The ShipCompliant Blog brings you a steady flow of legislative updates, regulatory changes and other important news impacting wine shippers. If you find this information valuable, you won’t want to miss DIRECT 2013, ShipCompliant’s 8th annual Direct Sales and Shipping Seminar taking place June 13, 2013, in Napa, California.
This full-day seminar will feature multiple breakout sessions to discuss, in detail, some of the most important issues to wine direct shippers today, including:
- Regulatory Roulette: A Discussion of Key Regulatory Issues Impacting Your Business
- Integrating a Mobile Marketing Strategy into Your Sales Efforts
- Third-Party Marketing: The Regulatory Landscape You Need to Know
- Best Practices for Managing your Fulfillment Efforts in the Age of Amazon
- Shipping Analytics: How Do You Measure Up?
- ShipCompliant Support Lab: 1-on-1 Training
- ShipCompliant University (three tracks)
- Back to Basics: ShipCompliant 101
- Compliance Made Easy
- From Sale to Shipment
You’ll also get to hear from best-selling author and keynote speaker, Dr. Joseph Michelli, as he shares his share his extensive, in-depth research into key differentiators that define the success of companies like Starbucks, Zappos, and The Ritz-Carlton Hotel Company. And more importantly, how wineries can incorporate these strategies to create their own “creaveable” brands.
Wine Institute Director of State Relations, Steve Gross, will give a detailed state-by-state overview of recent and upcoming changes affecting wine direct shippers. Pat Kohler, Director of the Washington State Liquor Control Board, and Deputy Director Rick Garza will provide insight on recent changes in Washington state that have industry-wide impacts.
Seating is limited, so register today to confirm your seat at this eighth-annual exciting and informative conference.
Verifying the age of online wine purchasers and shipping recipients is perhaps the most important and responsible task any online wine seller can engage in. Age verification not only protects your own licenses, but it supports the entire industry as being responsible and it protects against minors obtaining alcohol illicitly. As the new year approaches, direct wine sellers should make every effort to improve by incorporating one or more additional age verification tools into their direct selling protocols. What follows is a 7-point list that offers a variety of ways you can use age verification in the coming year to protect yourself, the industry and minors.
As you’re making the new years resolutions for your business, think about adding age verification to the list. I’d like to challenge each of you to do a better job at age verification in 2013. It will be easy, and we’ll help you through it. Please pick at least one item from the list below that you are not doing currently, and add it to your direct shipping program starting January 1st.
- Require the common carriers (FedEx, UPS, GSO, etc.) obtain an adult signature upon delivery
- Add an age affirmation gate on your website/store/mobile app
- Collect the date of birth of the purchaser
- Collect the date of birth of the recipient for gift shipments
- Use an online age verification provider to verify the age of the purchaser in Georgia, Kansas, Ohio, and Michigan
- Use an online age verification provider to verify the age of the purchase for orders to all states
- Use an online age verification provider to verify the age of the recipient for all gift orders
Require the common carriers (FedEx, UPS, GSO, etc.) obtain an adult signature upon delivery
This is a requirement for all wine shipments. No ifs, ands or buts about it. Work with your carrier to understand how to make sure your packages properly labeled for alcohol and ensure they’ll check ID and get an adult signature upon delivery.
Add an age affirmation gate on your website/store/mobile app
This is a pretty simple tool that will go a long way. Add a feature to your site that forces the visitor to affirm that they are of legal drinking age by checking a box prior to entering your website, shopping cart, or mobile application. Last time I mentioned this at a seminar, I got a few calls from some eCommerce companies saying that would damage the search engine optimization (SEO) for the products in the store. My response: you’re smart, figure it out! There’s got to be a slick way of enabling the age gate while also preserving the SEO of your site.
Collect the date of birth of the purchaser
If you’re going to add an age affirmation tool to your website/store/mobile app, why not take it one step further and collect the date of birth of the purchaser at that point? Alternatively, ask for the date of birth when the purchaser adds wine products to their cart. You’re going to need it at a minimum to include on the direct shipping reports due in Wisconsin, Michigan, and the four counties of Hawaii. You’ll also need it for audit purposes in New York and most of the states that you are shipping into, and it will also make for a much stronger match rate on your age verification checks when using an online provider (see below for details). States will typically require that you keep your records for two years for audit purposes, so we often recommend that you hold onto your data for at least 3-4 years just to be sure. Remember that dates of birth are very sensitive from a privacy perspective, so be sure to store them securely in your files.
