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On-Demand Delivery, Part 1: A Growth Engine For Retailers

April 26, 2022

Since the start of the pandemic, beverage alcohol has been one of the fastest-growing e-commerce sectors—a development that has given rise to increased expectations from consumers for on-demand delivery.New on-demand delivery options have emerged, while established platforms are rapidly expanding and increasing their investments in the space. At Mesa Liquor in Mesa, Arizona, on-demand orders have grown to account for 10% of sales, says owner Sam Yousef, noting that any margins lost from fees to third-party delivery providers and investments in own-store delivery have been made up by increased volume sales. Mesa has been partnered with Drizly for about three years and signed on with DoorDash a few months ago. “I would consider partnering with other companies,” Yousef says. “It could further increase my overall sales.”

Among other leading independent retailers, Gary’s Wine & Marketplace offers one-hour local delivery via its own vehicles within a 5-mile radius of its New Jersey stores and a 1-mile radius of its St. Helena location in California. “Customer response has far exceeded our expectations,” remarks Mike Fisch, Gary’s director of innovation. He notes that the average basket size for a local delivery order is $199, while conceding that vehicle and labor fees pose challenges when it comes to on-demand delivery. “Due to the high average basket size, the economics of local delivery are quite appealing, especially given the demand for the service,” Fisch says.

According to online grocery platform Instacart, baskets with beverage alcohol are typically 25% larger than those without. DoorDash reports even higher numbers, with beverage alcohol increasing restaurants’ and supermarkets’ average on-demand order values by up to 30% and convenience stores’ by more than 50%. The movement has of course been aided by legislative changes in many markets as a result of the pandemic and lockdowns that permitted beverage alcohol delivery to consumers’ homes. As a result, “we saw many of the retailers on our platform opting into adding alcohol to their menus or joining our platform for the first time,” says Caitlin Macnamara, director of alcohol strategy and operations at DoorDash. Innovative technology has also contributed, she adds. Overall, according to Drizly COO Cathy Lewenberg, between 7%-8% of off-premise beverage alcohol sales are now via e-commerce.

With such dramatic growth in a short period of time, it’s small wonder that the on-demand beverage alcohol space has attracted investors—and the infusion of significant capital. Drizly’s $1.1 billion acquisition by Uber Technologies closed in October, and integration with the San Francisco-based ride-share and tech company continues, including with its UberEats subsidiary. A number of launches are planned for this year that will “enhance the alcohol experience” for both Drizly and UberEats users, Lewenberg says. But she maintains that Drizly’s independent retailers remain the platform’s core, and with that the option for merchants to choose how product delivery is carried out—by store employees or outsourced to third-party couriers—where they legally can.

Drizly is partnered with more than 5,500 beverage alcohol licensees in 31 states and Washington, D.C., of which 70% are independent operators. Average order value is $65, Lewenberg says, which represents a 20% increase from 2019. Noting that unlike other on-demand platforms, Drizly was “built from the ground up to ensure that we were compliant with the three tiers,” Lewenberg adds, “we believe our singular emphasis on beverage alcohol will remain the differentiator between Drizly and other providers. And with Uber’s role now, it will help us to meet the convenience and demand components of e-commerce.”

Last fall, ReserveBar acquired Minibar Delivery, an on-demand ordering platform similar to the Drizly model. “The acquisition creates an expansive combined retail footprint which will grow to over 5,000 locations by the end of the year,” says ReserveBar president Derek Correia. “The acquisition was born out of synergies generated by the complementary e-commerce segments we serve.” With the merger, Minibar will expand into limited-edition brands, gift offerings, and personalized and engraved bottles, products on which ReserveBar was built. ReserveBar customers, meanwhile, will soon be able to receive on-demand fulfillment, Correia notes, as previously the concept relied on ground shipping. We’ll have more on the burgeoning market for on-demand drinks delivery in part two of this feature.—Terri Allan

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