Who’s Killing The Fine Wine Retailers?

Independent fine wine retailers are at risk of commercial irrelevancy by being permanently shut out of the lucrative wine shipping channel and the expanded markets they need for future survival. A combination of their own shortsighted fear of competition, the emergence of multi-state retail licensees and retailers’ proclivity to side with industry groups that don’t have retailers best interests at heart may doom them to disappearance.

To-date, only a small collection of fine wine retailers have invested in turning the tide of anti-retailer legislation that has led to bans on retailer interstate shipments of wine. Led by the National Association of Wine Retailers, these progressive retailers recognize one central fact: the future of the Independent fine wine retailer depends on being able to do business in the e-commerce economy.

Even as more and more of the fine wine retailing industry is captured by larger and larger big box entities, fine wine retailers are also feeling the kind of pinch that other industries have faced in the wake of consumers turning to and relying on internet purchasing. Now, with Amazon.com having purchased hundreds of liquor licenses via their takeover of Whole Foods, an even greater threat to the existence of the independent wine retailer is on the horizon.

When Amazon can offer consumers online purchases of wine that they have procured via the three-tier system in their own state and can deliver in hours, what kind of impact do independent retailers think this will have on their sales and their future?

Ironically, the majority of fine wine retailers across the country have happily and eagerly contributed to this dire situation by opposing direct to consumer shipments for fear of competition and at the urging of wholesalers who oppose retailer interstate shipment for no other reason than to maintain the death grip on wine distribution that the largest wholesalers currently possess. The opposition is shortsighted.

A recent and consequential example of this kind of shortsighted approach to fine wine retailing came at a committee hearing in Austin, Texas where a bill that would have allowed wine shipments from out of state retailers was being considered. At the hearing, the president of the Texas State Package Store Association went before committee members and proclaimed the organization’s opposition to the bill based on the jobs that would be lost if out-of-state retailers could ship to consumers in the state.

No Texas retailers would have been forced to fire employees if out of state wine retailers shipped bottles of wine to Texas consumers who could not find the wine they wanted in a local store. However, they will be forced to let employees go in response to orders taken by Amazon.com that are then fulfilled via the various Texas Whole Foods warehouses the Internet giant now possesses. What makes this coming circumstance particularly threatening to Texas retailers and their employees is that Amazon will be offering, selling and shipping to Texans the same wines the state’s package stores are selling.

This same scenario of online giants taking orders from local independent wine shops is and will play out across the country. The only way for fine wine retailers to address this threat by the changing retail economy is to expand their potential market and the services they offer. This, in turn, can only happen if they are able to expand their sales and marketing reach to the entire country and not just within their own state.

There are only two ways to create an open market for wine retailer shipping in the United States that can provide an effective response to the ongoing consumer migration to online sales: legislation and litigation. The National Association of Wine Retailers is the only organization pursuing either option.

Fine wine retailers must understand that they cannot rely on any other part of the alcohol beverage industry to support them. If they are going to confront the immense challenges that threaten their historic place in the industry, they are going to have to do it themselves and together.

Clearly, wholesalers will continue to fight with all their resources any legalization of retailer interstate shipment of wine. The position is not rational, but instead, a knee-jerk reaction that is emotional. The wines the fine wine retailers ship across state lines are wines that were purchased from wholesalers in the first place.

Wineries will not be allies in fine wine retailers attempt to stay relevant in a changing retail environment. Over the past decade, wineries and their trade associations have regularly and consistently supported amendments to direct shipping bills that strip out allowances for out-of-state retailer shipping.

In staunchly opposing retailer to consumer shipping, wineries and their representatives at the California Wine Institute and Free the Grapes have miscalculated. If online sales of wine by the largest online retailers diminish the number of independent wine stores, wineries will have fewer options where their wines can be sold and be put in difficult position with little choice but to embrace whatever deals they are offered by the likes of Amazon.com, Wine.Com, Walmart.com and Total Wine. It’s unlikely those deals will favor wineries. Additionally, wineries have failed to realize that their best customers are not wholesalers, but the retailers that present their wines to the public. Nonetheless, fine wine retailers have no reason to think wineries will support their efforts to stay relevant.

Fine wine retailers have historically organized on a state level and have largely allied themselves with their state’s wholesalers when regulatory issues are debated. If these same fine wine retailers do not change their perspective and see the entire country as their potential marketplace they will slowly be eaten and disposed of by the largest retailers in the country. And there is no indication that their own local wholesalers or wineries will help do anything to stop this evolution in the marketplace.

The National Association of Wine Retailers is the only organization pursuing changes to the laws that prohibit interstate shipment by retailers. NAWR works to introduce then support legislation changing the laws around retailer to consumer shipments. NAWR also supports litigation that challenges the discriminatory state laws that prevent interstate shipment by retailers.

NAWR has had both success and failure in its efforts. However, given the speed with which the retail environment is currently changing, it is far more likely that NAWR’s efforts will ultimately fail—unless the bulk of America’s progressive fine wine retailers in every state join, fund and support NAWR and its efforts to create a commercial landscape in which fine wine retailers have a fighting chance.

This means retailers supporting the liberalization of wine shipping laws in their own state. Too often fine wine retailers are happy to support or take advantage of liberalized shipping laws in other states, while staunchly opposing retailer wine shipments into their own states. This kind of commercial hypocrisy only leads to being walled off from the rest of the country where the protectionist retailer finds themselves cornered and exposed to the ravenous appetite of massive online retailers and their own state’s wholesalers who happily sit back and watch the independent retailer be devoured.

A recent survey of WineSearcher.com showed that roughly 1,200 retailers across the country take online orders. However, a significant number of these retailers either take online orders only for pickup or for local delivery. Nonetheless, if the even a quarter of all retailers that ship interstate chose to band together, join NAWR, and defend their industry, their power would be nearly unstoppable.

As a fine wine retailer, it’s getting late in the game to consider the future of your industry and your place in it. A wave of change is drawing very near. It’s time to consider your future and your options.

NAWR is located on the Internet at http://www.nawr.org where you can find more information about the battle ahead, the organization and how to join.