Eight years ago, Marques Warren, owner of Seattle’s Downtown Spirits, took a chance on expanding the store’s customer service offerings. That move—to provide on-demand delivery of wine and spirits—has proven pivotal for the retailer. Today, 40% of Downtown Spirits’ sales are from delivery orders, purchased via its own website, the Drizly platform, and the store’s corporate account program.
“Customer response to our delivery program has been overwhelmingly positive,” says Warren, noting that the service’s debut in 2014 coincided with the launch of Downtown’s partnership with Drizly. Pointing to the inroads Amazon had already made in the area at the time with on-demand delivery, he says that the delivery feature, largely carried out by Downtown’s own employees, “started out strong, and of course we saw a big surge in 2020.” The store even increased its team of delivery drivers from four to 12 during the pandemic.
Indeed, the Covid-19 pandemic dramatically increased consumer demand for merchandise delivery, and beverage alcohol was no exception. Beverage alcohol retailers around the country scrambled to set up delivery services or align with third-party platforms, where legal, at the height of lockdowns. And for those retailers already offering delivery, the need to fulfill skyrocketing orders became both a big opportunity and an enormous challenge. “Our delivery and curbside pickup exploded as people wanted to isolate,” says Ron Vaughn, co-owner and COO of Argonaut Wine & Liquor in Denver, which has offered its own delivery for more than 25 years (third-party delivery of beverage alcohol isn’t permitted in the Rocky Mountain State). At Spec’s Wine, Spirits & Finer Foods in Texas, meanwhile, third-generation co-owner Lisa Rydman Lindsey says, “The pandemic greatly affected our ability to fulfill all the delivery requests we had, simply from a standpoint of what our stores could handle with the difficulties we faced with staffing issues.” Third-party delivery partners were also hampered by staffing, she adds.
While Warren, Vaughn, and other 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. But the ability to provide delivery, including the usage of third-party couriers, differs by market. “Rules vary state by state—and often county by county—on who needs to own the delivery vehicle, what certifications are required to deliver alcohol versus sell it, as well as regulations for additional permits, insurance, and more,” says Aileen Foody, associate director of regional operations at Drizly.
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.
With the Drizly ordering platform, retailers control delivery—they may handle it on their own or work with third-party providers. Retailers new to the app often chose to outsource delivery at the beginning and then add their own delivery programs later on, Foody says. “When a Drizly retail partner staffs their own drivers, it allows them to control the entire customer experience, from start to finish,” she adds. “Once an order is placed, not only do they have control of the packaging and handling of the product, but also how quickly it leaves their shop and all the way down to getting it into the consumer’s hands.”
Of course, 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, 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, Warren says. “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 Vaughn from Argonaut, 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 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,” Lindsey notes.
The need to provide speedy delivery these days is only exacerbating labor challenges. “Delivering product in under an hour can be an unrealistic goal depending on the number of orders,” says Vaughn. “The time limit produces stress on the staff.” For its part, Drizly aims to avoid any undue stress, Foody says. “We work closely with our partners to ensure that if a store is having a staffing issue, or if there’s inclement weather, a parade, or another event, we’re able to adjust store hours and delivery zones to reflect that.”
At Brown Derby in Missouri, which has been offering delivery from the flagship Springfield store since 2020, marketing director Jennifer Feuerbacher adds that another downside to own-delivery can be completing the process. “If someone isn’t home to accept the delivery, our driver needs to go back at a later time,” she explains. Additionally, product can only be provided to the customer who placed the order, and identification must match up, she says. “Return trips take time away from the store for our employees and create more expense,” Feuerbacher says.
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 membership 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.”
Third-party fulfillment of delivery orders—whether under the Drizly platform or the online marketplaces themselves—also comes with its share of pros and cons. Overhead for vehicles and delivery labor is, of course, reduced. “One of the many benefits of using other platforms for delivery is if one of our drivers is unavailable, we have the option of selecting a third-party delivery service to deliver our online orders,” remarks Feuerbacher. Christine Corey Elder, president of Blanchards Wine & Spirits in West Roxbury, Massachusetts—one of six family-owned liquor stores in the Bay State—points to the labor savings that comes with third parties as critical to beverage alcohol delivery. Blanchards has been partnered for the last few years with a local delivery company, who Elder declines to identify, for its online orders after attempting its own delivery program prior to the pandemic. “Driving, especially in Boston, was stressful for our employees, and some quit,” she explains. With the labor shortages that abound today, the retailer says she’s grateful she no longer needs to hire drivers.
Spec’s, which is partnered with Drizly and Uber Eats, has also operated on the Instacart platform for many years, Lindsey says, and last year signed on with DoorDash for on-demand delivery. “Our customers love DoorDash delivery, and the results are growing each week,” she notes. Feuerbacher at Brown Derby, which also enlists multiple platforms for local delivery, points to the unique benefits of Instacart. “Instacart is great because their drivers come in and do the shopping, so it doesn’t take time away from our staff to fulfill the orders,” the retailer says.
While delivery isn’t labor intensive when using last-mile services, the additional orders can put stress on store staff. And fees to the delivery providers cut into retail margins. “It’s very expensive,” Elder says. “Some days I wonder if it’s worth the aggravation.” Wait times for drivers to arrive at stores is another added pressure of the third-party delivery model. Drizly’s Foody says that while that’s not typical in dense markets, “in more rural or suburban areas, it can take longer for the driver to first arrive at the store for the initial pickup.” Poor customer service from drivers, while uncommon, can also be a downside to using third parties, according to some retailers, who point to occurrences like theft, damaged product, and rudeness.
For some beverage alcohol merchants, a hybrid model of owned and outsourced delivery works best. Warren says that while Downtown’s own delivery service is preferred, “there are times when utilizing our employees to make Drizly orders doesn’t make economic sense.” If store traffic is busy and customer service would be impacted by sending a worker off on a delivery, for example, a third-party driver might be used. “We follow strict metrics to ensure on-demand delivery and profitable transactions,” the retailer says. Foody agrees that a hybrid model is a good approach to delivery. “Within our network, many retailers staff their own drivers but also have third-party delivery set up for those busy Friday nights or if they experience an unexpected staffing shortage,” the Drizly executive says.
Whatever last-mile model is selected, retailers agree that on-demand delivery of beverage alcohol is here to stay. “The convenience of alcohol delivery remains strong,” says Brown Derby’s Feuerbacher. “We don’t see that going away anytime soon.”