WineCanine

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Thursday, September 27, 2007

Dog Talk

"So, Zane," Red the Doberman said to me the other day, "I gather you think an internet wine business would be a good thing to get into."

"Absolutely!" I responded. "If you already had a wine shop, internet sales would be a great way to grow your business by making your existing stock available to a new, virtual neighborhood. And if you were just getting into the business you could start small, and maybe even specialize in just one type of wine — dessert wines, maybe — or wines from a certain region, like Alsace or Indiana. You could even specialize in a certain type of grape, sort of a Malbecs-R-Us approach."

"Specializing in obscure items doesn't seem like the best way to build a business," Red replied. "Seems to me you'd want to carry the things people want to buy most, like highly-rated Cabs, Zins and Pinot Noirs."

"That's true." I responded. "And if it were me, I'd want to offer everything that all the wine distributors in the state carry. But The Long Tail business model says that the future of internet sales is in selling less of more things, rather than the old model of selling a lot of a few things. Brick-and-mortar stores have a finite amount of display space, but virtual stores have a limitless amount."

"I like long tails," Red responded, wagging his. "I'm sure glad I was allowed to keep mine. Helps keep my nose warm sometimes."

"Yes, I'm sure they're nice!" I snapped. "My first family was full of traditionalists, so I have the kind of tail that Weimaraners have had for centuries. At least I've never had a door closed on mine."

"You know," Red said, scratching his ear thoughfully, "you wouldn't even have to physically stock a particular wine until somebody ordered it. All you'd have to do would be call your distributor, and if it were a big enough order maybe they could even drop-ship it for you."

"Exactly! I sure wish it were legal to do all that. I'd whip together a business plan so fast..." My thought trailed off.

"Better hurry up with that," Red said. "You know, at least one Indiana company already is selling wine online."

"What! Who?" I yelped. "They can't do that! It's illegal for wine shops and liquor stores to ship! They can make local deliveries, but only by their own employees. If you can't use common carriers like UPS or FedEx, how can they run an online business?"

"Wel-l-l-l-l," Red intoned, clearly enjoying the moment, "it may be illegal for wine shops and liquor stores to ship. But it may not be illegal for restaurants. Do you remember how Bowser's Fine Wines opened the Bone and Bowl next door to the wine shop? Now Bowser has a web site and is offering to ship across state lines — but from the Bone and Bowl, not from the wine shop."

Bowser! That sly dog — was he on to something? I bid Red good day, took my leave, and trotted home to plant myself in front of my MacBook to devour the Indiana Alcohol and Tobacco Commission's web site. After a few minutes of sifting through the voluminous pages of rules and regulations, I found what Red had been talking about:

IC 7.1-3-14-4:
Scope of permit
 Sec. 4. (a) The holder of a wine retailer's permit is entitled to purchase wine only from a permittee entitled to sell to the wine retailer under this title. A wine retailer is entitled to possess wine and sell it at retail to a customer for consumption on the licensed premises. A wine retailer is also entitled to sell wine to a customer and deliver it in permissible containers to the customer on the licensed premises or to the customer's house.

Now, that may sound like it applies to wine shops, but in ATC parlance, a "wine retailer" is a restaurant. A wine shop or liquor store is a "dealer." Dealers and retailers may only buy their stock from distributors, who may only buy from producers and importers, though distributors themselves are also allowed to do direct imports. This is what is referred to as the "three-tiered system," which has been around a long time and works pretty well. And could "deliver it in permissible containers" be construed to mean in wine shippers, and that the local delivery requirement didn't apply to out-of-state transactions?

Had Bowser actually found a way to legally ship wine out of Indiana? A wine rep I know named Bark asked the legal beagle where he works about it, and his opinion was that he had. I wanted to get it from the horse's mouth, though, so I zapped off an email to the ATC. (Remember, on the Internet, nobody knows you're a dog.)

It took a few emails to nail down the ATC's answer, but their response was this:

Currently retailer and dealer locations are allowed to sell from their premises and in some instances, are allowed to deliver to a person's residence or business.  Nothing beyond that is allowed under the scope of their permits. 

and then:

The deliveries must be by a permit holder or their employee.  It may not include common carriers. 

Well, that pretty much settles it as far as I'm concerned. If he gets caught, Bowser may be able to convince a court that the wording of the law is vague enough to allow him to use common carriers to make deliveries out of state, but I sure wouldn't be comfortable leasing a warehouse or building a Web site to go into that kind of business unless the Indiana General Assembly were to pass legislation that specifically permitted and regulated it.

Maybe if they got enough letters asking them to, they would. I'm going to contact my elected representatives and urge them to allow Indiana dealers and retailers to use common carriers to ship wines out of state — and within the state too, for that matter. If you have a few minutes, you can too.
M. Zane Grey, 11:57 PM