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SB-Roadshow-Jim-Compliance

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Simplifying Compliance

Simplifying Compliance

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  • When I was asked to present today I was thrilled, I had a great time at last year when we visited Paso, and I have been back many times since. But when Andrew and Corinna asked to me present about Compliance, I said: “Compliance, You want to talk about compliance.”

    The fact of the matter is none of us got into the wine business because we love sorting through the complexity of wine compliance but it is an unescapable reality, and something that is crucial to the long term success of the DTC channel.

  • So today I am going to hit three quick points regarding compliance
  • Matt story, 2 trends.
  • DTC has come of age
    41 states, come a long way. Now a CA winery can ship legally to 88% of US wine consumers.
    DTC has not only grown in terms of reach but it has exploded interim of market size.

    But with this growth comes increased scrutiny by regulators, attention from the opponents of DTC shipping.
  • DTC has not only grown in terms of reach but it has exploded interim of market size.
    Over $1.5 Billion of wine is being shipped DTC each year. A truly amazing number because it was just a few tears ago when we were talking about a market size in the $100s of millions.
    This is fueled by an increase in wine consumption per capita, growth in online sales in all categories, and by wineries excelling at finding and keeping direct customers.



    Consequences of growth in DTC
    ·         Scrutiny of reporting by shippers and carriers
    ·         Scrutiny of the roll of fulfillment houses
    ·         Scrutiny of the roll of other third-party providers
    ·         Scrutiny of retailer-direct shipments
    ·         Renewed attention to potential use of winery capacity caps
  • Contrast this growth in DTC shipping with widespread budget shortfalls, 30 states have shortfalls in 2013, and you can see why there has been an increase in enforcement activity recently.
    For example, Texas Auditors have been visiting CA wineries auditing their DTC shipping programs. Other states have done this too.
  • I always get asked is anyone really looking at this stuff?
    Here is a list of states that require common carrier to hold a licensee to ship wine to consumers, and more states require the carriers to report on their wine shipping activity.
    So what we are seeing is state regulators are comparing DTC shipment reports, with the carrier reports to make sure they match up, and when they don’t they are contacting wineries.
    TX, NH and a few others have gone as far as providing a black list to FedEx and UPS, essentially deputizing the carrier to help them enforce regulations.
    So the bottom line is the concept of “under the radar” no longer applies. Add state regulatory agencies have many more tools then they have had in the past to support enforcement.
  • Contrast this growth in DTC shipping with widespread budget shortfalls, 30 states have shortfalls in 2013, and you can see why there has been an increase in enforcement activity recently.
    For example, Texas Auditors have been visiting CA wineries auditing their DTC shipping programs. Other states have done this too.
  • So that’s the bad news, let’s take a good look at what states may be coming available to wineries
  • In 2013 two new states became open for DTC shipments.
    MT and AR.
    Speaker of the house in AR story, pushed through in 3 days.
    How many people in the room fired up to begin shipping to AR?
    That’s understandable, collectively the make up less than 1% of wine consumers.
  • But 2014 looks to be a very promising year.
    PA. Making efforts to modernize the alcohol distribution system in PA
    Several bills that are in process and the team at the Wine Institute feel that it is really likely
    MA.
    DTC shipping bill has been added to the budget and there is a great chance a workable bill will pass in 2014.
    Collectively these states represent a 6% increase in available market, which I think would be welcome from any winery.
  • But 2014 looks to be a very promising year.
    PA. Making efforts to modernize the alcohol distribution system in PA
    Several bills that are in process and the team at the Wine Institute feel that it is really likely
    MA.
    DTC shipping bill has been added to the budget and there is a great chance a workable bill will pass in 2014.
    Collectively these states represent a 6% increase in available market, which I think would be welcome from any winery.
  • One of the reasons things are looking so rosey in MA is entirely due to former Patriot’s quarterback Drew Bledsoe’s involvement. Drew Bledsoe operates a winey in Walla Walla Washington, and went to talk to the legislators in MA and make his case for direct to consumer shipping into MA. From all accounts he was very successful, captured the attention of a lot of media and consumers have rallied behind him to demand DTC shipping.
    Tom Brady story.
  • OK, so we heard about how enforcement is on the rise, and there is a lot of great opportunity on the horizon.
    But what does it really mean to get compliant?
  • So if your are a producer and you are thinking, oh man I have to buy licenses and keep track of laws in 40 states, you will be relived to see this. 75% of shipments made to consumers are made to the ten states shown here. I like to show this slide to let people know it is possible to be create and run a complaint DTC program without a lot of overhead and compliance hassle…many of these states do not even require additional licensing.
  • So if your are a producer and you are thinking, oh man I have to buy licenses and keep track of laws in 40 states, you will be relived to see this. 75% of shipments made to consumers are made to the ten states shown here. I like to show this slide to let people know it is possible to be create and run a complaint DTC program without a lot of overhead and compliance hassle…many of these states do not even require additional licensing.
  • So if your are a producer and you are thinking, oh man I have to buy licenses and keep track of laws in 40 states, you will be relived to see this. 75% of shipments made to consumers are made to the ten states shown here. I like to show this slide to let people know it is possible to be create and run a complaint DTC program without a lot of overhead and compliance hassle…many of these states do not even require additional licensing.
  • So if your are a producer and you are thinking, oh man I have to buy licenses and keep track of laws in 40 states, you will be relived to see this. 75% of shipments made to consumers are made to the ten states shown here. I like to show this slide to let people know it is possible to be create and run a complaint DTC program without a lot of overhead and compliance hassle…many of these states do not even require additional licensing.
  • Now that we have licenses taken care of, that leaves the four items here in the box, which it turns out are requirements that can all be met technologically, with software.
    But as you have heard, we at WineDirect are focused on the consumer experiences, so how can all these compliance tasks be completed without disrupting the consumers experience or adding additional steps and complexity for the DTC team.
  • Guiding Principles

    It’s not difficult

    It has to be right, always.

