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tiers for fears Print
Written by Nikitas Magel   

Tiers for Fears

The Future of U.S. Wine Distribution and its Three-Tier System
A Provocative Viewpoint by an Online Wine Retailer

The climate is altering.  The landscape is shifting.  Momentous change is unfolding in the wine world around us.  And it's being induced by something subtle yet powerful in its capacity to affect the way we think about wine in the marketplace: the internet.  Traditional distribution under the three-tier model, which has long held a stranglehold on the availability of wine we consume in this country, would do well to take heed.  Otherwise, those who have long enjoyed the privileges afforded them by the current model risk being toppled from their lofty heights of power and influence in wine sales by the strengthening quake of e-commerce.  An audacious pronouncement?  Perhaps.  But it's an opinion shared by an increasing number of internet-based retailers who are witnessing significant growth in consumer purchasing of wine on the web.  During a recent interview focusing on her online wine retail business,  the founder and CEO of Bottlenotes.com, Alyssa Rapp, shared some of her strong and well-informed views with me on the current state of wine distribution and retail in the U.S., as well as some provocative assertions about its direction in the future.

NM:  What broader changes do you see the wine industry going through in the next decade that you feel may significantly alter the state of the industry as we know it?

AR:  I think the world of online wine buying and conversing is just going to explode.  Amazon is entering the space in the next few months, so the story goes, and I think it's going to be an unbelievable sea change in the wine world — that, alone!  One e-commerce monolith entering this world is going to dramatically, dramatically change the landscape.  Because if their goal (which it is, to the best of my knowledge) is to have the most expansive collection of wine available, plus a lot of the stuff you don't find in stores and that's not picked up by major distributors — all of a sudden there's a single place that you can come for all that wine — then that's going to change consumer behavior!  With Amazon, it could be a situation where it's a rising tide; their entrance [into wine e-commerce] will make consumers so much more comfortable buying wine online, that it could be just a huge sea change.  Because, except when you're going to a specific shop where you trust the buyer, really, what's the point of going into a shop at all?  To schlep the wine?  It's a big pain in the tail!  If you know what you want, there's no reason not to buy it online!  And if you don't know what you want, then you have an alternate form of recommendations at your disposal, so why wouldn't still you get it online anyway?

NM:  Let's take it a step further: how do you see online wine retail working with — or without — the existing three tier system?

AR:  Frankly, I think that the three-tier system is broken.  I think a model where there are built-in regional monopolies of distributors with locks on the markets that are elbowing out phenomenal boutique producers is not a sustainable model.  I think a model in which they put their head in the sand is about the fact that this direct-to-consumer model is here, and it's here to stay.  They can fight it as long as they want to; at some point these walls of Berlin are going to come tearing down.  And what that means is that at first there'll be a workaround, like the distribution model [used by a number of online wine retailers] where we're shipping legally but still technically through the three-tier system — but eventually even those laws will change.  If you want fine wine in central Illinois, it should not be any different from buying shoes!  It shouldn't; it's absolutely ridiculous!  Consumers should have access to whatever they want, and it's better for the economic engine of America that that be the case.  Now, mind you, I'm not saying it shouldn't be taxed; it should be taxed by the state governments.  But the reality is that direct-to-consumer shipping has been in the direct interest of the producers and the consumers, so the only thing stopping it from happening is archaic thinking.



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