amazon wine bust

Tuesday, October 27, 2009

Just about this time last year, I was contacted by Nate Glissmeyer, Amazon’s Category Manager for Wine, and Dini Rao, the Senior Account Manager for Wine Business Development. They wanted to pick my brain specifically about Washington wines.

I believe that the intent at the time was to do some trial marketing of wine online, using Washington wines as the test. Since Amazon is headquartered in Seattle, it seemed logical.

Though both were cordial in a series of follow-up meetings, they were quite close-mouthed about the actual program specifics, and declined requests for on-the-record interviews.

Nate did explain, in an e-mail, that “our hope is that by offering nearly limitless product selection and excellent education and help to get folks started, we can help our customers share in the excitement of this growing region.”

A story on Reuters dated October 21, 2008 noted that “Consumers in just over half of the United States could soon be getting a better selection of wine at a cheaper price -- online.” It went on to quote Tyler Colman (Dr. Vino) predicting that “wineries will have a much wider reach,” and estimating that consumers could see a 20 percent drop in prices because Amazon “would eliminate a whole tier of the distribution system.”

None of this has come true, of course, and in retrospect, the signs were there from the start that this program was a no-go. In subsequent meetings, I did some spec writing for the Amazon wine team, only to find out that Amazon wanted to use my name and writing to promote the wines they were selling, but were unwilling to pay for it. It was one of those great opportunities for promotion that come along so very often when there is no money attached.

As far as I could ever figure, Amazon pricing was not going to do consumers any favors. By the time you figured in shipping costs, you weren’t going to find any bargains. But I would guess – this is pure conjecture – that it wasn’t pricing, nor the three-tier system, nor the difficulties of online retailing in all the different states that ultimately caused the wine program to be abandoned.

At a recent bookseller’s conference here in Seattle, the hot topic of conversation was the allegation that Amazon, along with Wal-Mart and other big online retailers, were planning to price blockbuster books (by such can’t-lose authors as Steven King) at below cost. The theory proposed by the small booksellers is that Amazon et al could afford to lose money on the best sellers, in order to drive more business to their sites. That makes sense. It also would be the final nail in the coffin for most mom ‘n’ pop bookstores, who live or die on such best-sellers. A lawsuit may be in the works.

I’m guessing that there was no way Amazon could round up enough comparable wines to do something similar. They can’t get the big name wines that are most desirable as “loss leaders”. Think about it. Is Quilceda Creek going to allocate wines to Amazon, so they can be sold at below-market prices? Or Leonetti? Or Cayuse? If a Washington winery with excess inventory (none of those three, by the way) wants to unload some really good juice, they turn to Jon Rimmerman at Garagiste. Rimmerman has been selling more and more Washington wine, and at very good prices. But he also brings a fine palate, a focused mailing list, a stellar reputation and first-class writing to the equation. I don’t see any way that Amazon could ever have competed with that.

5 comments:

Tannic said...

Or the flip side: what many retailers do is price the commodity wines at little or no margin so they can sell you the next Leonetti or perhaps even more tacky, their own private label. Hello Bevmo and Total Wine :)

Tyler Colman said...

Hi Paul,

Funny that you found my quote in that Reuters story from a year ago.

I was misquoted in the story and contacted the reporter (also an editor) after it ran. A correction was never appended; nor did she even reply.

Here is the letter I sent her:

Leslie,

While I am pleased to see my book's title getting a mention, I'm afraid that I did not say what you quoted me as saying. At the end of our discussion that ranged from my book to the economy, we started talking about the exciting prospect of Amazon's entry into wine retailing. I said that amazon *could* be a game changer and that wineries *could* have a broader reach if they adopt that business model. I do not know anything more than the next person about what amazon will do since they have not made their plans public. I simply stated that if they adopted a central warehousing business model, as opposed to the wine.com model, than that could be a radical change. But nobody really knows since they have kept the situation under wraps. I read the quote as implying that I have some inside knowledge, which I don't.

Tyler Colman

PaulG said...

Tyler, thanks for the clarification. Absolutely no intent on my part to misrepresent you. Hope we have chance to meet one day soon!

David Millman said...

Hi Paul,

Very interesting blog, particularly the insight into what writers face!

Kindly,
David Millman
DDO

Tyler Colman said...

Would be great, Paul!

-Tyler

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