After expanding its reach into food with the acquisition of Whole Foods, Amazon will now try its hand at selling wine. While the e-tailer isn’t yet producing its own wines (despite rumors to the contrary), it will be the sole distributor for Next, a label produced by Oregon’s King Estate Winery. However, the logistical constraints of selling alcohol online suggest that the service won’t yet cut into brick-and-mortar retailers’ revenue – although Amazon’s wealth of merchandising opportunities for brands means that online retailers and courier services like Drizly and Minibar may have reason to be concerned.
Amazon previously struggled to get into the wine business, spending two years developing a wine program that satisfied all the regulatory requirements. Ultimately, all wine sold by the e-tailer had to come from third-party vendors, making them (rather than Amazon) responsible for compliance. The introduction of Next suggests that this may be changing, but Amazon’s road to alcohol distribution remains paved with obstacles. Wine shipments are subject to geographical limitations, age verification and delivery receipt requirements, and they are not Prime-eligible – cutting into the convenience aspect that encourages shoppers to shop on Amazon in the first place.
While Amazon directly selling wine might not pose a threat to physical retailers, its rich array of merchandising opportunities could lure wine brands away from online retailers like Walmart and Target as well as budding courier services like Drizly and Minibar. AmazonFresh provides the most sophisticated merchandising opportunities of all online Beverage retailers in L2’s Beverages: E-Tailer Landscape report, from sponsored search listings and promotional banners to the ability to integrate custom assets on product pages. Courier services lack many of these features, and even established retailers like Walmart and Target fail to measure up.
Merchandising features on Drizly are more limited than on AmazonFresh and are nearly all confined to the homepage, rather than across the site. In addition, the study finds that brands without product badges, which are awarded for various criteria outside of their control, face significantly reduced visibility. On Minibar, merchandising features are more varied and brands can invest in badges to boost their visibility, but if they don’t, they won’t show up in the coveted above-the-fold position of the category product gallery.
Walmart Grocery’s merchandising features for Beverage brands are also considerably less robust than Amazon’s. Because the site has no category landing page for Beverages, for instance, brands have fewer opportunities to intercept undecided shoppers. Walmart did establish a competitive advantage by being the first to sell beer online. But as Amazon expands its alcohol distribution, that advantage may be short-lived.