    Set it up and largely forget it.

    Compliance should simply handle orders, calculate taxes, check compliance, and run reports

    There’s nothing to it!
  • Slower
    Less Visibility
    One More System for the DTC team to administer
    Why manage orders in Compliance?
  • Why It’s Better

    Doesn’t interfere with customer experience

    Doesn’t slow down order transmission to fulfillment

    Doesn’t interfere with innovation in order to fulfillment chain

    It’s a background process managed by the right people in the business


  • Guiding Principles

    It’s not difficult

    It has to be right, always.

    Set it up and largely forget it.

    Compliance should simply handle orders, calculate taxes, check compliance, and run reports

    There’s nothing to it!
  • Transcript

    • 1. Simplifying Compliance
    • 2. Compliance? We’re talking about compliance?
    • 3. Legal and Legislative Update Strategies for Getting Compliant Optimal Compliant Workflow
    • 4. Legal and Legislative Updates
    • 5. Wineries can ship to 41 states for offsite sales WA OR CA NV ID WY MT ND NE CO NM LA MO MN WI MI I IL IN OH KY AL GA FL NC VAWV P NY NH MA RI CT NJ DC MD DE AZ AK HI VT UT SD IA AR TX TN SC ME PA MS KS Restrictions (On-site Purchase Only) Prohibited Allowed OK
    • 6. Direct Shipping Update Trends $4.5 Billion Total DTC $1.5 Billion DTC Shipments $2.8B $540M $900M Events Ecommerce Tasting Room $270M Wine Club Source: Silicon Valley Bank DTC Survey, WineDirect Proprietary Data
    • 7. 30 States with Budget Shortfall in 2013 IA
    • 8. WA OR CA NV ID WY MT ND NE CO NM LLA MO MN WI MI L IN OH KY AL GGA FFL NC VAWV P NY NH MA RI CT NJ DC MD DE AZ AK HI VT UT SD AR OK TX TN SC ME PA MS KS DTC Shipping States That Require Common Carrier Licensure IA Source: Wine Institute IL
    • 9. IA
    • 10. Now for some good news…. OR CA NV ID WY MT ND CO NM LA MO WI IL G F NC P NY AZ AR PA MA
    • 11. 2013 State Update- Montana and Arkansas .31% .43% $50 $25*
    • 12. Massachusetts (HB 1029)Pending Legislation in 2014 3.5% 2.5%
    • 13. Massachusetts (HB 1029)Shipping starts 1/1/2015…probably. 3.5% 2.5% • $300 permit. • 12 cases consumer/ year. • Carrier 21+ stickers.
    • 14. Pending Legislation in 2014
    • 15. Okay, so you’re ready to get compliant. What do you do next?
    • 16. Real-time order checking Accurate collection of sales taxes Tax and shipment reporting Staying current with rule updates Obtain licenses where required
    • 17. All-In Updated January 2014 Source: WineDirect Proprietary Information WA OR CA NV ID WY MT ND NE CO NM LA MO MN WI MI I IL IN OH KY AL GA FL NC VAWV P NY NH MA RI CT NJ DC MD DE AZ AK HI VT UT SD IA AR TX TN SC ME PA MS KS OK • 88% of US Consumption • Total Cost: approximately $7,908 • Reports Required: Up to 780 filings per year.
    • 18. Maximum Opportunity OR NV ID WY MT ND NE NM LA WI P AZ AR PA 2.90% 18.07% 1.79% 4.83% 1.51% 4.34% 2.63% 2.65% 8.02% 2.19% 8.30% 0.27% 2.26%1.54% 0.54% 4.37%2.76% “Free” States • 70.3% of US Consumption • Total Cost: approximately $2,888 per year • Reports Required: Up to 312 filings per year. Updated January 2014 Source: WineDirect Proprietary Information
    • 19. Cost Conscious MT NE LA WI P AZ AR PA 2.90% 18.07% 1.79% 4.83% 1.51% 4.34% 2.65% 8.02% 8.30% 0.46% 0.45% 2.76% 0.12% 0.47% 0.11% 1.54% “Free” States 2.26% 0.54% 1.71% 1.43% • 62.2% of US Consumption • Total Cost: approximately $1,350 per year • Reports Required: Up to 348 filings per year. Updated January 2014 Source: WineDirect Proprietary Information 0.27%
    • 20. Licensing Strategies Cost Conscious •62% of consumers • 348 reports • $1,350/ year Maximum Opportunity •70% of consumers • 312 reports • $2,888/year All-In •88% of consumers • 780 reports • $7,908/ year
    • 21. Real-time order checking Accurate collection of sales taxes Tax and shipment reporting Staying current with rule updates Obtain licenses where required
    • 22. Introducing the Optimum Optimal Compliant Workflow
    • 23. Common DTC Workflow Order System Compliance Fulfillment Compliant Orders Tax Compliance Check Orders Tracking
    • 24. New Optimum DTC Workflow Vin65 Order Management POS Fulfillment System WineDirect Compliance software Tax Rates Compliant Y/N? Tracking Compliant Orders Club Tele- sales Tracking
    • 25. Introducing the Optimum Optimal Compliant Workflow
    • 26. Resources
    • 27. Join us for a Demo compliance@winedirect.com Jim Agger VP of Sales Email: jim.agger@winedirect.com Phone: 707.603.4013

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