Five years from now, as much as one-quarter of all retail alcoholic beverage sales could be taking place online, according to one e-commerce expert. That compares with less than 2% prior to the start of the pandemic last year. For progressive convenience-store operators interested in capitalizing on the shift, it may be time to consider the opportunities—along with the challenges—of online beverage alcohol sales. In fact, e-commerce platforms, third-party delivery services and retailers’ own delivery programs are already well under way, closing in on that “last mile” and bringing adult beverages direct to consumers’ homes.
“As retailers, we’re always striving to find new profit centers for our stores,” said Troy Little, president of Quik Mart, the chain of Tucson, Arizona-based c-stores. The company’s decision to partner with Minibar Delivery, a platform for on-demand delivery of wine, beer, liquor, mixers and more, in 2019, “has been a surprisingly nice addition,” Little noted, providing high rings and repeat business.
Indeed, a range of applications is now available that allow consumers to purchase alcoholic beverages from their mobile devices—where legal—with last-mile delivery provided directly from a partner retailer or a third party. Increasingly, these platforms are partnering with c-stores, and in light of the heightened demand the COVID-19 pandemic has placed on e-commerce, the apps provide c-stores the opportunity to better compete in online alcoholic beverage sales, allowing for higher basket rings and attracting new customers.
We’ve seen a higher percentage of orders containing alcohol through Instacart than on other platforms.
“Our c-store partners have seen strong growth in their online business through their partnership with Drizly,” said Liz Paquette, head of consumer insights at the online alcohol marketplace that operates in 32 states and counts Louisiana’s Tobacco Plus and Nebraska’s Mega Saver among its partners. With the app, orders are channeled to local participating retailers, which fulfill and deliver the products. (In some states, retailers use third-party delivery services to complete the last mile.) Consumers are generally charged a $5 service fee from the retailer, while Drizly collects a percentage of the sale, or a flat or tiered fee, depending on state regulations. “We’re looking forward to helping even more c-stores bring their shelves online to reach more consumers in 2021 and beyond,” remarked Paquette, who predicted that by 2025, between 18-25% of all off-premise alcohol purchases will be transacted online. In February, Uber Technologies announced a $1.1 billion deal to acquire Drizly and integrate its alcohol marketplace within the Uber Eats app.
Minibar, meanwhile, serves more than 200 markets across the U.S. Like Drizly, retailer partners can choose to utilize their own staff for delivery or work through outside providers like DoorDash and Postmates. According to Lindsey Andrews, CEO and co-founder, retailers incur a marketing fee for displaying their products on the Minibar platform and are responsible for credit card processing fees and delivery costs.
High Adoption Rates
The opportunity for enhanced e-commerce sales of alcoholic beverages hasn’t been lost on online convenience retailer goPuff, as the company announced late last year that it was acquiring BevMo!, a brick-and-mortar liquor store chain with more than 160 locations in Arizona, California and Washington. The deal, which closed in December 2020, provides goPuff with a seamless West Coast infrastructure and BevMo! customers with access to instant delivery of alcoholic beverages, along with goPuff’s inventory of everyday items.
7-Eleven’s increased emphasis on on-demand delivery, meanwhile, includes adult beverages, where legal. According to Raghu Mahadevan, vice president of digital and head of delivery, “We have a very high adoption rate of customers purchasing alcoholic beverages through the 7Now app, and we’re also seeing high repeat purchases for age-restricted products among customers. Our wide selection of beer and seltzers performs really well since we deliver in an average of 30 minutes or less.” The c-store chain partners with couriers like Postmates and DoorDash on 7Now orders.
Independent operators are also delving into adult beverage delivery. Cone & Steiner, with two convenience stores in Seattle, has been delivering beer and wine as part of its online platform for the past two years. Under the program, which carries a flat $5 delivery fee, Cone & Steiner staff typically deliver the products. In recent months, the stores have started to partner with DoorDash as well.
A typical order containing alcoholic beverages is for “a couple bottles of wine,” owner Dani Cone explained, with average wine prices between $12 and $15 a bottle. Seeing opportunity as consumers hunkered down at home during the pandemic, Cone & Steiner has marketed specially themed packages containing alcoholic beverages on its website, such as “Happy Hour,” “Netflix & Chill” and “Wine & Cheese Party.”
According to Quik Mart’s Little, Minibar approached the chain about becoming a retail partner. “We liked the concept and felt like the program was a good way for us to dip our toe into the direct delivery business,” he said. “After a slow start and ironing out a few wrinkles in the beginning, our Minibar Delivery sales started to grow and now have become a nice, consistent addition to our overall business.”
Beyond 7Now, 7-Eleven’s recently announced partnership with Instacart, includes the ability of its drivers to drop off alcoholic beverages with users, where legal. With the initial launch this past fall in markets including Baltimore, Dallas, Miami and Washington, D.C., Mahadevan said, “Generally, Instacart encourages customers to add more items, and we’ve seen a higher percentage of orders containing alcohol through Instacart than on other platforms.” Looking ahead, he added, “Partnerships like Instacart will continue to lift alcohol sales.”
Benefits and Challenges
Among the benefits of retailers partnering with the online platforms, according to Paquette and Andrews, are wider consumer audiences, cost and time savings, and access to proprietary data. “Drizly has millions of consumers visiting our platform already,” explained Paquette. “We allow c-stores to grow the business they are already building online by allowing them to tap into that existing audience and bring incremental customers to their store.”
Drizly also provides retailers with data and insights on top-selling items in their markets that can help inform operators of potential items to add to their inventory, she said. Andrews remarked that the creation of websites and apps can be costly and time-consuming for retailers, “whereas with Minibar Delivery, the store can usually be up and running within a month. The business we forward to retailers almost always serves as a source of revenue that the store wouldn’t have received.” Quik Mart’s Little confirmed, “The orders are typically larger than our in-store transactions, as it seems there’s more pantry load through Minibar Delivery, and our repeat business has been terrific.”
As with any licensed product, e-sales and delivery of alcoholic beverages can present challenges for retailers. State and local regulations can restrict the practice, and steps must be taken to ensure that the products are delivered only to consumers age 21 years and over. “Within the 7Now app, customers must verify their age prior to purchase and at the time of product drop-off for any age-restricted items,” Mahadevan remarked, while delivery drivers also verify that customers are of legal age. Similarly, Cone & Steiner’s site requires that those purchasing alcoholic beverages are at least 21. At delivery, driver’s license information is recorded, and a signature is required, Cone said.
There’s no question the pandemic has helped to expand e-sales of alcoholic beverages. “Since the onset of the pandemic, demand for beverage alcohol delivery significantly increased as consumers turned to delivery services as a safer alternative,” said Paquette. Indeed, she reported that at times during last March and April, Drizly sales grew at rates of 700-800%. Quik Mart also saw a gain. “During the pandemic and the stay-at-home orders, our Minibar Delivery business started to take off, and we were really able to grow our customer base as more and more people tried the service,” Little noted.
Paquette believes that alcohol e-commerce is here to stay. She pointed to a recent survey that found that 71% of current Drizly users and 50% of non-Drizly users anticipate that at least half of their alcoholic beverage shopping will take place online in the next year. That doesn’t surprise the likes of Dani Cone. “I see a significant amount of opportunity for the delivery of beer and wine,” the Seattle retailer said. “I don’t believe we’ve even come close to optimizing the opportunity.”