Last week I reported on the recently completed $13.7 billion purchase by Amazon of Whole Foods.
To me, this represents a sea change in food retailing that potentially will top the impact of Amazon’s stranglehold on virtually all hard goods sales in the United States.
I believe this impact on food will extend broadly and deeply into the retail channels currently dominated by brick and mortar supermarkets. And the coming food sales shift to the Internet will potentially affect the channels for selling wine in the United States.
Will wine sales and delivery channels be swept up in the national trend – from pushing a squeaky shopping cart at your local supermarket to the “let your fingers do the walking” virtual shopping cart?
To me it’s clear that Amazon’s goal is to become part of the very fiber of our lifestyles and shopping habits; an Amazon product in every nook and cranny of our lives. With the acquisition of Whole Foods, they now have the platform to accomplish this goal. Let’s look at the logistical might that each company brings to the market.
Amazon (“The Amazing”):
Footprint: 100 million square feet of distribution space; 100 warehouses across the country, each one employing 800 to 2,000 employees.
Clout: 180,000 employees, plus 100,000 more to be hired in the next year; tens of thousands of seasonal employees.
Customer Interface: Amazon Prime membership service. For a fixed annual cost of $99, purchases at the Amazon.com website are shipped free in two days. In certain markets, Prime customers receive ordered items the same day; select items, including wine, are delivered in two hours – all at no charge. There are now 60 million members, all increasingly loyal to Amazon’s web offerings.
Market Value: A financial measurement of value, stock market capitalization is one means of determining the value of a company. Amazon’s market capitalization has grown exponentially in the last five years, from $100 billion to nearly $500 billion, placing it in the top five of all United States companies.
Whole Foods: (“Your Whole Paycheck”):
Footprint: 1 million square feet of warehouse distribution space.
Clout: 460 brick and mortar stores, scattered across nearly every American state.
As a wine-centric columnist, my focus is the impact this new combination of virtual and storefront behemoths may have on the wine industry, and in particular, on retail wine shops in our New York metropolitan area.
Amazon offers wines on its website for customers in states permitting cross-border sales. In New York, they sell primarily through third party sellers, not directly to consumers. Whole Foods sells, and delivers, directly to in-state customers. With Whole Foods in the fold, Amazon will have a direct interface with local consumers.
Up until now, it has been a logistical problem for Whole Foods to distribute wine in New York State. The reason: strict New York laws restrict ownership to one shop, and only to individuals, not corporations. Whole Foods operates 19 stores in New York, but operates only one wine shop – on Columbus Avenue in Manhattan.
Shipping wines throughout the state can be problematic, but with the logistics depth of Amazon, consumers can be better served. This does not portend well for the local wine shop. In the future, while a mom (women make 85 percent of the purchasing decisions) is online shopping for books or diapers, she may be able to add her favorite bottle of wine to her order, and be sipping it the next day, or perhaps the same day. And if she’s a Prime member, delivery may be free. This is another Amazon convenience and another increase in customer loyalty, two concepts that dictate marketing in today’s economy.
Increasingly, a local wine shop owner would lose a sale – and perhaps a customer.
This scenario would potentially drive out of business hundreds of wine shops throughout the county and state.
Could a landscape devoid of wine shops be in our future? Could homogenized wine selections be on the horizon? Could our wine purchase decisions be limited to Amazon’s control over available offerings? I earnestly hope not.
Nick Antonaccio is a 40-year Pleasantville resident. For over 20 years he has conducted wine tastings and lectures. Nick is a member of the Wine Media Guild of wine writers. He also offers personalized wine tastings and wine travel services. Nick’s credo: continuous experimenting results in instinctive behavior. You can reach him at firstname.lastname@example.org or on Twitter @sharingwine.