Collect the date of birth of the recipient for gift shipments
For gift shipments, you’ll also want to collect the date of birth of the recipient. You’ll need this on the shipping reports due in Wisconsin and the four counties of Hawaii, and it will also result in a much stronger match if you decide to do age verification on the recipient. One thing to note here is that the purchaser will often not know the date of birth of the recipient. So, you don’t necessarily have to collect this at the time of transaction, but make sure you have your processes designed such that you can follow up and get the DOB of the recipient prior to shipping.
Use an online age verification provider to verify the age of the purchaser in Georgia, Kansas, Ohio, and Michigan
The states of Georgia, Kansas, Ohio and Michigan all have some kind of requirement for verifying the age of the purchaser. The easiest way to meet these requirements is to use an online age verification provider. ShipCompliant integrates with both Lexis Nexis (formerly ChoicePoint) and also IDology, both of which have been approved by the Michigan Liquor Control Commission. These services run about $.50 per check (per customer), and do not need to be repeated for subsequent purchases from an individual that has already been confirmed to be of legal drinking age. When running an online age verification check, you’ll need the purchaser’s name, address, and optionally date of birth. As mentioned above, if you include the date of birth you’ll get a much stronger likelihood of matching the individual in the age check provider’s database.
Use an online age verification provider to verify the age of the purchase for orders to all states
Wine Institute and Free the Grapes! both have codes that establish that (from Free the Grapes!’ code for direct shipping) “licensees must verify the purchaser’s age at the point of online purchase before completing any transaction.” Most of the bigger wine companies are therefore choosing not just to run an online age verification check in the four states that require it by statute, but to run online checks on the purchaser in all states that they ship to.
Use an online age verification provider to verify the age of the recipient for all gift orders
For gift shipments, you can also consider running an online age verification check on the recipient. Even though the common carrier will ask for identification and a signature for the person that actually signs for the package upon delivery, some wineries take a conservative approach and choose to run an age check on the recipient as well for gift shipments, especially on gift orders that originate from third party marketers.
In July of 2009, the Virginia Department of Alcohol Beverage Control (Virginia ABC) sent out Circular Letter 09-05 to Direct-to-Consumer Wine Shipper and Beer Shipper licensees, prohibiting Direct Shippers from contracting with third parties for receiving or shipping orders on behalf of the licensee. Since then, Virginia has been working with industry members to outline laws and regulations concerning the use of these third parties. The culmination of these efforts is a new Virginia regulation, which will go into effect this Sunday, November 4.
Initially these regulations were submitted in May of 2011 in support of a “fix-it” bill passed in April of 2010. The “fix it” bill – now current law – allows Direct Shippers to ship through approved Fulfillment Warehouses and Marketing Portals. These new regulations define how out-of-state Fulfillment Warehouses and Marketing Portals can become approved by Virginia ABC to do business with Virginia Direct Shipper licensees.
What’s Changing for Direct Shippers Using Fulfillment Warehouses
From 2010 until now, the Virginia ABC has allowed Direct Shippers to apply for more than one direct shipping license and submit separate monthly shipment reports for each shipping location as a temporary workaround. This workaround will remain in place after November 4, but only until the existing extra licenses expire (one year from the date of issue) giving Direct Shippers and Fulfillment Warehouses time to become approved as defined in the new regulations. All wineries must continue to maintain their primary Virginia Direct Shipper license, but no new licenses for additional fulfillment locations are expected to be approved. In order to gain Virginia ABC approval, Fulfillment Warehouses will need to:
- Submit a copy of the Fulfillment Warehouse’s home-state fulfillment services license to the Virginia ABC
- Submit a written contract or addendum to an existing contract, between the Fulfillment Warehouse and the licensed Direct Shipper, listing all shipping locations and indicating that the Fulfillment Warehouse is the agent of the Direct Shipper for purposes of complying with the Virginia direct wine shipper’s law under Va. Code §§4.1-209 and §§4.l-209.1, and Va. Administrative Regulation 3VAC5-70-240
- Maintain for two years and make available to Virginia ABC upon request, records of each shipment, including: quantity and volume, brands shipped, and names and addresses of recipients
Fulfillment Warehouses must submit these documents for EACH Direct Shipper they represent. A sample addendum to be endorsed by the Virginia ABC is currently being drafted and will allow any existing contract between the two parties to merely be referenced, saving time and protecting proprietary information in existing agreements.
