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Amazon Flows with Wine

Posted by: Bill Chidley on Friday, October 18 2013 05:01 PM
Amazon Wine

Availability drives consumption.

Amazon, a top riser on Best Global Brands 2013, is now shipping wine to New York, Michigan, Arizona and Louisiana, upping its distribution to 20 states and the majority of Americans. This is good news for wine makers, but a cause for concern to wine retailers who may fear obsolescence.

“Disintermediation” is the driver of ecommerce and what keeps traditional retailers up at night. Whole industries have changed as a result of taking steps out of the distribution model. How we acquire and enjoy books, music, movies, even travel, are forever different… and now wine appears to be joining the mix with the biggest e-retailer.

Lowering the cost of goods to consumers is the obvious upside of disintermediation, but an often overlooked result is a change in consumption habits. Make something that is inherently appealing cheaper and easier to get and without fail more will be sold.

The advance of Amazon's wine sales will have at least three profound collateral effects on how consumers engage with the wine category that will impact consumption habits:

  1. Reduced entry barriers for new consumers: Shopping for wine can be intimidating for shoppers and a barrier to entering the category. It is complex and difficult to navigate, with many varieties and price tiers. The Amazon experience offers the shopper the ability to educate themselves without pressure, use reviews for comparison, and filter search results to suit their priorities that will reduce the entry barriers for new consumers, and then keep them in the Amazon franchise.
  2. Frictionless purchasing for current consumers: The ability to easily repurchase favorites, put wines on a wish list to purchase in the future, immediately find a wine that was recommended or experienced at a restaurant, and then purchase with one-click, all will drive consumption. Furthermore, the ability to use Amazon’s “subscribe and save” option and push notifications for cool new wines to try, (or deals), will positively impact frequency of purchase.
  3. Contagious consumption for all consumers: Wine is a highly giftable and sharable category, and Amazon will be a great platform for both. Wine as a gift for friends and family in other zip codes gets little consideration, but Amazon introduces project-ability to wine, making it like flowers. Amazon will enable us to share our favorites not just in social media, but by actually physically sharing a bottle across the miles. This will not only increase purchase occasions, but also introduce more consumers to wine, or more varieties and premium tiers if they are already buying wine.

These three collateral effects will drive consumption and grow the wine business while also changing how consumers experience the category when they shop. Like iTunes and music, wine is highly fragmented so shopping online will be a great equalizer for small brands “on the shelf,” but give disproportionate advantage to brands that have the ability to pay to be featured or promoted.

Based on my recent Amazon Wine experience, it will also impact the design of packaging for wine if/when online becomes a top channel of distribution. The role of the bottle will be minimized and the label will be the single focus, and need to attract attention as a postage stamp in a sea of postage stamps.

Regarding the brick and mortar wine shops, they will feel the impact of Amazon and other e-commerce players eventually, but they still have their place for convenience. They will see reduced traffic and smaller purchases as “stock-up” trips migrate to online sales. But there will always be a need for brick and mortar wine stores until someone figures out a way to download a great Malbec!

Bill Chidley is SVP, Executive Consultant, Interbrand Design Forum.

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