Amazon.com Inc. (AMZN) has recently announced the launch of its new virtual wine marketplace, offering customers an opportunity to shop from a selection of more than 1000 domestic brands of wines.
Amazon Wine will feature selections from some of the big wineries in the United States, including Francis Ford Coppola, Hall, Mark Ryan, Eden Canyon, Pepper Bridge and Roadhouse. Additionally, the website will provide detailed information about individual wines, including their composition, alcohol content and American Viticultural Area (AVA).
Management stated that customers could order up to six bottles of wine for $9.99, without having to pay any shipping cost. Currently, the shipping service will be available in California, Connecticut, Florida, Idaho, Illinois, Iowa, Nebraska, Nevada, North Carolina, Oregon, Washington, Wyoming and the District of Columbia.
Amazon had tried to enter the virtual wine market a few years ago but could not take its plans ahead due to strict regulations governing the sale and delivery of alcohol across the U.S. state borders.
According to a study conducted by MarketResearch.com, the U.S. wine market is expected to touch $33.5 billion with 871 million gallons of wine sales by 2013. The study forecasts that wine shipments will expand at a compound annual growth rate (CAGR) of over 3% from 2010 to 2013.
Amazon is one of the leading players in the extremely fast-growing retail ecommerce market and its strength lies in its huge scale of offerings, its broad reach and platform approach. We believe the market leader should continue to grow as long as the market is expanding.
At the same time, we think that there is a certain amount of uncertainty regarding Amazon’s investment plans, which could pressure earnings in the near term.
Currently, Amazon has a Zacks #4 Rank, which implies a Sell rating in the near term.
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