Wine: the Web's Final Frontier

Tuesday, 6 November, 2012
Greg Bensinger, The Wall Street Journal
Online sales are expected to grab an increasing share of holiday shopping this season. But one product category remains stubbornly resistant to the trend: wine.
While bigger online audiences and efficient shipping operations have enabled categories like pet food and diapers to become viable Web businesses, selling wine over the Internet remains thorny. Chief among the hurdles is a patchwork of U.S. and state regulations governing alcohol sales that makes shipping bottles directly to consumers' doorsteps a mind-boggling proposition.

Rich Bergsund, chief executive of Inc., has experienced those vagaries firsthand. The San Francisco-based online wine merchant has been fined by New York state for shipping wine in gift baskets stuffed with food; state law mandates food and alcohol be shipped separately. It has had to build seven separate warehouses to satisfy differing sets of state regulations.

The business, formed in 1998, is on pace to reach $80 million in revenue this year, up from $67 million last year. But it took more than 10 years to turn cash positive, and it took a detour through bankruptcy. At one point, was down to a week's worth of cash and had to lay off a third of its workforce.

"Buying wine online makes a lot of sense; there's potentially unlimited inventory," said Mr. Bergsund. "But there are many factors that make it hard to sell wine that way: state regulations, shipping costs, even weather—making sure the wine you ship doesn't spoil in the summer months." pays about $2 million annually for its regulatory compliance, including licenses, legal costs and warehouse management.


The final frontier.
The final frontier.

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