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Blog: Online Wine Sales not likely in India

Posted: Thursday, 02 July 2015 11:26

Blog: Online Wine Sales not likely in India

July 02: Although there has been a sea-change in the retailing of wines in India with many stores and supermarkets storing bigger variety in air-conditioned space, allowing online sales may open up the market with simplified ordering on FlipKart and Snapdeal type online shops, but thanks to a myriad of existing laws on the sale of alcoholic products it is unlikely to happen in India for several years at least.

I get regular enquiries from people in India and overseas, who have experience in online sales of wine and spirits and are keen to start a venture in India. They are disappointed when I tell them that the current laws don’t allow this and it is unlikely that this may be possible in the near future.

Think of Tesco and Marks and Spencer, think of Hong Kong where you can order even from India, think of China, think of many places in Italy and you know you are a click away from selecting and ordering your favourite wine. There has been a news report that another major UK supermarket chain Lidl is about to get into the online wine sales. So why not India where the online sales has captured the imagination of millions of buyers and venture capitalists and the infrastructure is well set to  take a lion’s share of the market, given the opportunity to sell wine as well.

According to a study by Bordeaux’s Kedge Business School presented at Vinexpo last month, online sales of wine and liquor are expected to increase significantly in the coming years, led by UK and China. Online wine sales are currently around 600% higher than in 2006, contributing $6 billion to the industry, according to Drinks Business.

It can be anybody’s guess whether it would ever be feasible in India. My prediction is - not for years. There are several issues, most important of which being that wine and alcohol selling is a state subject and tightly controlled by the State Governments not only because they generate huge amount of revenues from the cash cow that is wine and spirits. There are practical issues besides the possibility of leakage in revenues. The online sales may be made to wrong persons- underage youth, though the same problem has been fairly well tackled in other countries. Then there is the issue of a ban on advertising of any kind. Currently, information and education on wine is allowed but selling would involve promotion and push that would go beyond the realm of information.

Inter-state movement of liquor is banned. This means that the sales would have to be within the State. This is true of some States in the USA where the hangover of prohibition of 1930s is still lurking. It may not be politically correct to allow the online sales since the anti-alcohol lobby will shout themselves hoarse saying it would result in an increase in alcoholism. There will be a huge lobbying from the existing licensed sales outlets. Not only do the States make a lot of money from these licenses, they may not allow these new channels without charging them huge license fees and thus making the process untenable. Registration of labels and costs will be another complex issue to handle. As an executive of Lidl says, they like to do things in a simple way and online sales can complicate matters.

Before the online sales can appear on the horizon many procedures will have to be streamlined. Excise storage and control, delivery, reign on incentives and discounting which are not allowed in Delhi-the list can be endless. What one can hope for is that a progressive State like Karnataka (many detractors might laugh at that!) can experiment with online sales, possibly only wine and beer to start with, within the State.

In fact, Wine and liquor retail stores like Madhuloka already run online portals. But as the chain owner K.S.  Lokesh explains, the online portal is merely a display of the price list and the wine bottles as would appear if one visited the retail store. Anyone can place an order online but it will be connected to one of their centralised retail stores which would execute the order. (In a State like Delhi, a retailer is not even allowed to deliver the product outside the store or offer any discount or incentive on the MRP declared).

In Maharashtra, an online retail store concept for members exists but sales are handled in a very covert way. An importer had originated a similar concept but fell on the wrong side of the law and had to fall in line the Karnataka way with sales through the proper retail licensed store. The product details are online but deliveries are through a licensed retail store, making it a quasi online venture without short-circuiting the warehousing, distribution and retail centre.

As I commented to a reader of delWine, online sales is currently not possible in India for wines and alcohols. I doubt if it will be possible for many years. There is a faint hope that one day it may be allowed within some States which will be able to control the process through changes in the existing laws and procedures. Till then, look for the neighbourhood grocery store if he has a wine and beer license and stores the bottles in an air-conditioned environment or look for a shopping mall where several such stores with proper storage and displays have been coming up. And never lose the hope that eventually it will happen.

Subhash Arora

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Tags: Lidl, Kedge Business School, Vinexpo, Online wine sales, Madhuloka, K.S. Lokesh

 

 
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