What’s Changing for Direct Shippers Using Marketing Portals
Virginia is one of the first states to restrict use of Third Party Marketers by out-of-state Direct Shippers. Beginning November 4, Third Party Marketers must follow these guidelines to become approved in the state:
- The Marketing Portal must be properly organized as an “agricultural cooperative” in its home-state and provide a copy of its license to the Virginia ABC
- Establish and submit to the state a written contract between the Marketing Portal and the Direct Shipper
The most commonly thought of Third Party Marketers (aka Third Party Providers, TPPs, flash sites, email marketers) may find it impossible to satisfy the new requirements as most are not licensed as “agricultural cooperatives”. Beginning November 4, Direct Shippers will no longer be able to accept Virginia orders made through a Third Party Marketer that is not an “agricultural cooperative”.
Three years after the release of Virginia Circular Letter 09-05, final regulation of third party services will be enacted on November 4. Industry members that are affected by these changes should continue to stay informed and be prepared to adapt how they do business with Virginia. Please comment with questions or contact Terri Cofer Beirne, Eastern Counsel, Wine Institute at firstname.lastname@example.org.
Editor’s Note: The following post is part of our series on the Third Party Providers
The rapid emergence of online wine marketers might be the biggest innovation in wine sales over the past five years. But selling and marketing your wine through these third-party channels poses many compliance and business-related challenges. That’s why we’ve put together this comprehensive 5-point checklist to help you sell through third-party marketers efficiently, compliantly and profitably.
1. Know Your Why
There are lots of great business reasons why wineries work through third-party marketers to sell their wine. It could be to move excess supply, help launch a new brand or label, power your social media efforts, or perhaps target a new demographic. And not all marketers are alike.The first thing you need to ask yourself is “Why?” Understanding this will help you best determine which marketer is best positioned to help you reach your business goals.
Key Questions to Ask:
- Which online marketers are best able to attract my target customers?
- How much inventory should I dedicate to this?
- Which type of online marketer best satisfies our business objectives – a daily deal site, social shopping, niche wine site or a mass market platform?
- How would my brand be impacted across these different options?
2. Know Your ABCs
From a compliance perspective, selling wine through third-party marketers had been somewhat of a gray matter until the release of a very important advisory from the California ABC last fall. In the advisory, the ABC provided clear guidance on how wineries and third-party marketers can work together in a compliant fashion. The guidance covers everything from pricing to fulfillment to disbursement. Luckily, there’s a great blog post that breaks down the full advisory, so you know exactly what landmines to look for.
Key Questions to Ask:
- Is my third-party marketer familiar with the ABC advisory?
- Have they considered the ABC’s guidance in how they’ve constructed their service?
- Am I assured that I won’t be putting my license at risk?
3. Know How Funds Get Handled
When working with third-party marketers, payments and disbursements can often be the trickiest steps of the process. In order to follow the guidelines set forth in the ABC advisory, the licensee must be in full control over all aspects of each transaction. This can be hard to balance as third-party marketers typically secure the credit card info and payment authorization. So make sure the process by which funds are collected and transferred is crystal clear.
Key Questions to Ask:
- What’s the checkout experience like from a user perspective?
- When do I take control of the order funds?
- Am I fully in control of the funds throughout the entire process?
- How are the marketing fees structured and when are they paid?
- How will taxes get calculated, collected and paid?
