Last week, Blake Gray wrote a blog about exactly why Amazon.com pulled out completely of wine sales. It got me thinking about the long road that Amazon has gone through to come to this point. I first remember hearing about this well over a year ago….

I believe it was late last summer. I was contacted by the administrators at the Santa Cruz Mountains Winegrowers Association regarding Amazon.com. Amazon had called them and was doing field work with local associations about what their plans were to sell wine on their site. I personally was intrigued about Amazon’s entry into online wine sales. I am a big fan of Amazon and buy a ton of stuff from them annually. I am  an Amazon Prime member as well, which means I get free two day shipping on things that come from them (vs. a third party retailer). This is a HUGE convenience for me. I do a ton of gift shopping on Amazon (last year, my husband and I sent a generator to his parents in new Hampshire who had been out of power for a week!) and even purchase a few things in bulk, like a certain kind of recycled paper towels I like. When my kids have a birthday party to go to on Saturday, I can buy something on Amazon on Wednesday and its at more door by Friday. A working mother’s dream, I tell you. Anyway, I digress. When I heard about the wine thing, I was excited. As a Prime Member, I would get free shipping on wine too!  And they were planning to have a huge selection of wine. Any winery that wanted to sell on Amazon could, was what I was lead to believe.

The initial meeting with the Association and Amazon.com was canceled because the main guy missed his flight. I was a little irritated by this because I left the office and drove to Aptos for the meeting. And they cancelled like half an hour before they were supposed to be there. But my love for Amazon is bigger than a missed afternoon in the office—but hey, I got to go to the beach that day instead. Maybe they did me a favor.

A few weeks later at the Annual Dinner for the Santa Cruz Mountains Winegrowers Association, I met Thomas, a very nice gentleman from Amazon.com who had come to network with wineries and tell them about Amazon’s plans. We chatted, exchanged cards and that was that.

A few days later, Thomas was in touch with more details. At this point they were reaching out to all the Associations and everyone was buzzing about it.

After looking at the marketing proposal, we were excited about it too….however the logistics were kind of a pain in the ass. We would have to re-register all of our wines with the TTB so that we could use the fulfillment house. I also believe that we would have to re-register in certain states as well. I think the total cost per wine in licensing and set up was about $450. And the margins were a little slim. But having access to Amazon’s customer base, wow, the potential could be huge. Our plan was to proceed slowly, test it out and see how things would go with one or two wines on the site.  As it turned out, through another online retailer we worked with, we already had a wine registered with the fulfillment house (the now defunct New Vine Logistics). So we decided to start with that one and see how it goes.

And then the waiting game began. Every few weeks, we would get a nice email from Amazon, keeping us in the loop…but never giving us an exact launch date of the site.

And then New Vine Logistics went down.  I figured that had to be a huge set back to Amazon—fulfillment of wine is the most important component to their involvement in the wine sector—and it is such a giant pain. 50 different sets of laws, licenses to obtain, taxes etc. Every state has a different direct shipping law.

But as it turns out, the Amazon thing was delayed by something much bigger than the wine industries own regulatory nightmare.   Internet taxes, specifically in California. Since Amazon does not have a “bricks and mortar” shop in California, they do not have to charge taxes on products shipped to the state from Amazon.com. To sell alcohol in California, the regulations are such that a retailer needs to have a some kind of retail presence in the shape of a retail store in the state (even if it is just an office with a cash register).  However, if they opened a store here, then state taxes would have to be collected on EVERTHING Amazon sold in California. Yikes.

This is even more interesting to me because my husband—who worked at eBay for years and was a media consultant for NetChoice—is very passionate about this issue. I forwarded him Gray’s blog and he had a lot to say about it in terms of e-commerce in general. He was very articulate and intelligent, however I can’t recall anything he said about it specifically besides that it is very bad for consumers and e-commerce and free trade etc. etc. (sorry honey!).

I feel bad for the winery liaison Thomas. He was a pretty good communicator about what was going on—and obviously he got caught up in a much bigger issue. I hope he is still working there with a different department. There was obviously a ton of money and resources spent on Amazon’s entry into wine sales.…and I am sure Amazon had most of the site built before it all came crashing down.

I wonder how many wineries registered all their products and are out some $$?

What I think it all comes down to is that alcohol laws + Internet taxation laws =  a complete sh*tshow.  

For more information about Alcohol Direct Shipping regulations, please visit www.freethegrapes.org.