Ecommerce as Fitness Training for Your Store

Posted on | June 1, 2007  
Writen by | Ian Griffith

Once in a while I meet a prominent retailer who insists the business model that is successful for his store wouldn’t work online. In a recent discussion a large retailer described recognizing the need to have a presence online but had low expectations from ecommerce and was reluctant to invest energy for little expected gain. Advising her that several retailers with mainstream selections at good prices were doing well online did little to get her attention. However, her resistance lifted when I suggested that given trends in the industry she could well need ecommerce experience to keep her business fit to compete in her future marketplace.

This particular retailer’s ambivalence about online sales is influenced by confusing messages from her State about whether retailers are permitted to make shipments out of state. The State’s beverage control agency has been clear that they do not permit shipments into the state from out-of-state retailers, but they do not enforce a ban on local stores who ship out. Another factor is the conservative view from her package store association which believes that banning out-of-state retailers from shipping into the state is more important than supporting local retailers to compete in markets around the country.

The Battle Rages On…

The current battle over interstate shipping legislation in Illinois has clarified the arguments over whether retailers should enjoy the same shipping privileges as wineries. At the time of writing it looks like retailers out-of-state will be denied the ability to ship to Illinois customers while Illinois retailers will retain the right to make these shipments. The state wholesalers argue that the Supreme Court ruled on shipments by wineries and the same logic does not apply to retailers. The Specialty Wine Retailers’ Association SWRA counters that this legislation violates the spirit and intent of the Supreme Court ruling which reads, “If a State chooses to allow direct shipment of wine, it must do so on evenhanded terms.”

Read more here about how FedEx and UPS are required to report Direct Wine Shipments to several States.

A review of the top 10 wine consuming states shows that New Jersey and Massachusetts are the only states that restrict shipments by retailers into their states. These states also have the highest per-capita consumption in the top 10 which suggests lucrative local markets that these retailers quite naturally want to protect. However, if SWRA wins their argument with the Supreme Court, state legislatures could be facing a choice between licensing and collecting taxes from out-of-state retailers or prohibiting in-state retailers from making deliveries.

Given the choice, a few retailers may choose to surrender service from FedEx to deliver an inconvenient order, so an out-of-state competitor would be prevented from doing the same. However, why gamble that the state might be persuaded that consumers are better served with access to greater selection and pricing by allowing competitors from other states to deliver; especially if they can be obliged to collect tax? It is quite likely that retailers who wait for this decision will find they lack the fitness to compete online with stores that have been growing their businesses using ecommerce for several years.

The attitude that change moves slowly in your part of the country, or in the liquor industry as a whole, is becoming harder to defend. Legal arguments are being made that foreshadow the most radical changes in this industry since the repeal of prohibition. The costs of experimenting with your business model online are low compared to the risk of discovering you lack the fitness to compete with a new host of competitors.

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