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February 25, 2016

3-Tier Sales Channel | Overview of the U.S. Wine Industry | Part Four

Retail Sales (Direct-to-Consumer, Consumer-Direct)

Retail sales are sales by a supplier direct to the end consumers. Regulated by each state, such sales may be conducted through:
Tasting rooms;
Retail operations;
Consumer events;
Supplier-managed wine clubs or subscription sales;
Direct mail, such as catalogs or newsletters;
Telephone sales;
Internet sales.

Suppliers set pricing for retail sales based on traditional, industry-standard markups in each sales tier to create a national, “suggested retail price” (SRP). The SRP can only be enforced in supplier-to-consumer retail sales, and not through the three-tier sales channels. In most cases, a wine’s SRP or “frontline” price will be the highest published retail price, and everyday “street” pricing will often be lower, reflecting the markups by the different companies that own the wine throughout the three-tier sales channel, and the effect of each company’s pricing strategy, including discounts, promotions, and programming.

Retail sales in-state and out-of-state are regulated by the state where the consumer makes the purchase. Retail sales vary in legality greatly state-to-state, and even county-to-county within some states. A supplier or the consumer may be required to purchase an annual license to conduct retail sales and/or pay state sales taxes. The level of compliance varies greatly for each state in terms of cost and requirements, and whether the supplier or the consumer is responsible for filing and paying for compliance and taxes.