- Drizly, the country's largest online alcohol seller, is saying bottoms up to growth. The e-commerce company recently announced it's in more than 100 North American markets — touting in a news release it entered more than 40 of them during the past year.
- Drizly partners with alcohol retailers across major metropolitan areas such New York City, Chicago, Los Angeles and Miami, as well as smaller markets, including Nantucket, Massachusetts and Albany, New York. The company offers beer, wine and spirits, and also sells soft drinks, juices, ice and mixers. Customers can arrange for delivery in as little as an hour, or schedule a pickup through their local store.
- The company has raised $35 million so far, and expects to move into more markets and partner with additional retailers over the next year."Reaching over 100 cities is a big moment for us as a company, but more than anything, it is proof of concept," Nick Rellas, Drizly's CEO and co-founder, said in the release. "Our platform is succeeding because it is helping everyone win, consumers who are getting the best selection, price transparency and convenience, retailers who are earning incremental business, and suppliers who have access to data and insight that didn't exist before Drizly came along.”
And although the public may view Drizly as an on-demand company, it has positioned itself as primarily a technology firm that makes money by charging a licensing fee to retailers that use its software. By working with local sellers rather than delivering booze itself, Drizly can take a standardized approach across a patchwork of state alcohol laws.
Drizly has also wisely focused on customer engagement through its app and website. The company offers cocktail recipes, pro tips, popular alcohol trends and advice on beverage options from local experts, appealing to millennial customers who want help with party planning or just finding the right drink for a Friday night.
Overall, the wine and spirits industry has struggled to thrive online despite booming demand for booze. A big challenge is alcohol regulations, many of which remain largely unchanged since Prohibition. For example, only five states today permit direct shipping of spirits to consumers. And the last mile is especially problematic for wine and spirit delivery, considering the need for ID verification and special handling of some bottles.
To deal with these challenges, retailers and other services would do well to build a personal relationship with customers. Experts say alcohol is more of a unique category than others, so brands must build relationships through education, helpful tools and high-touch customer service.
All of this doesn’t mean grocery stores must be big losers in the sale of beer, wine and spirits. Financial service company Rabobank estimates online alcohol sales at $1.7 billion, and said supermarkets should expect those who buy alcohol at brick-and-mortar groceries to gradually move those purchases online. That gives grocers the tough challenge of figuring out how to set up at-home delivery that meets state laws regarding alcohol sales if they don’t want to lose business.
Grocers would do well to promote their online alcohol sales, or even break out a separate service. As with other categories, customers won't hesitate to visit specialty e-stores to meet their demands. This is happening with the growing number of online meat specialty stores, which are in position to put pressure on grocery meat departments. Porter Road, which recently expanded delivery beyond its Nashville home market, makes 40% margins on its meat boxes and recently raised $1.5 million in venture funding.
The online market for adult beverages is still up for grabs. Grocers must make an effort to retain customers who buy booze along with their food. Laws and regulations are on brick-and-mortar retailers' side, since they have been in this business longer. But they can also play up their insider knowledge of food and drink pairings, arranging displays near items that wine or beer would compliment, as well as adding suggestive signage in the department.