Amazon Heads Back Into the Vineyards

John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Some of you may remember a few years ago when Amazon.com (NASDAQ: AMZN) was looking to add a wine selection to its massive online inventory. Unfortunately, those plans fell through as the company's partner for the venture ran into some financial troubles and Amazon Wines ended before it really began. The company didn't give up on the idea, however, and it seems that a new and improved Amazon wine marketplace could be gracing web browsers soon.

The new marketplace would be a little different than the one that Amazon originally planned, with wineries taking more of a direct role instead of using a third-party partner to connect them with Amazon. A $40 per-month fee is required for wineries to participate, and Amazon will earn a 15% commission on any sales made through the Amazon wine marketplace. Packaging and shipping will be up to the wineries themselves, with Amazon simply serving as an easy way for these wineries to connect to potential customers.

There's no word yet as to when the marketplace will launch or how many wineries will be involved initially, but it's rumored that Amazon wants to get the service online before the end of the year. The Napa Valley event where Amazon announced the marketplace had 100 wineries in attendance, and while it's possible that not all of them will sign on to take part initially, there's a good chance that at least the majority of them are interested in using Amazon to reach a larger customer base online.

It will be interesting to see how the new wine marketplace aids Amazon, as other major e-retailers such as the online arm of Wal-Mart (NYSE: WMT) and eBay (NASDAQ: EBAY) don't offer alcohol through their websites. Though Amazon won't be offering sales of hard liquor or beer, the appeal of being able to visit a single retailer for standard shopping and the purchase of select wines could further increase Amazon's appeal and make it harder for other sites to compete.

Walmart.com already lags behind Amazon's sales, and the competition between the two companies was made evident by the retailer's recent decision to stop selling Amazon Kindle devices in Wal-Mart stores. As for eBay, the auction leader's increasing focus on fixed-price items has already put it in direct competition with the Amazon Marketplace, and Amazon's new venture could potentially fan the flames if it draws potential customers away from.

Also of interest is whether this move will put Amazon at odds with existing distribution companies such as Southern Wine & Spirits of America, currently the leading distributor of wines in the country. I doubt that distributors will make any major attempts to compete openly with Amazon, but as more wineries sign on to use the new marketplace it could potentially lessen the demand for wines from existing distribution sources. It likely won't be a major drop in demand, though smaller distributors could be especially vulnerable to feeling the pinch of having such a large alternative to their services.

While investors often go back and forth about whether Amazon is a solid buy or a bubble waiting to pop, expansion into a new market where they have relatively little competition should be seen as a positive move. Though Amazon will only be getting a 15% commission off of sales and a modest monthly membership fee from wineries, there is still potential for a significant amount of income that won't require the usual Amazon back-end support like products packaged and shipped by Amazon would. This announcement alone might not be enough to convince potential investors that they should buy Amazon, but those who have been considering it for a while might find the upcoming wine marketplace a good reason to finally make that leap.

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Croaxleigh has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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