- Category: Digital Life
12 Nov 2012
- Written by Andrea Chang / Los Angeles Times
AMAZON.COM Inc. is uncorking a new venture. The online retail giant launched a wine marketplace on its web site, with more than 1,000 domestic brands available.
For now, wines will be shipped only to a dozen states and to Washington, D.C. Bottle prices range from less than $10 to more than $100; shipping costs $9.99 for up to six bottles of the same wine.
It’s an unusual addition for the Seattle company, better known for selling books, household items and Kindle e-readers.
Amazon has been making moves on several fronts lately to expand its dominance as the country’s largest online retailer and has been interested in getting into the wine business for years, analysts said.
“It’s a bit of a if-you-build-it-they-will-come approach to business, which in my experience seldom works effectively,” said Rob McMillan, executive vice president and founder of the wine division at Silicon Valley Bank. That said, “if they’re successful, it’s going to be hugely beneficial for the wine business—and the consumer, for that matter.”
But selling wine is very different from selling everyday consumer products, and Amazon has “a lot to learn,” McMillan added. To court discerning wine aficionados and casual drinkers, the company needs to offer a diverse but curated selection of wines and provide up-to-date, comprehensive tasting notes because shoppers don’t want to be inundated with pages and pages of wine listings.
“Most people look at that and their eyes glaze over; they don’t know where to start,” he said. “To sell in that kind of volume, to curate that many different kinds of wines that change every single year is, I think, quite a daunting task.”
Winemakers and industry groups cheered the news, saying Amazon’s reputation and scale would help get the word out about buying wine online. Currently, only about 2 percent of wine purchases are made via the Internet, said Rich Bergsund, chief executive of wine e-tailer Wine.com.
The Wine Institute said in a statement that it “welcomes creative companies, like Amazon, that are working to expand consumer choice.”
Unlike other online wine sellers, Amazon will merely serve as the middleman for wineries to sell their products; the company won’t be storing wines in its massive distribution centers or shipping the bottles directly.
Because the wines will be shipped from individual wineries, consumers won’t be able to combine bottles from different labels to save on delivery costs. Amazon Prime, the company’s $79-a-year program that gives members free two-day shipping, isn’t available for wine purchases, a company spokesman said.
Wineries, which include Gloria Ferrer, Francis Ford Coppola and Hall, reportedly are paying a monthly fee to be featured in the Amazon wine site and also giving a cut of their sales to the e-commerce company.
Rival online wine sellers said they weren’t too worried about Amazon’s entry into the market, speculating that the high shipping costs, lack of imported wine and delivery to only a handful of states would deter some shoppers.
Amazon is “basically an advertising agent for the wineries,” said Wine.com’s Bergsund. “If you’re a winery, it’s not that different from buying an ad on Google; there’s huge traffic, but there’s not much value added.”
Still, Amazon’s involvement will help bring detailed wine information and opinions to a central location, said Tom Hedges of Hedges Family Estate in Washington, one of the wineries selling bottles on Amazon.
“What Amazon has done with their new wine store is take the experience of hundreds of tasting rooms and put them online,” he said.
Amazon’s marketplace features details directly from winemakers, such as tasting notes, recommended food pairings and total case production.
Besides opening its wine shop, Amazon has been branching out into other categories, part of its strategy of being the “one-stop shop” for everything consumer-related, said Kerry Rice, an Internet analyst at Needham & Co.
Amazon has dabbled in a grocery delivery service in some markets and recently began testing a monthly subscription of Amazon Prime, which offers perks such as instant streaming of television shows and movies in addition to free shipping. The company is also installing so-called Amazon Lockers in brick-and-mortar stores including 7-Eleven and Staples, where online shoppers can go to pick up their Amazon orders.