DTC and Retailers, “Pay the Fine” and Keep Shipping

Hello wine lovers, retailers, wineries and DTC advocates. I awoke this morning to find a disturbing article on winespectator.com about interstate commerce, wine shipping, freedom and our ability to control our own destiny. Maybe that is too much drama, but while the article is fact based, the situation is slanted and otherwise stifling of free commerce.

When I was CEO of Sam’s Wines and Spirits of Chicago, we shipped almost $8M worth of alcohol beverage annually. We were the first to use the web as an ECOMM tool and used the gross margin opportunity to our benefit. We had a full-fledged shipping department, with picking and packing teams, and UPS/FedEx had full understanding of that we did. The carriers gladly took our money.

True commerce means that all of us are awarded the same opportunity as other retailers/wineries given that our state taxes are paid and we are operating a legal, licensed business.

Many wineries depend on ECOMM from retailers to sell wines that might not make it on the shelves but still can find a way into a consumer’s home via web sales.

When a state authority becomes involved it really muddies the waters. To hear that the New York State Liquor Authority (NYSLA) is using this store in upstate New York as a soap box to stand on is upsetting, ill-timed given the holiday, and frankly really not fair. This lawsuit and counter suit maligns the real issue of what we do. The real issue is that the world of selling has dramatically changed in the last 20 years, and our laws that govern selling have not changed at all.

Look at the alcohol beverage business. It is in a massive wave of consolidation. Independent retailers are being crushed by chains and big box. Distributors are merging as brands are hopping around to find the best distribution model, and wineries want to skip the whole mess and go DTC for their best shot at survival.

As a pioneer in the three-tier system, this is what I would do if someone would vote me into office.

1. Create language that clearly outlines the taxing issues. Who pays whom and to what governing body
2. Create protected brand class.
   1. No one shops online for Dewar’s, but they do for some rare California or Bordeaux wine. Create rules for brands and what trade class can sell them online. So rare, allocated wines can be retailer web sold while Bombay Gin cannot.
3. Make sure that everyone knows the rules
   1. Rules are currently different by state and county. What New York is enforcing now, no one cares about or takes the time to enforce in South Dakota
4. The whole shipping channel is driven by money. The average web sale online is over $150.00, but the average diamond online sale is $1,100. No one is talking about getting a diamond lawsuit going for the customer that does not tell his own state that he bought a diamond from bluenile.com

In my opinion, here is the net-net. Stores, wineries and anyone works the space will continue to sell and ship wine via the Internet. There is too much opportunity to be denied. If the local government wants to hang a legal precedent on this, the rules of the game must be universal and known. To financially penalize stores, wineries, and shippers because there is a violation of an unclear law that no one really knows they origin of is silly, and dare I say, unconstitutional.

In the mean time, UPS ships well over a million brown, nondescript boxes a day; the odds are in your favor to ship, what you want, to whomever you want.

*Opinion is that of the author and not necessarily the Wine Industry Advisor.