Amazon has had a mixed experience with wine. In 2012, it launched Amazon Wine as a marketplace that connected wineries and its customers. Five years later, however, its acquisition of the retail chain Whole Foods Markets led to problems with complex alcohol distribution legislation in the US that varies from one state to the next. In 2018, despite having only just expanded its wine distribution by opening up to a further 11 states, the company suddenly decided to stop selling wine completely.
This did not prevent it from building a market in Japan where, in 2016, it trialled offering customers its own phone-based sommelier service and in 2017 opened a pop-up wine bar in the trendy Ginza district of Tokyo.
In other markets, including the UK and Germany, Amazon is still quietly developing a market for wine, as this examination of the German market by Meininger International’s sister publication, WEINWIRTSCHAFT, reveals.
Despite having sold wine for 13 years, Amazon has, German professionals to whom the magazine spoke, agree, failed to build a reputation for having any real expertise in the sector. This, they say, explains why German wine merchants find Amazon an interesting sales channel.
“Amazon will never truly become a wine merchant,” says René Harnisch, founder of the Dresden-based retailer Vinello. Its marketplace, he believes, exists for the quick and reliable delivery of a wide range of products for a very broad audience.
Anyone with a business and something to offer can become a seller on the Amazon platform. “Registration is online. The basic fee to participate in the marketplace is €39 per month,” explains Tanja Weber from the Hamburg agency Front Row, which supports sellers on the platform with a range services and software solutions.
Logistics
After that, there are different levels of integration. Sellers can either handle logistics entirely on their own or store their goods at Amazon and let Amazon handle delivery. “Shipping via Amazon, also known as Fulfilment by Amazon (FBA), ties up capital. We tested it but decided against it because then we can't access the goods that we might be able to sell at a better margin,” Harnisch says. “However, now that we use ‘Prime by Seller’, we deliver just as fast, the very next day.”
One of the larger players on Amazon's marketplace is Thomas Hiebl. His 'Wein- und Genießerparadies' store, which only exists on Amazon, boasts about 4,000 listings.
His solution to the logistics question was to outsource it to his suppliers. “It took a while, and with some partners, it was quite a challenge, but now it's running smoothly.”
When Hiebl launched his shop over 10 years ago, eBay and hood.de, a German platform, were still significant for him. “But as sales dwindled there over the years, they grew on Amazon and I dropped the other marketplaces.” He is able to offer his vast selection because he works with almost all of Germany’s major wholesalers from Mack & Schühle to Schlumberger. Hiebl's primary task is managing data and prices, forwarding orders, and handling returns. Despite being one of the big players in the Amazon wine marketplace, he remains virtually invisible.
“Selling wine on Amazon is very different from traditional online wine sales,” Hiebl explains. “I don't have a shop-in-shop; customers can't curate a package from my inventory. Often each order triggers its own shipping process because the customer can't tell which wine comes from which of my suppliers.” This is why customers have to buy cartons of six bottles of each wine. Selling wine on Amazon is primarily about repackaging six-bottle cartons for shipment. Harnisch agrees, “Establishing a brand position or launching new wines is challenging.”
Pricing
Amazon takes a 10% commission from sellers in the wine category, and there are additional costs for technical implementation. “There are several interfaces to merchandise management systems,” says Weber, “but the descriptions on Amazon are shorter and formatted in a different way to traditional shops. Data has to be handled manually.” Vinello uses AI for this purpose, which reduces additional costs. However, expenses still arise, which — including Amazon’s commission — Harnisch estimates to be 12% to 15%. Vinello adds this to the retail price. A key advantage of the Amazon marketplace is that the prices for wine are, on average, 10% to 15% above the cheapest on the market. Yet customers still buy. The common misconception that consumers imagine Amazon is always to be the cheapest, making price comparisons unnecessary, is disputed by Thomas Hiebl. He sees other reasons: “People appreciate rapid delivery and the assurance that their payment data stays with Amazon. Also, buying doesn't trigger a barrage of emails and newsletters.”
Customer Data
Data ownership, as it is often is the case when small businesses engage with large ones, is unequal. Amazon can evaluate each customer’s transaction history, but sellers only receive their postal address. This leads to an unsurprising consequence. “Of course, sometimes a wine that sells especially fast in my range suddenly appears in Amazon's own range at a price I can't match. That's why I have such a broad range,” Hiebl says. For Vinello, the issue is less relevant. Well-known wineries avoid selling directly to Amazon just as they do to German discounters like Aldi and Lidl. This is also why selling on the Amazon marketplace is only a nice sideline for Harnisch. “Amazon is too risky and too price-volatile as a mainstay. Moreover, some products lose their value by being listed on Amazon, and we don't want to impose that on our winemakers.”
Amazon does not disclose sales figures for individual categories on a country-by-country basis, but professionals believe it is satisfied with its wine offerings. Consumers won't find any cut-price offers with traditionally branded products and the pricing generally is not particularly aggressive. “Every few months, Amazon shows increased interest, and then there are more special offers, and my sales suffer a bit. But it always ends after a few weeks,” Hiebl says. “Daily adjustment of prices and maintenance of data is the key to success,” he continues. This is hard to implement for many retailers who mainly run a brick-and-mortar shop or online store. However, those who limit their Amazon offerings to part of their range can make a decent additional business.
