As we’ve mentioned in previous blog posts, alcohol delivery services are changing the shape of the liquor industry during the pandemic. Their convenience has led to millions of new customers around the country, which is impressive, considering there are still many states where they aren’t allowed to operate. Most of these services work by partnering with local liquor stores, which show their catalogue of products on the service’s app or web page, so that users can select what they want and purchase it online. Then, drivers hired by the delivery service bring the bottles to the customer and receive a small commission and, hopefully, a tip.
It would seem that this relationship benefits everyone involved: the liquor store, the delivery service, the driver, and the customer. However, some people argue that the relationship actually hurts local liquor stores, who receive significantly less money per sale than they do from in-store purchases. What are the downsides to these partnerships, and how can they be improved? The answer, as you might have guessed, involves data.
Why some suppliers and customers are opposed to delivery services
Not everyone is on board with the shift to deliveries. Mom and pop liquor stores often refuse to work with delivery giants like Drizly and DoorDash because of the fees they charge. While they still receive money from the sale of their products, the delivery service takes a large cut which can leave the stores with razor thin profit margins on each sale. The store owners often feel that selling their products through a delivery service would only reduce the number of customers buying from them in-store. And in some cases, they may be right.
Around the world, some customers are starting to make an effort to purchase directly from local restaurants and stores when possible, effectively boycotting third-party delivery companies.
Food delivery services like GrubHub have been the saving grace for countless restaurants across the country, who would otherwise have lost all of their revenue when the pandemic shut down indoor dining. While alcohol delivery services work in a similar way, there are some key differences to consider. Most importantly, liquor stores were never fully closed down. As ‘essential businesses’ they were allowed to remain open, even at the height of the pandemic. Because of this, it’s hard to tell how much new business is being generated versus how many of the deliveries are going to existing customers opting for convenience. The only way to separate the two is through careful observation of data.
Still, the pandemic is deterring walk-in visitors, and the lean times are making the partnerships more tempting. If a mom and pop store’s regional competitors are offering delivery through a third party, they often have little choice but to do the same.
How liquor stores and delivery services can work together using data
While some stores feel threatened by the encroachment of delivery services in their area, others have seized the opportunity to expand their customer base. For them these partnerships have, in many cases, multiplied their sales.
Before the pandemic, deliveries made up such a small portion of their sales that stores often didn’t focus on facilitating the drivers. Stores were designed for foot traffic, not for delivery drivers to quickly grab what they needed. Now, more stores are reorganizing their supplies and even putting together orders so that they can immediately be picked up and sent on their way. Liquor suppliers whose sales seem to be shifting towards being primarily deliveries should examine their sales data and possibly reevaluate their store’s setup. Streamlining the delivery process means that drivers will not have to spend as much time in the store, leaving more room for customers. It also means that deliveries will be quicker and have fewer errors, which will encourage people to order from the same location again.
As a report from the Harvard Business Review concluded, “When suppliers become better-optimized around marketplace transactions, the consumer experience on the platform improves, too — often due to increased availability, selection, and price options. Drizly has found that having more stores to choose from and better inventory overall results in much higher conversion rates: a customer with three stores and 1,000 items to choose from spends 67% more per session than a customer facing just one store with 300 items.”
Likewise, there is plenty that delivery services can do to assist the local liquor stores. These third-party companies are usually privy to massive amounts of data relating to the numerous suppliers in their network. By sharing this data with their partnered stores, they can help those stores improve their business by letting them know when their peak hours for delivery tend to be, what those customers tend to order, and more.
While the relationship between liquor stores and delivery services is a complicated one, it is, without a doubt, here to stay. As long as the pandemic rages on, there will always be demand for home deliveries, and even after it subsides the delivery services are bound to retain a large portion of their customers. So the question is not whether or not the stores should form these partnerships, but how to make them the most beneficial to both companies involved.
As long as these relationships remain symbiotic, more and more liquor stores will be willing to join the fold, which will cause sales for the delivery services to continue rising. Stores will likely begin to change to better suit the delivery-driven market, and those changes begin with the sharing of data.