Since the pandemic began, alcohol consumption has skyrocketed. In 2020, U.S. alcohol ecommerce sales were up $2.6 billion compared to 2019. Due to supply chain disruption, beverage companies were forced to pivot their strategies in order to serve their customers. Lately, people have limited access to bars and restaurants for their favorite drinks. Businesses can’t meet in person for happy hours or events. Holidays are difficult to celebrate. This just means that consumers had to find creative ways to gather (zoom happy hours, virtual events, etc.) and the alcohol industry had to follow suit. In turn, ecommerce and online sales in the alcohol industry have exploded.
ALCOHOL ECOMMERCE IS BOOMING
Since the availability of apps like Doordash, Uber Eats, Instacart, Postmates, etc., consumers are able to get nearly anything they want quickly delivered right to their door. Well, almost everything… except alcohol. It makes sense why those in the spirits industry would be hesitant to jump into an ecommerce channel, the laws and regulations are a huge hurdle. But, those who do embrace the challenge find great success.
Take Drizly for example. They’re the largest online marketplace for alcohol in North America. They partner with retailers, sell their alcohol online, and deliver the alcohol to their customers in under an hour. At the beginning of the pandemic, Drizly saw 2x growth in sales from the first to the second week and 3.5x growth in sales from the third to fourth week. They also found that customers are spending an average of 30% more on their Drizly orders. The pandemic resulted in challenging times for many industries, including the beer, wine, and spirits industries. Those who understood the importance of a strong digital strategy excelled, while others are working to catch up.
CONSIDERATIONS
We know that having an ecommerce channel is no easy task, but we have a few considerations and examples that might make the journey a bit easier. From picking a shipping provider that meets your needs to reviewing laws and regulations, there are a few things that need to be thought through before you start selling and shipping alcohol online.
Work With A Shipping Provider That Meets Your Needs
Shipping alcohol is tricky and shippers like UPS, FedEx, and USPS don’t make this an easy task. We can thank Prohibition for these rules. The 21st Amendment reversed the 18th Amendment prohibition on alcohol and gave states the power to enact their own laws regarding the production, distribution, and sale of alcohol.
It’s slim pickings when it comes to a shipping provider. Shipping alcohol via USPS domestically and internationally is illegal, so that crosses one off the list. Luckily, UPS and FedEx are able to ship alcohol, but they both require special approval and licensing in order to ship alcohol domestically or internationally. Alcohol shipments have to be marked with a special alcoholic beverages label as well as require a signature from the (21 and over) person receiving the shipment.
When shipping alcohol, It is also essential to consider how your products will be packaged. If you are a service like Cocktail Courier, you are going to be focused on the presentation, since their specialty is cocktail kits right to your door. Delivering the product in one piece is still top of mind, they just have more flexibility with how they choose to package their products since the size of the alcohol is scaled-down and only meant for one or two drinks.
For a business like wine.com, the focus is on making sure their wine bottles are getting proper packaging and cushioning to get to their destination safely, especially if multiple bottles of wine are being shipped. FedEx and UPS both offer special boxes and packaging and can help ensure that your products are secure and will arrive intact.
Resources:
Shipping alcohol via UPS
Shipping alcohol via FedEx
REVIEW STATE LAWS AND REGULATIONS
Since each state is able to determine individual rules and regulations for shipping alcohol within or outside its borders, it’s critical to do your research. The majority of states have statutory provisions that allow out-of-state manufacturers to ship alcoholic beverages directly to consumers, but unfortunately not all of them.
Take Alabama for example. Alabama prohibits the direct shipment of alcoholic beverages to consumers. Delaware requires that shipments must be delivered to a wholesaler, then delivered to consumers by a retail licensee. Some states even limit the number of bottles an individual is allowed to ship or receive. Making all restrictions transparent to your customers will help avoid future disappointment.
For example, we worked closely with a Napa Valley-based premier winery. We helped them build out their ecommerce experience to grow their D2C sales. With this particular project, shipping restrictions and concerns immediately came into play. They needed to have a system put in place that is built in a way that recognizes that they can’t ship to certain locations, and provide other options for where a customer could purchase their product if they are unable to ship to their location.
