What Wine Geeks Want to Know About Amazon Wine

Posted by | Posted in Commentary | Posted on 07-11-2013

Amazon WineAmazon Wine is here. Again.

After repeated attempts to enter the wine industry, Amazon Wine has now made bold strides to gain a foothold in the wine marketing and selling space. Yesterday, the company added its 500th winery to the site — and now offers thousands of labels to consumers in 16 states. As the company works through state shipping laws and attempts to add more wine brands, many people in the wine industry are looking on skeptically.

What’s different this time? What’s Amazon’s model? How will Amazon’s presence change the wine retail business?

I had a chance to sit down with Erik Farleigh (PR Manager) and David Lusby (Business Development at Amazon Wine) during their visit to New York last month for the Amazon holiday retail display/show for journalists. The event was a spectacle on its own. Toys everywhere, fake rooms set-up with gorgeous home decor, a pet playground complete with a real live pet, and a mini-wine bar set up for tastings.

Once I calmed my desire to play with everything in the room, we chatted about Amazon’s goals in the wine space, which the team insisted were serious and long-term this time. The other big takeaways were that first, Amazon is not managing the fulfillment and shipping of wine. This is all managed by the wineries. A “marketplace play” for those in tune with the Amazon lingo. Second, Amazon doesn’t charge wineries to market wines on the site, but does charge a 15% referral fee when product sells. Wineries set the prices on the site. Finally, Amazon is working to make the site more content-rich with searchable notes, categorical tasting filters, and recommendations.

I followed up with the Amazon team to get a little more detail about their plans for Amazon Wine. You’ll notice they don’t exactly address all my questions, but I hope this gets the conversation started about Amazon Wine and clears up some of the wine community’s confusion about the site. See below for my interview with Steve Johnson, Director of Amazon Wine.

Steve Johnson, Director of Amazon Wine

Steve Johnson, Director of Amazon Wine

Many people in the wine industry have followed your past efforts to enter the wine space. Can you briefly describe what’s happened before (i.e., what years you got in and out of the wine business) and why it didn’t work each time?

Steve: At Amazon, we are always looking for ways to improve the shopping experience. We’ve heard from our customers they wanted to buy wine online on Amazon.com, so for the first time we created a new marketplace where they can explore great wines, purchase directly from wineries and have the wines delivered right to their doorstep. [RC note: i.e., it's purely a marketing move - Amazon is the marketing tool for wineries]

We have a long-term view on the business and are excited about what we’re doing now. Amazon Wine launched November 2012. At launch, the Amazon Wine Marketplace offered more than a thousand wines from around the country, enabling wineries of all sizes to sell their wines directly to customers. Since launch we’ve added hundreds of wineries and thousands of wines to our selection and even more labels are being added every week. [RC note: my question about past attempts wasn't answered. Guess we can Google this.]

Do you plan to work in strict control states like Pennsylvania and Utah? How would this be structured?

Steve: Wineries on Amazon Wine can currently ship to California, Colorado, Connecticut, Florida, Idaho, Illinois, Iowa, Maryland, Nebraska, Nevada, North Carolina, Oregon, South Carolina, Texas, Washington, Wyoming, and the District of Columbia. We started with 12 states, and have added four new states (Colorado, Maryland, South Carolina and Texas) since our launch. We will continue to work closely with wineries and would love to make Amazon Wine available to customers across the country in as many states as possible, so stay tuned.

We also love to hear from customers that would like us to add their state, which is among the most frequent feedback we receive (“when are you coming to my state?”). If you go to the front page of our store at amazon.com/wine, there is a link on the top left side to provide feedback. We review every piece of feedback we get, and have been delighted to see how many customers want wine to be available for shipment to their state. Customers can find more information about shipping at www.amazon.com/wineshipping. Customers can also find out more about direct shipping and encourage their legislators to allow or expand direct shipment in their state at freethegrapes.com. 

Any chance you can you share your approximate budget for compliance issues? 

Steve: As I am sure you can understand, we don’t share that information publicly. We do take compliance seriously and require all wineries provide appropriate state licenses.  

Do you have plans to obtain a direct import license?

Steve: I can’t discuss future plans but we are excited about what we’re doing now directly with wineries. Our goal is to connect customers with wineries around the country and provide a destination where customers can learn about and purchase wines directly from wineries, using the customized tools created just for the new store in addition to the Amazon features they’ve come to love, on the platform they trust. [RC note: So, my guess is "yes"...but they won't say.] 