4. Know How Compliance Gets Handled
In online shopping environments where customers are used to lightning fast checkouts and no additional actions are needed, compliance checks can also be a very delicate thing to handle. Technology has now evolved to a point that holistic compliance checks and tax rate calculations can happen in real-time; online orders can also be automatically bundled into your overall numbers for state reporting, but the third-party marketer must work in close concert with your compliance provider. If you want to keep your back-office paperwork to a minimum, this point is truly important.
Key Questions to Ask:
- Is the third-party marketer integrated with our compliance solution?
- If not integrated, how will orders get checked for compliance? How quickly can it occur after transaction?
- How do I consider my other direct shipments when evaluating the compliance of these orders?
- If the transaction is found to be out-of-compliance, how does that get communicated back to the customer?
- How do I retrieve the order information needed to aggregate and consolidate for tax and shipping reports?
5. Know How To Measure Success
In addition to the hard costs involved in selling through third-party marketers, there are several soft costs to consider as well. Namely, how much time will it take for me and my staff to launch and maintain this sales channel? Make sure mechanisms are also in place to measure progress towards your original business objectives, whether it’s tracking new Facebook fans, wine club members, or net proceeds on a certain batch of inventory.
Key Questions to Ask:
- Did this third-party marketer help us achieve our original objectives?
- What would make working with this third-party marketer an easier process?
- Was our brand well represented through the entire marketing, transaction and distribution process?
- What information will I receive about the customers who buy through this marketer?
At ShipCompliant, we believe compliance should never get in the way of your success in the wine industry. That’s why we’re intently focused on making sure you’re fully aware of both the potential and risk involved with selling through online wine marketers.
If you feel that you are ready to engage in selling your wine through third-party marketers, we’d be happy to answer any questions that you have or introduce you to similar sized wineries that have already navigated these waters and experienced success. Learn more about ShipCompliant MarketPlace.
Editor’s Note: The following post is part of our series on the Third Party Providers
“A compliant and effective e-commerce sales platform [is] now in place and available. There is a Fifth Column of wine sales now…The evolution and momentum of the Fifth Column of wine sales leads us to believe the genie is finally out of the bottle and there is no putting it back for state-to-state and direct wine e-commerce.”
The historical metaphor of the “Fifth Column” is new to the world of wine marketing. As used by Rob McMillan and the authors of Silicon Valley Bank’s recent “State of the Wine Industry” report, it is a reference to the Spanish Civil War of the 1930s and the idea that “an ad-hoc group of loyalists emerging from within the city [of Madrid] who would rise up against the incumbent order”. Silicon Valley Bank uses the term to refer to a “group of wine businesses partnering with producers to sell direct”.
The Silicon Valley Bank report is referring to various companies in the wine industry that have been founded to support direct to consumer sales such as logistics, compliance, third party marketers and others companies that, taken together, provide suppliers with a support system for getting wine into the hands of consumers across the country.
From our perspective, another way of understanding the “Fifth Column” is the recognition that after many fits and start, innovations, failures, successes and the introduction of new technologies, the wine industry now has new paths to market by which new and old customers can be cultivated with confidence. We view the emergence of compliantly operating third party marketers as the final piece of the “fifth column” puzzle.
The first glimpse of the real value that third party marketers provide to the direct-to-consumer market came during the recent recession when these talented marketers were able to use private or “flash” sales, membership platforms and outstandingly executed e-mail marketing campaigns to help suppliers move through distressed inventory during a decline in demand. Third party marketers played a key role putting suppliers’ wines in front of motivated consumers.
While some people have predicted either the end of the road for these marketers as inventory has dried up and the recession wanes, or the end of firms that focus on discounting, we believe that the third party marketer is here to stay and will continue to play an important role not only in giving suppliers a new path to market, but in introducing brands to new customers.
Third party marketers, flash sites, and email marketers in a number of industries continue to thrive. In large part this is occurring because consumers have become accustomed to using these services and appear to be quite comfortable with either encountering singular products on a daily basis or allowing the products to “come to them” via trusted vendors and marketers. We see the same thing happening in the wine consumer world.
In fact, we are convinced that 2012 is the year that third party wine marketers will demonstrate not only their staying power but also their long term importance to the wine consumer and wine supplier that they bring together. We recommend that everyone working in the direct-to-consumer channel carefully read the new Silicon Valley Bank “State of the Industry” report with particular focus on their understanding of the “Fifth Column”. It explains what we are seeing put into practice: The formalization of a new channel to successfully cultivate new customers and sell more wine.
