Evan Schuman's StorefrontBacktalk

After fostering excitement among winery owners and engaging in about two years of preparation, Amazon has decided to put the cork back in a plan to sell wine over the Internet. The E-Commerce giant is staying tightlipped about the reasons for its sudden attack of cold feet, and many are pointing to the myriad rules, regulations, taxes, fees and laws involved in selling and shipping vino in the U.S.

Amazon planned to have a California company with which it partnered, New Vine Logistics (NVL), handle the complex order-fulfillment hassles and legalities. That didn’t quite work out as NVL, citing a “financial crisis,” went out of business in July. Although Inertia Beverage Group subsequently purchased NVL, some have argued that NVL’s problems played a part in Amazon’s retreat from wine.

This is not the first time Amazon has tried selling wine and been sidetracked by bad economic conditions. Back in 2000, Amazon bought almost half of WineShopper for $30 million. But the dot-com implosion that summer wound its way to the wine seller and brought stock prices into the cellar, too. WineShopper merged with another crushed grape E-tailer, Wine.com, and the combined company went bankrupt and was sold in 2001, according to Wine Spectator, which added that Wine.com operates today with new owners.

Lewis Perdue, editor of Wine Industry Insight reported that NVL spent tons of money getting ready to handle Amazon business that never came despite all indications it was on track. “They had a beta test of the [Amazonwines.com] site up and running this past summer and I saw it, courtesy of one of the people who had a password,” he said. “They had a system, and it had supposedly advanced toward the late beta stage.”

In his publication, Perdue noted that NVL, in preparation for the onslaught of Amazon business, “ramped up shipping and fulfillment capabilities by expanding into a 380,000 square foot warehouse facility.” However, he noted that an NVL investor told him he became weary of waiting for the Amazon deal to become reality. “We got tired of hearing ‘Amazon, Amazon, Amazon,’” from NVL, Perdue quoted the investor as saying. “I felt like I was back at a college production of Waiting For Godot. I didn’t like the play then, and I certainly didn’t like having my money wait any longer,” the investor added.

On October 23, many wine industry executives received an E-mail from Dini V. Rao, Amazon’s senior account manager for Business Development, Wine, in which Rao said, “I am very sorry to let you know we have recently decided not to resume shipping. As you know, we were excited to work with you to build the AmazonWine business. For that reason, this was a very tough choice for us. Many of you took the time and leap of faith to really support us. Thank you so much! I am sorry that we won’t get to realize the vision on which we have collaborated. Be well and may we work together again soon.”

On his Web site, Perdue cited “insiders familiar with the situation” in reporting that, by September, Amazon began “to distance itself from New Vine/Inertia Beverage Group as a fulfillment partner.” That, he added, “left other fulfillment partners—who have been concentrating on their own businesses—less eager to ‘get into bed’ with Amazon, especially since it has been seen as dragging its feet and unreasonably stringing its partners along.”

In an interview, Perdue said he thinks Amazon wanted out of the wine business for reasons beyond the hassles of regulatory compliance. “Another thing that happened, which threw a curveball into the whole thing, was a ruling by California’s alcoholic beverage commission that any sort of performance-based advertising or compensation on the Web would be considered illegal,” Perdue said. “They pretty much outlawed things like the typical affiliate system.”