Beverage alcohol delivery is a fast-growing segment for the industry as more consumers tap, scroll, and click to order their favorite drinks from the comfort of their couches. The number of consumers ordering alcohol for delivery increased 41% last year, according to category share leader DoorDash. “Third-party marketplaces help increase our volume and expose additional customers to Gary’s selection,” says Mike Fisch, CFO of the three-unit New Jersey-based Gary’s Wine & Marketplace. “However, third-party marketplaces aren’t as helpful in building relationships with customers as our own mobile app.”
Gary’s customers can order from seven mobile apps, including the company’s own platform, along with Uber Eats and DoorDash, the latter of which experienced a 54% increase in alcohol pick-up and delivery orders last year. “Roughly 50% of our online business is generated from the Gary’s mobile app, powered by City Hive,” Fisch says. “Gary’s mobile app orders represent roughly 8% of our total business. Third-party marketplaces, such as Uber Eats and DoorDash, represent roughly 1% of our total business. Prior to 2020, we didn’t have a mobile app, and the largest alcohol marketplace was Drizly, representing under 1% of our total volume.”
Gary’s sends out push notifications to over 40,000 customers who’ve downloaded the app. “Mobile app customers tend to outperform website customers on all key metrics, including conversion rates, frequency of visits, and basket size,” Fisch says. “Many third-party marketplace customers shopping from our selection represent incremental volume, rather than existing customers switching to shop with us through third-party apps.”
In Hoboken, New Jersey, it’s not unusual to see up to 10 delivery bicycles lined up outside either of the two Sparrow Wine & Liquor Co. stores. “We’re in downtown Hoboken where there’s a lot of activity with at-home services,” says store owner Armando Luis. “The third-party apps have hundreds of bicyclists and can deliver in 15-20 minutes. We can’t match it. I have a couple of delivery drivers and advertise 40-to-60-minute deliveries.”
Mobile delivery apps account for about 8% of Sparrow’s overall sales. Luis utilizes his own store app, as well as two third-party platforms — DoorDash and Uber Eats. “It’s a factor that is changing the industry at a big level,” he says. “The average customer from the third-party apps is spending roughly the same as the customer over the counter, but I am paying a large commission on it and losing money in some transactions.” The number of transactions Sparrow does via Uber Eats easily exceeds the number of transactions that come from its own website. “Given the very dominant presence of Uber in our market, if I am not in, then I am out,” Luis says. “My best hope is customers become aware of us through Uber and then realize they are much better off going to our website or visiting the store.”
The average sale on the store’s website is $165 and most of it’s for delivery. “Even though we have a price advantage on our website, the convenience of the apps and their value proposition outperforms our value proposition in the eyes of apparently a large percentage of consumers,” Luis says. “The customer on the apps is much more of a granular convenience buyer. The reason why I participate is because I want to be in front of every customer in my market. We’ve been in business a long time. I’ve experienced the maturation of thousands of customers that started out drinking White Zinfandel and our now drinking Caymus.” At Sparrow, Caymus ranges from $50 a 750-ml. of California Cabernet Sauvignon to $80 a 750-ml. of 2022 50th Anniversary Napa Valley Cabernet.
Delivery apps are a double-edged sword because they increase online retail exposure but decrease in-store foot traffic, neutralizing the added value of traditional retailing. Retailers participate because they don’t want to lose out on the sale, even if it means razor thin margins from some of the third-party apps. According to some retailers, third-party apps are commoditizing the retail alcohol industry, magnifying the importance for retailers to engage with customers through in-store tastings, educational events, and vanguard customer service. “We are dealing with a much bigger force than ourselves,” Luis says. “I need to be more focused on highly curated, boutique concierge service. It’s very difficult for third-party apps to replicate that. Our consumers realize what we bring in that sense, and it’s working.”
Austin, Texas-based Twin Liquors, which has more than 100 stores, uses three platforms to support its e-commerce and delivery services: DoorDash, Favor, and City Hive, which powers the store’s e-commerce and mobile app. “These partnerships allow us to serve a broad range of customer needs, from scheduled in-store pick-ups to on-demand delivery,” says marketing manager Michael Salome.
Ordering through mobile apps is expected to continue growing. “Mobile apps and e-commerce will remain a valuable complement to traditional brick-and-mortar retail, particularly for convenience-driven consumers accustomed to app-based shopping,” Salome says. “Long-term success in beverage alcohol retail, however, will continue relying on a strong in-store experience—offering elements digital platforms can’t replicate, such as tastings, educational events, knowledgeable staff, and personalized service fostering meaningful relationships in our communities.”