Small wineries breaking in to the direct-to-consumer (DtC) wine business sometimes choose to partner with third-party services that make big promises about handling compliance and licensing needs. Of course, there are numerous partners that can provide excellent help with managing these needs. But caution is in order when a third-party service makes sweeping claims, for example about providing all licenses a winery would need in order to ship, or that a winery needn’t worry about paying taxes itself. As businesses grow and states become more focused on license enforcement, there comes a time when the cost of proper licensure outweighs the risk and penalties associated with operating without them.
If you’re experiencing any of the following scenarios, it’s probably time to obtain your own DtC shipping licenses.
Your small winery is growing
Many small wineries opt for a third-party service to skirt the upfront costs of obtaining multiple licenses in the infancy of their DtC shipping. Partners offer deals that take a percentage or flat fee per bottle shipped. As a winery’s footprint grows, so does the likelihood of penalties or loss of a production license when products are found to be violating “not of own production“ rules.
You should be able to celebrate the growth of your business, and not worry that it’s attracting unwanted scrutiny from state agencies.
Your monthly transaction fee is unpredictable, with a yearly total above $3,000
Shipping under someone else’s license is not just legally dicey, it can be expensive as well. Pricing structures based around shipments, reports or transactions can lead to surprise costs during busier seasons. A predictable fee structure can save you more than just money in the long run.
You’re shipping more than 200 cases to your top five states per year
If you were to compare the cost of obtaining DtC licenses in your five most profitable states to the amount you’re paying a third party, you may be surprised at the results. If you have proven growth and sales in even a few states, it’s worth doing the math to determine your return on investment.
Working with third-party shipping services may initially seem convenient and cost effective, but it comes with a host of challenges that you’re better off avoiding. When you begin to notice the limitations of relying on third-party shipping partners, it’s time to consider getting your own DtC licenses.
Take Action
Considering working with a third-party shipper? Consider these factors.
