Wine Delivery? There’s More Than One App for That

Before 2005, most Americans could legally have wine sent to their homes either from wineries located in their state or not at all. In 2015, at around 7:30 on a Tuesday night in Queens, one can order a bottle of Tenuta Villa Rosa Barolo 2010 for $27.99 with a few taps on a phone, and receive it at the front door exactly 20 minutes later. Wine delivery is on the cusp of becoming mainstream.

In just the past three years, businesses have figured out how to pair local retailers with the idea behind direct-to-consumer shipping, adding more personalized selection, flexibility and speed. While small startups were first, large companies in the wine distribution chain are taking notice.

In August, Amazon Prime began offering one-hour alcohol delivery in Seattle; in December, they expanded to New York. In November, national retail chain Total Wine & More announced a partnership with delivery service Instacart, rolling out in a Miami Beach location, with plans to expand. Chains ABC Fine Wine & Spirits in Florida, Goody Goody Liquors in Texas and Big Red Liquors in Indiana have all enlisted another service, Drizly, for their deliveries. Seeing a «shipping» option that doesn’t bypass wholesale and retail, the Wine & Spirits Wholesalers of America invested in Drizly in May, just one part of $17.8 million the company has raised.

Drizly connects networks of brick-and-mortar retailers with consumers to facilitate alcohol deliveries, typically in under an hour. Other programs that synchronize with stores for quick delivery include Minibar, Thirstie, Saucey, Swill, Klink and Drync, most launched in the past two years. Minibar, in its first full year of operation, already operates in 19 markets and has $1.8 million in investment money.

The model is simple. Users enter an address, search for wine, beer or spirits by beverage, price and variety or style, place an order (for Drizly, the minimum is usually $20 to $30; Minibar’s is $25 in New York), and receive their selections. The order, including tax and tip, is placed through the app.

But a retail store partner, chosen based on the customer’s address and wine selection, processes the order and sends an employee to deliver the beverages and verify the ID of the recipient. The idea is to remove the app from any part of the three-tier system. The apps make money by charging the stores a license or transaction-based fee; the buyer pays no markup from the store price, though a delivery fee may be appended in some locations.

According to Drizly cofounder and CEO Nick Rellas, there was plenty of skepticism when they started in 2012. «When we approached retailers, overwhelmingly, people said, ‘Absolutely not. There’s no way I’m going to do this,'» he said. He and his partner convinced one Boston store to hire them, and for a year, they worked as drivers themselves. «We started to understand what owners go through, profitability of the store, merchandising, seasonality, how do you deal with wholesalers—what are wholesalers?»

But while they partner with retailers, they also need to add further value to compete with them. «For us, the biggest competitor is going to the store,» said Rellas. «The way we look at it, ‘going to the store’ is not broken. We’ve got to use technology to provide value to people that they’re not getting in a store.»

One advantage delivery services offer is selection: In markets dominated by small retailers, app users can effectively shop at all area stores at once. And sometimes, all stores win: «We see spikes in inclement weather—when it’s snowing, when it’s raining. There’s a ton of value for retailers as well,» said Rellas. «Last year in Boston, we got about 10 feet of snow in a month in February,» and business grew by 75 percent that month.

Lara Crystal, cofounder of Minibar, cites convenience for corporate orders. «You’re having a holiday happy hour; in years past, you might’ve been sending out the administrative assistants who I’m sure are thrilled to go out and lug cases of beer and wine around,» she said. «Now you can order in a few taps.»

One key advantage the services have over retailers is that it’s much easier for them to learn about their clients. Minibar has a subscription service to allow users to automatically receive bottles of their choosing on set days and times. Next up, both sites hope to incorporate purchase data into recommendation algorithms so they can display users’ most likely preferred bottles more prominently.

Sending gifts, helping drinkers who find liquor stores «intimidating» and serving people who simply wish to shop digitally «because they like buying things on their phone or computer» were other usage scenarios the founders mentioned. Ultimately, «you sit down to dinner and realize you ran out of wine; that’s our most common case,» said Crystal.

Relationships with retailers are still a work in progress. The licensing fees the apps charge are not a one-size-fits-all affair, as the costs and profits derived from delivery vary from state to state and market to market.

But retailers as well as consumers clearly see promise in delivery. John Jordan, Total Wine & More’s senior vice president of customer experience, said their South Beach trial has generated «significant customer demand. [Offering] convenience is a challenge for us because we’re a destination store.»

Instacart differs from Drizly and Minibar in that it supplies drivers and primarily delivers groceries. «One of the things we’re really intrigued about with that Instacart partnership is that some of those customers are getting their milk, eggs and bread from Whole Foods and then their wine or beer or spirits from Total,» said Jordan.

Right now, the wine delivery customer is a demographic overlap of wine drinkers and tech early adopters. Drizly executives say their average buyer is about 32 years old, making $75,000 to $100,000, with a 50/50 gender split. Roughly 35 percent of its business is wine—the rest is beer and spirits. Minibar’s Crystal reports that 70 percent of its orders include wine.

The growth in online beverage sales is well-known, but it still represents a tiny percentage of total off-premise alcohol sales in the U.S. (for wine, direct-to-consumer shipping accounts for 1.5 percent of all off-premise sales).

Rellas thinks that within the next three to five years, online sales could move close to 10 percent of off-premise sales, which translates to billions of dollars. Wine delivery may be a new thing, but its companies hope it will be as routine as pizza delivery before long.

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