Amazon is conquering logistics, then wine

In a world in which Amazon seems to be taking over, it seems noteworthy when the company backs down from a challenge. This is what happened with wine – at least for the time being.

Amazon Wine was launched in 2012 and shut down just recently, at the end of 2017. Its history is well summarized by Tech Crunch (https://techcrunch.com/2017/10/23/amazon-wine-is-shutting-down/). The story boils down to the company not being able to deal with the restrictive regulations around wine that we discussed in class – a classic case of what a conservative-minded person might point to as “overregulation of the markets”. But this isn’t the first time Amazon has run into regulations (take, for example, their battle with the FAA on drones http://fortune.com/2015/04/29/drones-amazon-letter-faa/). So why is it giving up on its own wine marketplace?

Instead, Amazon seems to be abandoning its wine platform while doubling down on its logistics services, such as Amazon Fresh and and Prime now. Right now, it’s rolling these services out in new cities, including deliveries of alcohol (mostly beer). At the same time, the Whole Foods acquisition seems to be part of the picture. Now that Amazon has a nation-wide brick-and-mortar presence throughout the US with stores that are already licensed to sell beer and wine, it may be able to leverage its logistics advantage into capturing the market that Amazon Wine could not. After all, its ability to deliver wine more quickly (via Amazon Prime) may trump a platform that delivers variety (such as Wine.com, which has not been doing so well either). 

Duane Stanford, executive editor at Beverage Digest, noted in an interview:  "The three-tier alcohol distribution system is a complicated web of state-by-state laws that make it tough to scale online delivery… If anyone can apply pressure and creativity to the problem, however, it's Amazon, and Whole Foods gives Bezos yet another paint brush.” (https://www.cnbc.com/2017/09/17/getting-alcohol-delivery-on-amazon--will-whole-foods-help.html). Will Amazon use some of its creativity and political capital to change the regulatory structure? Will the company be the savior of anti-regulation advocates in the industry by using its might to simplify the system? Is the wine industry worth fighting for among all of Amazon's other priorities?