Delivery On-Demand, Part 2: Retailers Weigh The Pros And Cons
March 11, 2015Alcohol delivery-on-demand apps have hit the market with a splash, but not everyone is embracing the trend. Some retailers express concern about fees, increased overhead, tight delivery deadlines and legal issues. But retailers who use the apps cite some major benefits. “It’s business you wouldn’t otherwise have,” argues Gidget Kupiszewski, manager of retailer Uncorkit Chicago, which has partnered with both Drizly and Minibar. Delivery charges to customers have offset the added expense, she adds.
Both Minibar and Drizly say their apps result in higher average transactions. The average Drizly delivery is over $100, with 40% of the wines sold carrying retail prices of $18 or higher.
Big Red Liquors, which operates 55 stores in Indiana and Kentucky, has been using Drizly at eight of its Indianapolis locations since late last year. Spokesperson Matt Bell says Big Red has seen growth in the number and size of delivery orders thanks to the app. Bell adds that the service has also led to increased store traffic as “users get to know our inventory and come into the stores looking for certain items.”
Targeting tech-savvy Millennials is a key benefit to the apps. Billy Kim, owner of River Road Wine in Guttenberg, New Jersey, uses app providers including Minibar and Ultra, and says they’ve helped him reach new customers aged 21-35. River Road’s deliveries are up 10% as a result of the apps. Overheads are generally at 7% of the retail price, in addition to hiring of a part-time driver. But Kim adds that on-demand sites help promote the store. “As a small operator, I don’t have the resources to spend on advertising,” he says.
Other retailers who’ve stayed away from on-demand apps are still unconvinced. “We have no interest in delivering a 1.75-liter bottle of vodka at 11 p.m. on a Saturday night,” says Greg Versch, director of communications at Chicago-based Binny’s Beverage Depot. (Minibar argues that while there was initial concern that the site would be favored by late-night partiers, the busiest time has been between 6 p.m. and 8 p.m.) But Versch also maintains that at least some sites would prohibit Binny’s from offering “consistent pricing online and in store. Price and selection are our core values.”
Regarding the issue of increased costs, Denver-based Argonaut Wine & Liquor boosted store staffing and added a delivery vehicle after partnering with Drizly, general manager Mark Fetter says. “The biggest challenge has been integrating our inventory and website from the back end, because each provider has a unique platflorm,” says Daniel Mensch, co-owner of Pier Wines in Brooklyn, New York, who works with eight on-demand providers. Higher labor and vehicle costs have also been incurred, Mensch adds.
Regulatory and logistical factors also come into play. Some markets prohibit on-demand delivery, including Philadelphia, Pittsburgh and Oklahoma City. And while the current focus is on urban markets, expansion into suburban and rural areas will likely come with higher minimum purchase prices and longer delivery times. David Symmes, co-owner of Crown Liquors, which operates 23 stores in Indiana, says on-demand delivery “is a great idea in markets like New York City,” but poses challenges in less densely populated areas. “It can get expensive paying a dedicated person for delivery, especially when things are slow,” Symmes notes.
A full report covering the delivery on-demand apps will appear in the April issue of Market Watch magazine.
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