From Maryland: Why Retailers Want Shipping

In preparation for our March 5th House Economic Matters Committee hearing, we wanted to answer some of the questions raised by direct wine shipping legislation opponents.

Myth #1: Direct-to-consumer wine sales will hurt Maryland retailers.

Fact: Wine shipping is an entrepreneurial opportunity for those retailers that want to take advantage of it; for the rest, it is irrelevant.

Maryland is one of a few states that prohibit chain store sales of beer and wine, which means that a Maryland liquor licensee must a) be a Maryland resident; b) not have a liquor license in another state; and c) only hold one liquor license in their name.  As a result of the franchise exclusion, Maryland liquor stores have only one option for expanding their bricks-and-mortar business: going online.  Of the 1,581 liquor stores in Maryland, most of which are urban and neighborhood liquor stores, the overwhelming majority do not sell fine wine which is usually defined as wine priced above $20 per bottle.

We estimate that only about 100-125 fine wine stores exist in Maryland.  These stores are distinguished by a large focus on wines, with hundreds priced higher than $20 per bottle, and a customer base that draws from a broad geographic footprint.  A typical fine wine store offers extensive wine education to its staff and customers through tastings, organized visits to wine-growing areas and winemaker visits.  As these stores specialize in harder to find selections, they are most apt to take advantage of consumer internet sales for the discriminating buyer looking for low-production wines.  Many fine wine stores already have online presences and are waiting for legalized wine shipping to be able to take advantage of it.  With a multi-jurisdictional customer base, these Maryland stores would finally be able to service their far away customers while gaining new ones from other states.

Another reason that fine wine stores want shipping is because their customers are already being forced to shop out-of-state due to Maryland’s felony ban on shipping.  These patrons have wine shipped to DC, Virginia and West Virginia addresses or buy wine not sold in Maryland from retailers in those jurisdictions that carry them.  Many fine wine retailers would rather have consumers receive shipments from wineries directly so that they would not have to develop relationships out-of-state.

Lastly, only about 15% of all American wineries do business in the state of Maryland due to their size and lack of distributor representation.  Maryland already has a permit that allows small wineries to ship directly to Maryland liquor licensees called the Non-Resident Winery Permit.  Currently fewer than 50 wineries hold one because Maryland’s felony statute is so well known that they do not want to risk running afoul of it.  With the passage of consumer direct shipping, many retailers anticipate that they will be able to satisfy their and their customers’ desires for hard-to-find boutique wines through increased adoption of the Non-Resident Winery Permit.  These highly allocated wines will most likely never be distributed by liquor wholesalers because of their small production, but they are exactly the edge that fine wine retailers are looking for to distinguish themselves in the competitive retail environment.

For fine wine entrepreneurs, legalizing retailer shipping is an opportunity.  For average small business liquor store owners, retailer shipping is irrelevant to their customers and to them.

Tastefully yours,

Adam Borden
Executive Director
Marylanders for Better Beer & Wine Laws
4315 Underwood Road
Baltimore, MD 21218
Tel: (443) 570-8102