Home Wine Business Editorial Three Tier Talk Adult Beverage Retailers Need to Be VERY SCARED of the Amazon Purchase...

Adult Beverage Retailers Need to Be VERY SCARED of the Amazon Purchase of Whole Foods

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Bezos does not make mistakes. We, regular people, we make mistakes.

I am not going to gasp at $13.7B price tag. I am not in the camp that it was overpriced. I am not going to gasp at what it means for grocery stores nationally. I am not going to comment on share price and valuation. What I will share with you is that this merger, or purchase, will have a huge impact on distributors, liquor stores, brands, and the consumer. Basically the independent liquor store is officially on the endangered species list followed in a close second by the independent grocer.

This will go down as the biggest steal in history for Bezos. If you bought $1000.00 worth of AMZN when it went public, that $1000.00 would be worth $500,000.00 today. Not really a shabby ROI. The crap I bought for $1000.00 is worth six dollars. He is clearly smarter than I am. Here is why the deal is catastrophic for the off premise retailer, and here is some food for thought.

  • Over 50% of Americans use Amazon once a week, while less than 2% of consumers use AMZN to purchase alcohol currently.
  • USPS is the main delivery hub for AMZN, and historically has more loose adult beverage shipping rules that UPS or FedEx
  • The average cost to ship a bottle of wine from NY to LA is $15.00. The average cost to ship a case of wine is $35.00, and champagne is nearly $50.00 coast to coast.
  • The average off premise (non big box) retailer carries 500 items.
  • Costco carries 200 items
  • State Laws for selling booze will not change quickly, benefiting AMZN

Now let’s put that all in a smart blender, and here is what you will get.

Everything is sold online and specifically through Amazon. Online sales of booze has been a challenged for decades. The joke in the industry is that, the only person to ever make money at Wine.com was the person that sold the URL to Wine.com. Shipping is expensive, weight is heavy, bottle shapes are all different (making automation hard), very specific wines and vintages are changing, and wait time is long to conserve costs. 

The acquisition takes all that away.

There are Whole Foods in 38 states. It is perfectly legal to ship to an end user within your own state. Costs are cut down by proximity. Time to deliver is cut down by store location. Price is cut down because Whole Foods and Amazon have effectively created the nation’s largest online/offline retailer. Grocery, which was the heart of the deal, will be ordered by Prime customers and so will the booze, now more than ever. Amazon Fresh quickly realized that while cereal and canned beans can easily be ordered by Amazon, the USA consumer was slow to adapt to the high margin items like meat and produce. Now, Whole Foods will get a 50% share of eyeballs. Whole Foods/Amazon will get a 50% share of consumers that want to round out their virtual shopping cart with adult beverage.

The independent grocer and liquor store owner will suffer greatly. No longer will the consumer stop by the wine shop on the way home from work, they will send it in advance to be delivered within an hour. That sale will be booked at AMZN and WFM.

I wrote a piece for Progressive Grocer many years ago about the untapped potential of the wine/liquor aisle within the grocery store. No one paid attention to it, and ownership only cared about the high margin walls of the store; produce, meat, fish, etc.

Amazon paid attention and now so will the independents as they fill for COBRA benefits.

Brian RosenExpert Editorial
by Brian RosenRosen Retail Method

Brian Rosen is Former CEO of America’s #1 Retailer, Sam’s Wines in Chicago, Former Partner at PricewaterhouseCoopers in Retail and sought after retailer consultant.

He can be reached at @rosenretail or [email protected]

 
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3 COMMENTS

  1. I will never buy anothing from Amazon! Why you ask?

    A little basckground- Do you remember when California wanted to add sales tax to on-line sales a few years back, if the company had a presence, brick & mortar,in the state. At the time Amazon had HUNDREDS of small & large business vendors in CA supplying & shippng product to Amazon customers. Amazon FIRED ALL these busineses so it could say it didn’t do business in CA. Such a wonderful display of loyality to their vendors many of who had been with Amazon from the beginning.

    Then Amazon threatened a ballot issue to outlaw the sales taxing of on-line sales.Then the state government caved, yes that is the word, and the stae and Amazon agreed to a ONE year delay in collecting sales taxes on on-line sales.

    Then this wonderful company full of integrity- Amazon offered to HIRE BACK all the vendors in CA.

    Now do you understand why I will not deal with them? They are corrupt.

  2. Two comments:
    “USPS is the main delivery hub for AMZN, and historically has more loose adult beverage shipping rules that UPS or FedEx”
    My understanding is that USPS is currently, and has been, prohibited by law from shipping alcohol.

    “the independent liquor store is officially on the endangered species list”
    I’m not so sure. More likely “the crappy independent liquor stores are officially on the endangered species list”

  3. Here is my guess as to what Amazon/Whole Foods will do with wine. The big push won’t be shipping to home addresses. Even within a state it is expensive, dangerous because of heat and cold, a hassle because of the need to sign for wine (be home when wine is delivered and they don’t give you a narrow window). The big benefit would be having a large inventory at centralized “fulfillment” centers, letting customers select from maybe 10,000 wines, have it delivered to your nearest Whole Foods. That approach eliminates a large share of shipping costs, assuming refrigerated trucks it would eliminate the danger of weather to the wine, and would eliminate the hassle of having to be home to pickup. Would dramatically improve selection and hopefully be very competitive with wine store prices. That would work for me.

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