As Amazon Wine Shuts Down, Amazon Prime Moves To Main Street

Posted: Nov 02, 2017

Amazon Wine is shutting down. Their letter to winery partners says exactly why this an ominous sign for independent liquor retailers.

If Amazon’s focus on Beverage Alcohol wasn’t apparent before, it certainly should be now. Amazon has clearly tipped their hand on where they will focus their energies and (considerable) resources going forward… and it is literally around the corner.

Short term, we can expect super aggressive, innovative stuff from Amazon in the beverage alcohol space. They seem to want to own local delivery of alcohol and just made a huge move to acquire their way into that market.
In July, we wrote about how Amazon’s purchase of Whole Foods gives it over 330 liquor licenses across 41 states, and how that could potentially disrupt the industry.

With the Whole Foods acquisition, Amazon can fulfill wine orders and deliveries more faster, easier and cheaper through Amazon Prime than with Amazon Wine.

The potential of this move dwarfs their $120M a year Amazon Wine business, which is primarily direct shipping from wineries to consumers, but why would they give Amazon Wine up so abruptly?

The core reason is most likely that Amazon felt they were in a legally compromised position, due to Tied House laws that prohibit retailers receiving any monetary value from producers. With Amazon Wine, they were acting as “marketing agent” for producers and getting paid by them directly, but with all of their shiny newly acquired Whole Foods liquor licenses Amazon will be a retailer very soon as well.

Also, as a winery direct marketing agent, Amazon did not have the warmest relationship with the nation’s wholesalers, who saw Amazon Wines direct-to-consumer model as skirting the 3-tier system (specifically the wholesale and retail tiers). Prior to the purchase of Whole Foods, there were even rumblings that Amazon would further skirt these theirs with direct-to-consumer private label brands. While it seems those plans have been temporarily put on hold, it would not be surprising if someday they make an end run around wholesalers.

In the meantime, and as a retailer, Amazon will need to play nicely in the sandbox with wholesalers for the foreseeable future. That said, Amazon is probably not too worried about upsetting the apple cart. They will be the customer, after all?—?and a big one at that.

So, let’s focus a moment on Amazon’s size and success: Amazon might be the most user-friendly retailer out there (they patented one-click shopping!), but their operational and logistical expertise has been their true key to success. While most retailers are still struggling with the costs and operational challenges of eCommerce, mobile order ahead and local delivery, Amazon is leap-frogging traditional brick and mortar retailers with their mobile-first, sophisticated logistics juggernaut. Business as usual is truly going out of business.

Beverage alcohol retailers need to do everything they can to stay relevant and keep customers loyal, or they’re going to go the way of the dodo. Amazon uses well-honed technology, logistics and marketing techniques to offer customers a magical experience and, as a result, they own 40% of all e-commerce, 73% of which is mobile.

Turnkey platforms, like Drync, give you your own branded mobile ordering app, and a compelling platform to engage customers and drive sales.

Amazon is mobile first. This is a new battlefield for most beverage alcohol retailers and they need to be prepared to fight on this platform. Leverage the tools and technology to stay in the game, then play your own unique hand to set yourself apart from Amazon.

Support your brick-and-mortar experience with brand-building and sales opportunities outside of your four walls. Think outside the box about what your customers want. Test and learn. Invest in technology and resources to take you there, go mobile, stay local, and offer great service and convenience.

Amazon may have tipped its hand, but local businesses are the fabric of main street and the local community. As a local business, you have a wild card that Amazon can’t compete with, you just need to figure out how to play it.

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