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Retailers Navigate The New Drinks Delivery Landscape

September 27, 2022

The Covid pandemic dramatically increased consumer demand for merchandise delivery, and beverage alcohol was no exception. While drinks retailers note that demand for delivery has slowed a bit compared to its pandemic peak, they say the service continues to be a significant contributor to topline sales and an excellent tool to attract new customers.

The entry of on-demand marketplaces like DoorDash, Instacart, and Uber Eats (whose parent company, Uber Technologies, also owns Drizly) into beverage alcohol has expanded the delivery options for retailers in some markets. They can opt to handle delivery exclusively on their own, partner with the marketplaces or other couriers, or employ a hybrid system, depending on their needs. Each of the models, retailers say, comes with benefits and drawbacks.

Own-store delivery eliminates added fees to couriers and gratuities from the transactions go to store employees. Retailers note that overall delivery rings tend to be higher than walk-in baskets, often because customers seek to reach a purchase minimum in order to avoid delivery fees. At Downtown Spirits in Seattle, for example—where about 75% of delivery orders are completed by store employees—the average delivery order runs between $80-$85 as compared to $60 for the average walk-in transaction. Another benefit to using the store’s own delivery service—Downtown employs a fleet of four vehicles—is the marketing the vans provide, says owner Marques Warren. “People see our vans all over Seattle, so it helps to build the brand’s presence,” the retailer notes.

But own-delivery services have become increasingly capital- and labor-intensive for retailers. “Gas, labor, and product costs are all rising and only so much can be passed on to the customer,” says Ron Vaughn, co-owner and COO of Argonaut Wine & Liquor in Denver, which utilizes ten vehicles and a staff of about 30 to carry out delivery orders. Warren agrees that increasing fuel and labor costs can inhibit profitability of beverage alcohol delivery. “We’re constantly looking at metrics like how many orders are processed in-store in an hour versus how many are processed for delivery,” he notes. “In order to manage the costs, the numbers have to add up.”

As with so many other retailers, labor has emerged as a big challenge for Texas retail chain Spec’s in recent years, and delivery—which the chain has offered for more than a decade—can be a further complication. “We focus on bringing the best customer service to our guests, whether in-store or with delivery, and when our workforce is smaller or intermittent, it creates struggles,” third-generation co-owner Lisa Rydman Lindsey notes.

In an effort to further build their own delivery programs, some retailers are getting creative. Downtown Spirits launched its Co-Op membership program two years ago, which, for an annual fee of $119, provides unlimited free delivery in particular neighborhoods (with a $25 minimum purchase), along with other incentives. “It’s been a fantastic addition,” says Warren, noting that the program, which he calls “the Amazon Prime for liquor,” has already attracted some 800 members. “It drives customer loyalty.” Lindsey at Spec’s, meanwhile, notes that the chain’s app promotes both curbside pickup and delivery. “Our customers love it,” she says. “We’re continually surprised with the gains we’ve made in this portion of our business.” We’ll have more on the market for on-demand retail delivery in the second part of this feature.

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