Amazon is zeroing in on the alcohol industry.
On Saturday, Business Insider wrote about a liquor license the company acquired in San Francisco. Initial reports said Amazon was potentially opening its own brick-and-mortar liquor store. In reality, this is more likely part of Amazon’s ever-growing alcohol delivery business — which requires the company to obtain individual local licenses in order to facilitate online purchases. The e-commerce giant appears to be strategically expanding to take on a new and untapped market.
So far, Amazon has had a slow ramp up in the alcohol space. Currently, Amazon offers some form of alcohol delivery to a little less than three dozen U.S. cities. The company has either been obtaining liquor licenses in select locations, or has been grandfathered in thanks to its 2017 acquisition of Whole Foods.
Earlier this year, Amazon also posted a job opening for a public policy manager who should “help lead state and local engagement and public policy activities related to Alcohol Regulation.” Specifically, the job posting explained, this person would be managing key “issues related to Alcohol Procurement and Sales.”
This fits squarely in Amazon’s playbook. For years, the company has hired lobbyists to flood Capitol Hill to advocate for the company’s various positions — ranging from local sales taxes to corporate tax reform to labor laws — to make sure it has a direct line to lawmakers. The need for an alcohol public policy manager indicates that it needs someone to take the lead on yet another issue.
How far Amazon’s alcohol ambitions go aren’t yet clear. For years, the company offered an online wine marketplace for select cities, called Amazon Wine. It, however, was shut down to keep Whole Foods’s liquor program in the regulatory clear. At the heart of the matter was that Amazon couldn’t take in fees from independent wine businesses via its marketplace while also operating its own liquor-selling retail business. Now — with Whole Foods in the mix — the company is forgoing a marketplace and is instead establishing a local retail presence one city at a time.
If Amazon ramps up its alcohol business, it would be playing in a space currently dominated by marketplace and delivery startups. According to Cory Rellas, CEO of the alcohol delivery platform Drizly, the market remains extremely untapped.
“Less than 2% of alcohol is sold online,” he said. “In many ways, there is a massive opportunity — not just for Amazon but for others.” The current alcohol wholesale industry is estimated to be a little north of $125 billion.
To Rellas, one of the big reasons people aren’t buying alcohol online is simply because they didn’t know they can. “Consumer awareness may actually build with Amazon entering the space,” he said.
According to Chris Towt, co-founder and CEO of the wine e-commerce platform VineSpring, if Amazon were to double down and begin rapidly expanding its alcohol sales program, it could have a positive effect for smaller players. Many wineries, for example, rely on sales from people directly connecting with the brand — going to their website or even driving out to their vineyard. “Having more channels for selling your wine — and having the choice of where to place [product] in — is always a good thing,” he said.
But it’s still early days for Amazon’s alcohol disruption. Currently, the company is acquiring the correct local licenses and selling the alcohol products like any normal liquor store would. But in keeping with the Amazon playbook, the company could be trying to figure out ways to rebuild channels to circumvent traditional alcohol distributors. This would require a complete regulatory overhaul, but is certainly not out of the question given Amazon’s deep pockets and penchant for Washington maneuvering.
According to Rellas, its most pertinent competitors now are the offline mom-and-pop liquor stores and larger grocery spaces that have resisted e-commerce. But if more people become wise to buying it online, everything could change.
“It’s kind of exciting that [Amazon] is getting into this space,” he said. “It will accelerate the need for these other guys to come online.”