These rules and regulations also popped back up for this Napa Valley winery when thinking about their marketing tactics. Since there are a handful of states that the wine industry is unable to ship to, you need to think about how you’re going to market your product. It’s important to not waste your time and money marketing to people in Ohio or Alabama, or any other restricted state. By targeting your ads geographically, you will not only hit your target audience but also reach the people who can actually purchase and receive your products, and reign in marketing spend. The alcohol industry is a tricky one and compliance will remain an ongoing challenge for many.
State by state alcohol shipping regulations.
REVIEW TAX CALCULATIONS
Since the shipping process is so complicated from state to state, it is important to make sure you are remaining compliant and review the different types of taxes applicable to each state. Sellers are responsible for paying applicable federal, state, or local taxes on the sale of beverage alcohol when shipping direct to consumer. Automating this process can easily help you keep track of the tax rate you need to charge, and related forms you need to fill out, especially if you are shipping to multiple different states.
Avalara provides a tax tool to help look up sales tax and is a great resource for DTC Shipping 101.
UTILIZE BOPIS AND CURBSIDE PICKUP
If you’re a brick-and-mortar retailer, consider implementing Buy Online Pickup In-Store (BOPIS) or even Curbside Pickup to your ecommerce experience for that added convenience for your customers. BOPIS is an additional fulfillment option that can be selected during the checkout process. Customers are able to add items into their cart online and complete the checkout process as usual but choose to retrieve their order in-store. A store employee then gathers their order and typically sends some type of notification to the customer letting them know their order is ready for pickup. Curbside Pickup is simply a variation of BOPIS with pickup from outside a place of business. This service enables customers to purchase their items online and pull up to the store in a designated location and have their items brought out to them and placed in their car, contact-free.
We worked with a regional wine and spirits retailer, which was deemed an essential business during the pandemic but wanted to provide a more efficient, safer option for their customers to shop. Through implementing a BOPIS and Curbside option into this retailer’s ecommerce channel, this midwest chain saw a huge increase in revenue and transactions. The best part about BOPIS and Curbside Pickup is the fact that they will last beyond the pandemic. In an instant gratification world, convenience is key, and these added fulfillment options cater to that need.
WHAT ABOUT BEVERAGE DISTRIBUTORS AND WHOLESALERS?
Typically, the alcohol that is purchased in stores is based on the three-tier model. The 21st Amendment gave each state the authority to regulate alcohol however they saw fit. They developed a structure that provided alcohol to consumers while ensuring a method to collect tax revenue. The three-tier model is pretty straightforward, manufacturers provide alcohol products to distributors / wholesalers, who then distribute those products to retailers, who then sell products to consumers.
Now, this may lead to the question of ‘how would an ecommerce channel benefit a beverage distributor or wholesaler?’. Well, an ecommerce channel can streamline the ordering process for the various retailers they work with.
We work with a leading North American beverage wholesaler who originally had a limited ecommerce presence and experience. They wanted to provide an ecommerce experience that enables the various businesses they work with to seamlessly transact online. Since they work in the North American market, this poses many different challenges with the individual rules and regulations that each state has, resulting in building an ecommerce experience for one market and gradually expanding from there.
By starting with one market as a beta-test, we were able to lay down the overall foundation of the site and from there we can adjust to meet the requirements of each individual state. This beverage wholesaler found great success with the launch of their first site and plan to continue expanding across the North American market and improve their overall customer experience and reduce operating costs.
FINAL THOUGHTS
The United States is on track to be the biggest alcohol ecommerce market, passing China, by the end of 2021. The IWSR found that nearly half (44%) of American spirits online shoppers first began buying their booze online in 2020, which will only carry over into this year, and years to follow as our digital future continues to evolve. Whether you are a retailer, distributor, or wholesaler, as the awareness of purchasing alcohol online continues to rise, more brands will have to work to meet their customer’s constantly evolving needs.
