Will Amazon kill the wine retail trade?

Amazon killed the book business. It killed small bookstores. It killed chains like Barnes & Noble. In the German town where I live, the number of bookstores has shrunk in five years from six to three.

Now, Amazon is coming for wine.

At every conference on wine retailing, at least one speaker will grimly warn the audience that “Amazon is coming”. They will cite Amazon’s dramatic growth curve. They will also mention Amazon’s speed of delivery.

Wine retailers are doomed.

Maybe.

Certainly, Amazon has blown a hole through the high street, shuttering stores all over the world. The retail industry has even coined a phrase to explain the destruction: “the Amazon effect”. Come to that, I also shop on Amazon, while subeditor Scott Saunders tells me his household makes 80% of its purchases through Amazon.

So why am I sceptical about Amazon and wine?

Two words: Fashion. And diamonds.

Complex is different

The US business press reports that Amazon is destroying bricks-and-mortar fashion retail, with MarketWatch reporting “a continued shift away from traditional retailers, including Walmart and Target”. But what the analysts are talking about is ‘commodity fashion’, where the designs are the same as last year, and the aesthetic is comfortable and casual. Think the Blossom Hill of apparel.
When it comes to both youth-oriented fashion and luxury apparel, Amazon has failed, with these segments dominated by online retailers like asos.com or Net-a-Porter.com. It’s not hard to see why: Amazon is a warehouse. You enter the warehouse, go straight to the relevant section, emerge with what you want and check out. No lingering.

Asos.com, on the other hand, is the go-to for youth-oriented, trend-setting fashion, while Net-a-Porter.com is a luxury destination. It has videos of models wearing the clothes, and it will suggest accessories, shoes and handbags to go with the clothes you’ve chosen. Both sites capture the fun of fashion in a way that Amazon has not.

For any product that’s experiential in nature – or somewhat intimidating, like high-end fashion or wine – the more the online experience can both reassure the consumer and replicate the real
world experience, the more commercially successful it will be. Which is how one site revolutionised the selling of gemstones.

JamesAllen.com posts a 360-degree video of every gem offered. Customers can rotate the gem in every direction and instantly see any inclusions or flaws – which is a better service than most real-world jewelers offer. It takes the uncertainty out of buying a gem.

Amazon also sells diamonds – I found one listed for $52,900.00 (and free shipping) – but it was simply a picture hanging in space. Nothing about it reassured me that the gem was a good buy.
Based on how Amazon handles fashion and luxury, I expected that its wine section would be full of commercial brands, with fewer unusual or niche wines on offer. The reality is worse. There are plenty of big brand wines available, but when I typed in ‘Georgia wine’ on the UK website, I got Georgia Moon Pie Apple Whiskey as the first result.

Wine is difficult to sell online, not least because operators face a maze of licensing, taxation and regulations. It has an added problem, in that it’s not possible to sample the wine. That’s why plenty of pictures and information is required. For wineries with the social media chops to offer that, Amazon can be a great way to sell wine. Cathy Huyghe, writing in Forbes, reports on Hedges Family Estate from Washington, which has seen a sharp rise in sales since listing on Amazon. But they’re maintaining their own Amazon page, as well as managing the logistics and shipping. There are many producers, particularly in Europe, who would struggle to copy this.

What’s next

In 1999, Net-a-Porter founder Natalie Massenet raised £1.2m ($1.58m) in seed capital; by the time she sold the company in 2010 for an estimated £50m, the company had enormous operating overheads, with nearly 5,000 staff and a huge back end. But the value of the average sale at Net-a-Porter is £506.00 a transaction. That means paying the money to create an immersive site is justifiable. In the low-margin world of wine? Not so much.

So it’s not surprising that the world’s wine commerce sites, from Laithwaite’s to hawesko.de all have the same layout: the same tabs for red, white and sparkling wines. The same bottle shots, the same information. But not only is Amazon no better, its organisation of the information is demonstrably worse. And since it relies on its partners to ship the wines, it’s generally not faster, either.
The future of wine might belong to Amazon. But it might not. The best defence that wine retailers have is to take the Net-a-Porter.com route rather than the Amazon.com one. Become a destination and offer lots of tastings. Understand where the consumer will be drinking the wine, and make suggestions around that.

Which, believe it or not, is what bookshops are now doing. Bookstores are experiencing a small renaissance by offering author events, workshops and staff who understand their books and customers. Want more proof that good destination stores work? Look no further than Amazon itself, which has opened two bookshops – and has plans for more.

This article first appeared in Issue 4, 2016 of Meininger’s Wine Business International. It formed part of a debate, which can be found here.

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