winefeature

Should You Consider Selling Wine Online? Part One

by
October 6, 2015

 

Do you enjoy a glass of Pinot Noir at the end of the day? Maybe you have a wine cellar, and enjoy sharing your favorites with friends and family. You’re not alone.

In the US alone, 2014 wine sales were $37.6 billion and sales have been growing, according to information from Statista:

statista

With a market that large, it’s no surprise that online wine sales have been increasing in the United States at double-digit rates for the past five years, says Wine Spectator. Yet online sales are still a very small part of the industry. In the same Wine Spectator article, Michael Osborne, founder and vice president for merchandising at Wine.com, notes “Wine remains under-penetrated online at less than 2 percent of all U.S. wines sales.”

Why are online sales such a small part of the market? The most likely reason is the abundance and complexity of laws and rules that govern everything, different for each state, from how you can sell wine, to packaging, shipping, and delivery.

What States Allow You to Buy and Sell Wine Online

Following Prohibition and until 2005, states decided who could and could not ship and receive wine based on what they considered to be the best interests of their state. In 2005, the Supreme Court changed the game with its landmark Granholm decision, which stated that it was unconstitutional for a state to discriminate between in-state and out-of-state wineries when it comes to who may sell and ship wine directly to a consumer.

Since then, the number of states that permit winery direct-to-consumer shipping has risen from 27 to 40 as of January 2015, when Massachusetts’ winery direct-shipping law went into effect. Following is a map showing winery direct shipping laws, by state:

winedirect

source: Wine Spectator

In January 2016, South Dakota will permit winery direct shipping.

Unfortunately, since 2005, the number of states permitting out-of-state retailer direct-to-consumer shipping has fallen, from 18 states to just 14 today. Why is this happening? Wine Spectator cites a recent study in Maryland showing that everybody wins with winery direct shipping; states get more tax revenue and consumers get more choice. Local businesses feel threatened by the prospect of online retailers undercutting their prices and market share.

Online retailers have gotten creative to get around the stricter non-winery shipping rules. Wine.com sells wine to residents of states where out-of-state retailer shipping is illegal by setting up its own warehouse, from which all Wine.com deliveries in that state are fulfilled. However in those states, Wine.com can only offer you the wines that are available through that state’s wholesalers. Amazon, which offers wine, is not actually a wine retailer, but a way for customers to order directly through wineries.

Shipping Carriers That Ship Wine

The USPS is not allowed to ship alcohol, based on a law from 1909 that is still on the books. UPS and FedEx ship wine. Here is more information:

To ship wine through FedEx or UPS, you must have an account with them, and must sign an alcohol shipping agreement as well. In addition, you’ll have to adhere to packaging requirements designed to prevent breakage and leakage.

You are required to affix a special label identifying that the package contains alcohol. If you are a ShipStation user, and are using FedEx to ship wine, you can print these labels from within the system. You can learn how to do that here.

Finally, you are required to use the Adult (21 years and older) Signature option. More on that, below.

Full details on FedEx wine shipping requirements are available here.

Full details on UPS wine shipping requirements are available here.

Age 21 and Over Requirement

Checking the age of your customer takes on a whole new level of complexity when you’re selling wine online.

First, you need a customer to let you know that she or he is over 21. This is generally done on a website with a pop up or a button that must be chosen before anyone is allowed into the online store.

That’s just the beginning of the age issue. Even more challenging is managing the requirement that only adults 21 years of age and over can take delivery of an online wine order, and that they must actually sign for the delivery (it can’t be dropped off without a signature). Not only does this create extra costs for online retailers in the form of requiring a carrier signature, but it also creates additional costs (in money and customer goodwill) if shipments aren’t accepted after three attempts and are returned.

Kjiel Carlson, Vice President of Operations for Club W, a monthly wine subscription service, admits that managing the 21 and over delivery process is his toughest challenge. “We are constantly offering new solutions, and working on new solutions to this issue,” he says. “Some of our ideas include asking people to choose delivery times and places as part of the ordering process, delivering to a business, holding shipments at FedEx locations, working with local delivery services, and more.”

Next Steps

Still interested in selling wine online? We’ll cover best practices in our next article.