Oct. 28--Online retail giant Amazon.com is making yet another attempt to capitalize on the complicated market for online wine sales, a closely-watched initiative that could open a new distribution channel for wineries.
If it succeeds this time after two previous failures, Amazon could bring exposure to boutique wineries that are too small to land a deal with major distributors. And wineries that opt to play could find an alternate route to consumers, bypassing the traditional three-tier distribution system that dates back to Prohibition.
The online wine shop is expected to debut in the first week of November, said North Coast winery executives familiar with the launch.
"The additional distribution is fantastic," said David Freed, chairman of the Silverado Group. "Being able to just get into all the states where it's legal would be wonderful."
Amazon's muscle as an online retailer could bring new consumers to the industry while leveling the playing field for smaller wineries, who typically have less access to distributors than larger wineries, industry executives said.
The Seattle company's websites attracted more than 103 million unique visitors in August, making it the sixth-most visited online property that month, according to measurement firm ComScore. Last year, Amazon reported $48 billion in net sales and employed 56,200 people in full-time and part-time roles, according to company filings.
"The only reason that you would even think about this is because it's Amazon, and they are this incredible powerhouse," said Jim Caudill, director of public relations and hospitality at Hess Collection in Napa. "They know what makes consumers tick, so you can't ignore that. But the wine business is not quite as simple as some other business."
Wineries will pay Amazon for the exposure. Several wineries working with Amazon said the wineries would be responsible for handling fulfillment of the orders -- including warehousing, shipping and compliance with the complex thicket of state alcohol distribution rules. One said Amazon also offered a second option where it would complete the fulfillment process for the wineries.
"You'll check out, just like you would to buy a book," said Marlow Daniel, director of public relations and communications at Francis Ford Coppola Winery, which is participating in the Amazon wine launch. "You'll pay Amazon on the Amazon site. And on the back end, it will shoot it over to us to where we do fulfillment and compliance ... and we'll send it."
Amazon is charging wineries a 15 percent referral fee, a cooperative fee of $49 for every $350 in sales, and a subscription fee of $39.99 a month, according to a document obtained by The Press Democrat. The cooperative fee and subscription fee will be waived until Jan. 31, 2013.
Whether the costs of selling wine through Amazon are cheaper than the three-tier distribution system depends on a variety of factors, said Paul Tincknell, a Healdsburg wine marketing consultant who prepared a pricing analysis of the Amazon program for his clients.
"It's very heavily dependent on the price point of your wines and how much you can sell per month," Tincknell said. "If you're paying $40 a month and selling a $4.99 bottle of wine, it's going to be a bigger percentage of your margins than if you're selling a $49.99 bottle of wine."
Even so, he believed the cost would be worthwhile because a winery could reach millions of potential new customers.
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