Amazon: 1 Step Closer to World Domination
Nov 9th 2012 5:31PM
Updated Nov 9th 2012 5:38PM
Is there anything that Amazon.com (NAS: AMZN) can't sell online? It doesn't seem that way. On Thursday the world's largest Web retailer pulled back the curtain on its latest business venture: a wine marketplace. Now shoppers can buy everything from ball valves, diapers, and centrifuges to rare books and wine at Amazon.com.
Amazon's entry into the wine business could be hugely beneficial for the wine industry given the e-tailer's scale and accessibility. According to Wine.com CEO Rich Bergsund, "Only about 2% of wine purchases are currently made via the Internet." However, that could change now that Amazon is bringing more than 100 million unique monthly visitors to the table. This should be particularly helpful for smaller wineries that would otherwise not have the resources to reach audiences of that size.
Of course, Amazon is also a winner. The company plans to take a 15% cut of wine sales made on its site in addition to charging featured wineries monthly listing fees, according to The Wall Street Journal. This is a win-win for Amazon since it won't be responsible for packing and shipping the wine. But for Amazon shoppers that's also a downside because wine purchases won't qualify for Amazon Prime.
Amazon recently added a new pricing structure for its Prime program. The online retailer's new model offers customers a monthly subscription plan of $7.99 for free two-day shipping, unlimited TV, and movie streaming. While purchases from Amazon's wine marketplace won't qualify for Prime shipping, the new monthly pricing plan should help entice more customers to sign up on Amazon.com ahead of the holiday season.
Meanwhile, the wine initiative puts Amazon in direct competition with Wine.com, and down the road it could also challenge wholesaler Costco (NAS: COST) . But this is nothing new for Amazon. Six months ago it took on office supply heavyweight Staples (NAS: SPLS) when it launched AmazonSupply.com. The business-to-business site supplies companies and industrial customers with more than 500,000 items including office goods and manufacturing equipment.
Similar to its foray into the B2B world, Amazon's arrival in the wine market puts it at the center of yet another lucrative industry. With a proven track record of transforming industries outside of its core competence, I suspect the e-commerce giant will have a disruptive effect on the way consumers shop for wine.
The article Amazon: 1 Step Closer to World Domination originally appeared on Fool.com.Fool contributor Tamara Rutter owns shares of Amazon.com. The Motley Fool owns shares of Amazon.com, Costco Wholesale, and Staples. Motley Fool newsletter services recommend Amazon.com, Costco Wholesale, and Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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