The Ongoing Attempt to Kill America’s Greatest Wine Retailers

National Association of Wine Retailers
June 25th, 2017

In the face of the declining brick and mortar retail sector at the hands of Amazon and other online players, it’s hard to overstate the shortsightedness of the opponents of retailer-to-consumer wine shipping. Without the ability to access the broader, more expansive national marketplace for fine wine via direct interstate shipment , traditional specialty wine retailers are likely to slowly disappear as wine consumers gravitate toward the large, multi-state retailers.

Consider the power that Amazon can bring to the online wine marketplace via its new Whole Foods outlets and its winery-fulfilled online selection. Consider the same market power wielded by the likes of Total Wine, Jet.com and other powerful retailers set to tempt consumers.

If the smaller, specialty wine retailers across the country are to survive in this contracting retail environment and the consumer’s ongoing migration to online purchases, they must be able to offer their uniquely curated inventory to the smaller but significant cadre of wine lovers looking online for something unique, rare and authentic.

Yet the forces of regulatory inertia, lawmakers’ slavish devotion to the deep pockets of wine wholesalers who oppose retailer wine shipping, and a reactionary fear of change by most small retailers all stand in the way of giving America’s traditional specialty wine retailers their chance at survival.

The more cynical industry watchers have long suggested that the opposition to retailer to consumer shipping by America’s wine wholesalers is a calculated position aimed at actually helping along the demise of these types of retailers. They say that it’s actually more trouble and more expensive for a wholesaler to service a small, specialty wine retailer than a large, big box store. And they are correct about this.

Others have suggested that wholesalers have used their political power to thwart retailer to consumer shipping for the simple reason they don’t want the competition. This argument was on full display in Texas this year during a committee hearing on HB 2291, a bill that would have changed Texas law to allow the state’s consumers to receive wine shipments from both in-state and out-of-state wine stores. After the members of the Committee heard testimony explaining how the ban on shipments from out-of-state retailers was both protectionist and anti-consumer, wholesaler representatives addressed committee members with this nugget: “Call it protectionism if you want, but we don’t see why Texas should allow out of state carpetbaggers to access our customers.”

This is a near verbatim quote from the wholesaler representative and suggests that if killing off specialty retailers isn’t the ultimate goal, certainly buying protection from competition at the expense of both consumers and retailers is surely part of the equation.

It’s easier to understand why wholesalers put their political might behind efforts to kill any retailer shipping reforms. That’s what the shortsighted do when carefully purchased protection from competition negate any reason to innovate. The reasoning behind most wine retailers’ opposition to retailer to consumer shipments is a bit more opaque.

A recent survey of Wine Searcher, the premier online search engine of online wine inventories showed that across all states, 1,170 retailers claimed to take online, secure orders. However, not all of these retailers listed on Wine Searcher as secure online order takers necessarily ship wine orders outside their state or even in their own state. Many simply take orders online for pickup at the store. So the number of true, online wine retailers is much smaller (likely around 700) than the 1,170 that told wine searcher they take secure online orders.

But even if all of the 1,170 retailers did, in fact, ship wine across state lines, that number would still represent a tiny percent of the total wine retailers in the country. In June 2014 the California Department of Alcohol Beverage Control counted nearly 30,000 off-premise licensees eligible to sell wine. That’s JUST in California.

The point is that the vast majority of American retailers that sell wine have no interest at all in selling online. However, via their state trade associations, they work hand-in-glove with wholesalers to stop shipments of wine into their state from out-of-state specialty wine retailers who are serving a small market of wine consumers who can’t find what they want at local wine retailers. Simply put, they fear the competition represented by out-of-state shipments, following the lead of their state wholesalers who have spent decades whipping up fear among wine retailers.

America’s specialty wine retailers understand the threat posed by the consumer migration to large, online vendors. They understand the threat posed by the likes of Amazon getting heavily into the brick and mortar retail business that will morph into an online food and beverage delivery empire. Specialty wine retailers understand the threat of the likes of Total Wine setting up shop in every state and presenting an online wine inventory that is culled from wholesalers’ selection available in the state where the online buyer resides.

To address these challenges, the best wine retailers in America have started to push back. New legislation is introduced on a regular basis that allows retailer to consumer shipping. More of these unique retailers are gravitating toward the NAWR, the only trade group in America that actually represents their interests. Many are becoming much more active in alerting their consumers and clients across the country of the threat specialty wine retailers face and garnering support from the very consumers they serve.

However, the jury is still out as to whether or not America’s best and most innovative and most iconic wine retailers will survive the current market conditions. One thing, however, is certain: liberalized regulations allowing more direct shipment of wine by retailers across state lines is essential to their survival. Furthermore, it can also be said with certainty that any industry entity or player that opposes this kind of liberalization (such as with America’s wine wholesalers)  of shipping laws is consciously working to kill off the small specialty wine retailer in order to pad their own bottom line.

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