Wine. Food. Reviews. Recipes. Lap it up.

Monday, September 24, 2007

Proactivism vs. Protectionism

No matter how the Wine and Spirits Wholesalers of Indiana or the Indiana Association of Beverage Retailers try to spin their support of restrictive shipping laws as concern for keeping the eeeevil alcohol out of the hands and gullets of children, the real issue is this: They want to protect their turf.

That's entirely understandable. Whether you run a small, mom-and-pop package store or a major distributorship, a lot of energy and money goes into growing a business, and once you've carved out a market share you want to keep it. If a new, similar business moves into your neighborhood, you would rightly perceive it to be a potential threat to your bottom line. In response, you could respond to the competition by offering superior service, lower prices or an outstanding product mix — or you could remonstrate and try to prevent the new business from getting a permit to operate.

Effectively, the advent of Internet commerce has plopped a seemingly infinite number of invisible competitors in every neighborhood. If you're selling a typical product — printing, for example, or computers, or tires — you have to adapt and compete. But if what you sell is regulated by the government you may have other options, such as pressing your state's elected representatives to pass protective legislation.

And indeed, the barriers thrown up by protective legislation can work — for a while. But they eventually crumble under the pressure of the free enterprise system, and when they do the industry they had been protecting may find itself to be too flabby and out-of-shape to meet its new competition. This very thing happened to Indiana banks, which were at one time forbidden to cross county lines in search of new business. After the banking industry was deregulated, many Indiana's banks were gobbled up by larger ones from neighboring states, where they had been allowed to compete and grow. In the end, the demise of Indiana banks was helped along by the very legislation that had been designed to protect them.

Internet commerce is changing the way business is done; the genie is out of the bottle, and he's not going to be stuffed back in. Rather than spin their wheels and squander their resources by trying to throw up temporary barriers to competition, how about if the beverage industry groups pushed for deregulation that would enable their members to grow their businesses instead?

Consider this: Indiana's location makes it an excellent shipping center. Its taxes are reasonable, especially when compared to those of coastal states (think California, New York and Massachusetts). There are several excellent wine and spirits distributors here that bring in everything from mass-produced supermarket wine to low-production rarities from boutique wineries. In short, conditions are ideal for an Internet wine sales industry to grow and blossom in Indiana.

Except for one thing: Current Indiana law doesn't specifically permit such a type of business to exist. Certain sections of existing regulations could conceivably be interpreted to allow Interstate shipping (I'll get to that in a separate post), but until provisions are written addressing the ability of Indiana retailers to engage in Interstate sales and the direct shipping of alcoholic beverages, I sure wouldn't invest too much in a Web site or warehouse.

So, the industry has a choice: Should it continue pursuing a protectionist course, throwing up barrier after barrier as the courts knock them down? Or should it be proactive, and help prepare Indiana to compete in this young and developing area of Internet commerce?

Maybe we should ask a banker....
M. Zane Grey, 11:20 AM