Understanding the Ins & Outs of Alcohol Delivery

NATIONAL REPORT — On-demand alcohol delivery can be a lucrative incremental business for convenience store retailers, but there are many details to consider before taking the plunge.

Right from the outset, c-store retailers should consider two things, according to Blaine Grinna, director of retail partnerships at Drizly, an online ordering and delivery platform that facilitates the delivery of alcohol from local retailers, including convenience stores. 

“First, are you already participating in e-commerce in any capacity? Are you delivering some subset of your food through other marketplaces or your own native channel? Or is alcohol e-commerce brand new?” Grinna said. “I would look at what my inventory set looks like, who the potential partners are I can work with and within alcohol, treat each market separately.”

A second must for any c-store retailer considering a foray into alcohol delivery is to know the regulatory landscape; namely, being familiar with all state and local laws within the area the c-store retailer serves.

“It could be at the state level, county level or local municipality level. You must know if there are any regulations that will prevent you from being able to participate in alcohol e-commerce,” Grinna relayed. “Curbside pickup is an option in some places and delivery is not. And in some places, delivery is only available via your staff vs. being able to leverage a third-party provider for last-mile services.”

Unfortunately, most states do not have one easy location to find these answers. State websites can provide some insights, Grinna said, but probably not all of them. He recommends retailers contact their local division of alcohol beverage control.

Once regulatory concerns are solved, c-store retailers can focus on what to offer customers via on-demand alcohol delivery. According to data compiled by The Boston Beer Co., maker of Samuel Adams, Dogfish Head, Truly Hard Seltzer and Twisted Tea, wine accounts for 42 percent of online sales via retail channels, followed by beer at 38 percent and spirits at 20 percent.

Zeroing in on the beer category, hard seltzer is the biggest segment, comprising one quarter of total sales. However, premixed cocktails experienced the most growth in this category in 2021, rising 115 percent compared to the prior year, Nielsen research revealed.

DoorDash, a provider of last-mile logistics for many c-stores, including alcohol delivery, stated in its recent Grocery Online Ordering Trends Report that all alcohol types, including hard cider, alcohol, wine and beer, saw more than 100-percent growth on its platform when comparing orders from January to June 2021 to orders during the same period in 2020. 

“As retailers expand their alcohol and non-ABV beverage offerings, they should take note of what customers in their area are particularly drawn to and curate their stock or menu based on that,” advised Caitlin Macnamara, director of alcohol strategy and operations at DoorDash.

If operations and staffing allow, she recommends matching the in-store selection to the delivery menu. “If a retailer is constrained to a subset of items, they should consider featuring top sellers and a variety of brands and sizes. For example, offering both large pack sizes for consumers hosting a party and ready-to-drink options for consumers enjoying a drink with their purchase allows retailers to appeal to a variety of audiences,” she explained.

C-store retailers also should not overlook opportunities for add-on sales. “Complementary items can also sell well. Think about cups, ice and items that are considered mixers,” Grinna noted. “Those are extra add-ons to round out the cart. Snacks are another thing you can offer.”

Delivery fees is another factor all c-store retailers must consider. While consumers who purchase alcohol online may be expecting a fee for the convenience of delivery, knowing just how much of a fee to charge can be challenging. A positive is that retailers can adjust their fees in real-time, and operators of multiple stores can test different pricing for different stores to ensure a good margin, according to Grinna.

“There is no one-size-fits-all plan. It is market dependent, store dependent, and will evolve as the marketplace evolves,” he said.

The Drizly executive added there is one caveat. “There are some states where pricing in-store and online need to match,” he said. “So, that is another place where you must do your due diligence beforehand to find out what is permissible and what is not.”

When all is said and done, the decision to offer on-demand alcohol delivery boils down to whether the service enables c-store retailers to gain more sales overall, or if it is simply shifting in-store sales to online. Both DoorDash and Drizly have conducted research on this topic.

“What we found is that it is overwhelmingly, delivery customers are not walking through the store’s doors,” Grinna stated. “Customers are finding new stores. They are shopping at stores where they have not entered the physical storefront. That is of great value to a retailer.”

DoorDash research released in the summer of 2021 cited that alcohol purchases on its platform may increase merchant sales subtotals by up to 30 percent. Macnamara also pointed to a recent Nielsen report that concluded "alcohol is the fastest-growing e-commerce vertical across all consumer packaged goods, and many retailers and restaurants on DoorDash see increased sales due to the reach and visibility of the DoorDash Marketplace."