Wednesday, December 10, 2008

Amazon and wine e-commerce

As many of you are aware, is getting into the wine ecommerce business and I've stated publicly that they are going to be a game changer. Their corporate business model is to be a mile deep and a mile wide in terms of selection, and then add the "if you liked this you might want to try that" recommendation function.

So here are two observations on why I think this is going to be so significant.
1. Lots of choice, personal assistance in selection. Assuming that Amazon is going to apply the same strategies with wine as they do with books, it represents the online equivalent of a knowledgeable wine shop salesperson helping an individual customer, with the added twist of already knowing what they've purchased previously. So they'd be complementing an extraordinarily broad inventory with a function that makes selection personalized and easy. Pretty cool concept.
2. Inclusion vs. exclusion. The existing wine marketing convention in the U.S. is pretty much governed by a philosophy of excluding, rather than including brands. There's a physical limitation on shelf space in retail stores and in restaurants. So it's sort of like a zero sum game...if I put this brand in, something has to come out, so I have to know a priori that the new bottle will sell more than the one it's replacing. Net's tough for new brands to crack the U.S. market. So here comes a solution that turns that inside out. The "long tail" strategy means there there is no limit on shelf's "virtual" on the web, even if it's real in the warehouse.

So my recco is for brand owners is...when Amazon knocks on your door welcome them with open arms. And for retailers...the challenge will be to differentiate yourself in "in person" service and timeliness that rivals what Amazon can deliver electronically. Sphere: Related Content