How are you choosing what SKUs to carry?

Steve: It is up to the wineries to determine how much of their selection they would like to offer on Amazon. We encourage wineries to list their entire selection and deliver to as many states as they can. 

What are the key benefits to wineries of selling on Amazon Wine?

Steve: Wineries are the sellers on Amazon Wine, which is the same business model we use for the more than two million sellers that currently offer their products on Amazon worldwide. Amazon’s role is to help over 200 million customers discover the great wines available from the wineries on Amazon. Wineries benefit from our tens of millions of customers that visit Amazon.com daily, and the opportunity to reach new customers in regions they may not have previously been able to reach. In addition, wineries control their brand and offerings on Amazon. Wineries provide Amazon with label and bottle images and their detailed wine information, which comes together on our beautiful product pages. We succeed when wineries succeed, as there is no per-item listing cost. Wineries set their own prices and inventory levels, and they also handle all shipping and fulfillment.

Will you tell us about the cost structure for a winery to place its products on Amazon Wine?

Steve: There is no cost for wineries to sell on Amazon.com. Wineries only pay a fee when they sell wine. The referral fee is 15% of the product sale (not including shipping). This fee is the same referral fee that we charge for most of our third party sellers, including those that sell everything ranging from books to musical instruments.

There is no long term commitment with Amazon Wine. Wineries provide us with information about their wines along with their price and quantity data, which they can change at any time. We post that information and handle the payment processing and fraud protection. Wineries then receive the order and are able to handle in line with their standard processes, including compliance and accepting or rejecting the order.  

Are you looking to obtain exclusives on smaller-production wines? (So as to avoid these brands getting lost at distributors, who maybe give more attention to the big guys)

Steve: It is up to the wineries to determine how much of their selection they would like to offer on Amazon. 

Are you selling into control states where distributors have brand monopolies? How are you able to handle this to offer the products, particularly larger mass-market brands?

Steve: It is up to the wineries to determine which states they would like to ship to. 

Are you able to bundle wine with accessories? Certain states prevent this, like New York, but maybe you have a work-around?

Steve: No. Wineries handle the wine shipping directly from their winery. Any accessories items purchased during a customer order would come separately from Amazon or the third-party seller on Amazon.   

Will you  (or do you) offer mixed packs? Library selections from wineries?

Steve: Yes, we currently offer customers the option to purchase different varietals, or a mixed pack, from the same winery. 

As a fun aside, will you look at doing custom-label production? What about offering customers customizable label services?

Steve: We are focused on connecting customers with wineries around the country and provide a destination where customers can learn about and purchase wines directly from wineries, using the customized tools created just for the new store in addition to the Amazon features they’ve come to love, on the platform they trust. [RC note: This isn't an important question, but I'm still not sure what the answer is.]

I’m not sure how this would work, but one of my friends wants to know…will you run a futures campaign a la Bordeaux?

Steve: We can’t discuss future plans, but that is an interesting idea and we are always looking to improve the customer experience. 

What do you see as Amazon’s role in the wine retail and marketing business 5 years from now? What’s your ideal state?

Steve: Stay tuned! We’re always looking for ways to improve the shopping experience for customers. We think customers will enjoy the Amazon wine store and the tailored shopping experience we’ve created on their behalf. We look forward to hearing their feedback so we can continue to improve the tools and features.

What else do you want us to know?

Steve: Amazon Wine allows customers to browse vast wine-country selection and purchase directly from the more than 500 wineries offering more than 3,000 labels available on Amazon.com. Amazon Wine is a one-stop destination where customers can learn about and purchase wines using customized tools created just for the new store in addition to the Amazon features they’ve come to love on the platform they trust.

Customers can explore wines from wineries of all sizes – from those that have large, robust tasting rooms to those that have no tasting rooms at all. This broad selection of wines gives customers more freedom to explore and buy unique wines that may not be available to them locally. Today, there are wines available from the top producing states across the country – California, Washington, Oregon, New York, and Texas. Amazon Wine has wine from the renowned and emerging wine country regions, including Napa Valley, Sonoma, Paso Robles, Walla Walla, Red Mountain and Willamette Valley. Customers enjoy wine-country selection combined with the convenience of delivery right to your door.

[RC note: Thanks, Amazon team!]

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