means to a collector:  pretty much nil.  Amazon is not trying to go after fine wine sales, and even if it is, it will have to realize that wineries have deeper relationships with retailers than booksellers do.

But despite it all, competition is a good thing.  Amazon’s commitment to enter and likely dominate online wine sales can only be good for the consumer.  I’m curious to see if my predictions of the Kindle as a vehicle for sales wine out.  I think they will.

NOTE – to date, Amazon has initially launched a version of their wine sales format via their fresh.amazon.com grocery arm.  All sales are limited to about seven Seattle zip codes and will require ID and presence at time of delivery.  They list just shy of 600 brands right now.  Keep watch of this, their brands aren’t that esoteric, but I imagine they will branch out as this test case evolves…