Quinton Jay is the founder of Bacchus Consulting Group, Bacchus Wine & Spirits, and Coasters Liquor, consultant, and retailer of Alc-Bev.
At some point, you may have wondered why it’s so hard to buy spirits like whiskey, gin and tequila online and have them shipped to your home or someone else as a gift. Well, the short answer is the 21st Amendment and states’ rights, but the long answer is far more interesting.
I’d argue that the reason it’s such a pain for online marketplaces to sell and ship alcohol around the country is, in large part, because of the businessman and crime boss Al Capone. Al Capone’s reign as one of the preeminent bootleggers during the Prohibition era left a lasting impact on the country’s regulatory framework and law enforcement practices. The era highlighted the difficulties in controlling and regulating the distribution of alcohol, and its legacy continues to shape alcohol shipping regulations and policies to this day.
Several key pieces of legislation and regulatory frameworks emerged in response to the challenges faced during Prohibition, shaping the current landscape of alcohol distribution and sales. One of the most significant pieces of legislation is the 21st Amendment, which repealed Prohibition in 1933. While it ended the nationwide ban on alcohol, it also granted states the authority to regulate the importation and distribution of alcohol within their borders. This resulted in a patchwork of state-based alcohol regulations and control systems that vary widely by state.
Today, each state has the power to set its own laws governing the intrastate shipping and sale of alcohol. These regulations range from permitting direct-to-consumer (DTC) shipments to imposing strict limitations or outright bans. This decentralized approach has created complexities and challenges for businesses seeking to engage in interstate alcohol shipping and sales.
One other prominent regulation that emerged is the nationwide three-tier system. Under this system, alcohol production, distribution and retail are separated into three distinct tiers: producers (breweries, wineries, distilleries), distributors or wholesalers and retailers (bars, restaurants, liquor stores). It requires producers to sell their products to distributors who, in turn, sell to retailers who then sell to consumers, ensuring a level of oversight and tax collection. The three-tier system was intended to promote accountability, prevent monopolies and regulate the sale of alcohol. It’s the government’s way of stopping another Capone-like syndicate from owning a part of all three tiers and manipulating the market.
The three-tier system presents hurdles for DTC alcohol shipping. In many states, DTC shipments are subject to strict regulations or are completely prohibited. These restrictions require consumers to purchase alcohol through licensed retailers within their state. States may impose various requirements on businesses wishing to engage in DTC alcohol shipping, including obtaining specific licenses or permits, complying with reporting and tax requirements and adhering to quantity limitations. Age verification and shipping restrictions are also commonly imposed to prevent alcohol sales to minors or in “dry” areas where alcohol is prohibited.
So what can online marketplaces do if they want to compliantly sell alcohol online? Through my time working in the spirits industry, on both the merchant side as the proprietor of one of Beverage Dynamics’ Top 100 retail shops and on the fulfillment side as a managing partner for Coasters, the first national network of retail liquor stores designed for the e-commerce fulfillment, I’ve found two ways.
1. Consider working with a third-party logistics provider.
If you want a faster and easier route, consider partnering with an alcohol 3PL provider to simplify logistics, warehousing, distribution, delivery and compliant sales. Working with a 3PL can help improve your time to market and lessen the pain points that come with offering spirits on your online marketplace. They should have built the infrastructure, technology and state-specific licensing that enables any e-commerce store or marketplace to sell and ship alcohol online quickly, easily and professionally.
Questions To Ask Before Partnering With A 3PL
• Who are they already working with? It’s a good sign if your prospective 3PL is already shipping with large, established partners.
• Do they have a preferred relationship with a licensed shipper? Is it a single carrier like UPS or a patchwork of different carriers? Alcohol is a premium product; a good carrier will ensure a consistent, high-end customer experience.
• How will their tech stack integrate with your website? A 3PL with a flexible API will make inventory management easier, order fulfillment faster and prevent so many headaches.
• Which states do they have licensed fulfillment centers in? Because of intrastate shipping laws, your 3PL partner needs to have a fulfillment center in each state you plan on doing business.
2. Do it yourself.
You can also go the DIY route. Based on my experience, I’ve devised a “quick” start guide.
Six Steps For Getting Your Online Alcohol Sales Started
• Understand the three-tier system. Learn the roles of producers, wholesalers and retailers in alcohol distribution.
• Research state laws. Dive into specific regulations of the states you’ll be shipping to, considering interstate and intrastate variations.
• Select a shipping partner. Choose a reliable shipping company and work to meet their requirements and agreements.
• Obtain licenses and permits. Ensure your business is licensed in each state, complying with state, municipal and city rules. Collaborate with licensed off-premise retailers.
• Set up age verification. Implement pop-ups, manual ID checks or verification services to comply with legal requirements and prevent underage sales.
• List your products. Once licensed and verified, list alcohol products on your online store using e-commerce platforms and plugins for labeling and packaging.
To wrap up, the laws enacted to combat Al Capone and the illicit alcohol trade during Prohibition are still affecting modern intrastate alcohol shipping in the United States. The rules around interstate shipping of distilled spirits have made online sales and fulfillment difficult but not impossible. New companies and technologies are building the future and pulling alcohol sales into the modern area. Cheers to that.
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