Editor’s Note: The following post is part of our series on the Third Party Providers
In the quickly evolving world of third party wine marketing, it’s important that marketers and licensed sellers work together in such a way that puts the licensed seller in full control of all aspects of each transaction. One of the most important elements of control is the concept of acceptance.
The fundamental concepts behind third party marketing are quite simple on the surface: A third party provider (TPP) places and merchandises products from licensed wineries on its website, mobile application or platform, then solicits requests from consumers who would like to purchase the products, and passes the request on to the licensee for final sale and fulfillment.
Below the surface, the process can be much more complex. Technology has advanced to a point where almost all aspects of third party sales can be completely automated. For example, all of the following functions can be completed in real-time within seconds of the consumer actually clicking the button to complete/submit their order:
- Third Party Providers (TPPs) can dynamically display product information that licensed sellers have authorized for placement
- Inventory levels can be fully synchronized and reserved
- Sales tax can be calculated precisely based on the licensed seller’s tax preferences
- A comprehensive compliance check can be run against the licensed seller’s permits and volume from other channels
- Consumer age can be affirmed and validated
- Credit card funds can be authorized and reserved
- Orders can be released to the licensed seller’s preferred fulfillment location
In the past, many of these steps were typically carried out through some combination of phone, fax, snail mail, carrier pigeons, smoke, and mirrors. But today, as TPPs increasingly look for a world-class quality of service for their customers, automation and efficiency are paramount.
At the core of compliant third party marketing is the notion that licensed sellers are always fully in control of all aspects of each transaction. Although one could probably argue that the order-acceptance process could also be established contractually, we believe that it’s important for the licensed seller to always have an option to interrupt the automated flow so that they have every confidence in the orders that are fulfilled on their behalf, prior to payment capture and fulfillment.
Another significant consideration is that regulatory agencies place tremendous importance on this step. In its October 2011 Advisory on the issue of Third Party Providers the California Department of Alcoholic Beverage Control wrote, “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.” It makes sense that regulators want to ensure that there is a licensee involved that they know is in control and that they can hold accountable for orders that are shipped into their state.
The Nuts and Bolts
An easy way to implement an acceptance mechanism is for the TPP to send an email with the order requests to the licensee for their review. Licensed sellers can then review the order details, and will likely consider the following when evaluating whether or not they would like to accept or reject the order:
- Compliance: Has this order request been checked for compliance, and aggregated against my other order sources (my winery website, wine club, tasting room, and phone orders)? Has the consumer’s age been affirmed and/or validated using an online age verification service.
- Pricing: Are the prices for the requested items within the predetermined ranges I established with this TPP?
- Inventory: Do I have sufficient inventory for these items to fulfill this request?
- Advertising Fee: Is the advertising/customer acquisition fee (if applicable) for this order request within the predetermined range that I established with this TPP?
- Sales Tax: Has the appropriate amount of sales tax been collected based on my tax preferences in the destination state?
If the answer to all of these questions is yes, then the licensee should have no reason to reject the order requests, and can therefore feel comfortable accepting them. Once the requests are accepted by the licensee, the orders can be released to the designated fulfillment location, and payment can be captured (note: payment should ideally be authorized at the time of transaction, but captured after acceptance and fulfillment).
The acceptance email can be implemented in a way that batches order requests over set periods of time (daily, twice/daily, every 4 hours, etc.). Each licensee may have different preferences about both the timing of the emails (during local business hours, for example), and the review period (4 hours, 8 hours, etc.), based on their desired level of control. This preferences-based method of acceptance is what we implemented into ShipCompliant’s MarketPlace platform, as we believe it provides a good amount of flexibility for licensed sellers.
In summary, the relatively straightforward process of creating an acceptance mechanism can really go a long way towards establishing the most important regulatory requirement for working with TPPs — licensee control. As wineries more and more look to work with TPPs that complement their brand and their direct to consumer strategy, relying on a robust and consistent acceptance mechanism becomes increasingly important.