By generating orders online for bricks & mortar retailers, Drizly has managed to expand its US operations to 31 states with thousands of partner stores. COO Cathy Lewenberg tells Roger Morris how the e-tailer got where it is today and where it wants to be tomorrow.
In early 2021 when Uber Technologies announced the acquisition of Drizly for US$1.1bn, the mobility company with a $61bn market capitalisation promised the alcohol e-tailer would continue as a standalone business. At the time, Drizly CEO Cory Rellas, who co-founded the Boston-based company in 2012, said: “We’re thrilled to join a world-class Uber team whose platform will accelerate Drizly on its mission to be there when it matters – committed to life’s moments and the people who create them.”
A year later and Drizly remains an independent app and online platform – and it’s still headquartered in Boston.
Since the Uber purchase, Drizly has increased the number of partner retail outlets that fulfil and deliver orders booked through its app by 45% and has quadrupled its growth rate during the pandemic, as consumers switched from shopping in-store to having goods delivered to their homes. The company now operates in 31 states along with the District of Columbia and one province of Canada.
While Drizly doesn’t report its sales figures publicly, one independent estimate for 2021 suggests in the region of $41m.
“We will continue to operate separately as a remote-first company,” Drizly chief operating officer Cathy Lewenberg tells Global Drinks Intel. “What got us really excited [about the Uber acquisition] is that they have millions of customers actively involved, so that’ll give us better reach and greater delivery technology.”
The Drizly business model has been engineered to work within the US’s three-tier sales and marketing system – a set-up that also varies from state to state and even city to city – with the promise that consumers will have their alcohol orders delivered within 60 minutes. Some locales permit delivery of spirits, wine and beer, while others permit only one or two categories. In the last 12 months, the company reports that liquor constituted 45% of sales, wine 38%, beer 15% and ‘extras’ – snacks and paraphernalia – 2%.
The ‘Amazon of the liquor industry’
To initiate an order, a consumer, using either the Drizly website or app, enters their zip code, which links them to the menus of one or more bricks & mortar partner retail stores in their delivery area. As with most online sales platforms, the consumer selects items, puts them in a shopping cart and checks out.
The order is then submitted electronically to the store of choice, the order is filled and the store delivers the alcohol, usually with its own personnel [some locales do not permit third-party services, such as Uber, to deliver alcohol]. Each partner store independently determines the amount of the delivery charge. Payment, including tips if allowed, is handled through the store, and Drizly receives a $1.99 service charge per order.
“Four-and-a-half years ago I was looking to expand my online sales,” says Advay Amin, owner of Garden Liquor & Wines in Lodi, New Jersey. “I was searching for an online partner and that’s when I found Drizly. They’re awesome! I call them the Amazon of the liquor industry.”
Since partnering with the company, Amin, who has around 5,400 products listed on his store’s Drizly shopping menu, says he has hired additional delivery personnel. “It varies according to season, but about 40% of deliveries are wine and about 30% each for liquor and beer,” he says.
States and locales are gradually loosening laws to permit store deliveries of alcohol, many spurred by their experience during Covid-19 lockdowns. One of the latest was Georgia, which includes the large Atlanta market, and Lewenberg says Drizly anticipates the Honolulu area of Hawaii will come on board later this year. While she points out Drizly does not actively campaign for states or cities to change their laws, she says: “We will have a strategy in place to begin operations as soon as the change is made.”
The selling message Drizly gives to its online and app customers is fourfold. First, it sells the convenience of being able to order something online and have it delivered within 60 minutes; a huge incentive when unexpected visitors arrive or spur-of-the-moment occasions arise. Second is that customers have access to the same selection as in-store. Third is value and comparison shopping, especially in areas where Drizly has more than one store that can service the customer.
Finally, Drizly entices customers to broaden their reasons for shopping. According to the company, it’s had great success in promoting gift-giving, for example. In 2021, gift-buying increased by two-thirds over the previous year and now accounts for 11% of group sales. As has generally occurred elsewhere, Drizly’s customers became bigger spenders during the first year of the pandemic, with the average order value growing by 20% from 2019 through 2021.
Drizly’s ‘sweet spot’ is consumers aged 28 to 24
Surprisingly, the youngest (and presumably most technically-oriented) consumer group – those aged 21 to 27 – represent only 9% of Drizly sales. Instead, the sweet spot that makes up half of its sales are between 28 and 34 (24% of sales) and 35 to 41 (26%). Percentages fall as groups get older: 42 to 48 at 17%, 49 to 55 at 11%, and 56 and older totalling 12%. According to Lewenberg, Millennials, those now 25 to 40 years old, “have stuck with Drizly” as they have aged.
The sales messages to potential retail partners, meanwhile, are also simple and compelling, especially for stores that want to increase their online sales or haven’t previously sold online. There are no investment costs or sign-up and maintenance fees – the only requirement is that partners pay a cut of sales.
Potential partners are told that signing up with Drizly will grow their consumer base – according to many of them, it does. Robert Jernigan, owner of Bacchus Wine & Spirits in Oklahoma City – and president of the state’s retailers association – is a recent sign-up. He says some of his new customers had previously shopped at other stores in his area and notes Drizly-originated customers also tend to urge neighbours to try the service.
Drizly also tells potential partners they will receive valuable marketing data. “We process thousands of alcohol transactions daily and share the trend data right back with retailers,” Lewenberg says, “so they know the right products to carry in-store.” For example, the data might point out, she says, that “shochu is a top seller with Generation Z [the youngest cohort of drinkers], and that they are over-indexing with ready-to-drink cocktails.” Whisky, Tequila and mezcal are also big on the overall Drizly market.
Of course, Drizly is not without its growing pains. “I love the people at Drizly, but I preferred it when I was working with one manager, whom I got to know,” Garden Liquors’ Amin says. “Now, I have to work with a team of people.”
Bacchus’ Jernigan adds that while he believes Drizly is doing a good job so far, “they are expensive”. He also thinks his new partner is leaving money on the table by having a ‘one-size-fits-all’ business strategy. “I have people in my organisation who have stores in rural areas of Oklahoma that would be interested in Drizly, but there’s no way they can fill every order within an hour, as many have only one delivery person to cover a wide area,” he says. “Perhaps, they could guarantee in those areas that deliveries would go out on the hour.”
Lewenberg says the company is proud of its efforts “to work with our partner retailers in bringing in more brands owned by historically-marginalised groups, including black-owned and women-owned groups”, and says those numbers have been increasing. But otherwise, she maintains Drizly does little to change the way their retailers do business, other than needing more staff to keep up with sales growth or by extending holiday delivery hours.
“I’m not worried about competition,” Lewenberg says, pointing out the industry is still busy carving up this new pie. “What excites me is the opportunity. The beverage alcohol market is estimated at around $280bn – and 90% of that is still sold in-store.”
For Drizly, there’s still plenty of low-hanging fruit to go for in the years ahead.
This article was initially published in June’s issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
