Dec 03, 2015

Technology: Drinks on Demand



There’s a new group of mobile apps available that promise to make delivering alcohol to your home as simple as ordering takeout. At first they sound a bit like they were named after the seven dwarfs – Saucey, Thirstie, Tipsy, Drizly – but a closer examination proves they solve a real problem in a very creative yet simple way.

Alcohol home delivery has always been available, but it was largely promoted and executed by individual liquor stores that had licenses to deliver. The challenges to upend this model would seem insurmountable: delivery logistics, state licensing, payment processing, inventory control and the list goes on. The reason these apps have serious staying power is in the simplicity of their model. For the most part, they are connecting the consumer and the business through technology and allowing the transaction to occur at the store level.

Here’s how it works for the liquor store:

1.  The store applies for the service and allows the on-demand provider access to the store’s inventory. Many of the apps integrate directly with the store’s POS system to maintain inventory control.

2. When a customer completes an order through the mobile app, a notification is sent via email, fax, phone or online supplier portal.

3.  The store confirms the order, packs it and sends it out for delivery. The transaction goes through the store’s existing credit card processor so customer payments are applied to the merchant account.

App-DesignEach of the providers has a slightly different revenue model, but it usually involves charging a fee to the store for processing the order. The consumer, on the other hand, might pay a delivery fee, but is purchasing the product for the same price they would be paying if they walked into the liquor store.

In addition to selling alcohol, many of these apps sell barware, mixers, fresh garnishes and ice. For the consumer this means the party never has to end, and a trip to the liquor store doesn’t involve a DUI. In my experience while living in New York City, the delivery time was roughly 25 minutes from order to delivery. In other markets that are more spread out, delivery times are probably longer.

While the apps are just starting to get the interest of large brand suppliers, the promotional and advertising opportunities are quite obvious. The on-demand providers are getting more savvy with their marketing as well. Instead of promotional emails that read like bad holiday cards, they are starting to offer compelling packages with multiple ingredients and recipes.

To offer the largest inventory possible, these on-demand providers market inventory from multiple stores to the same consumer. The challenge is fulfilling the order in the most efficient manner. In New York City, for instance, beer, wine and spirits are not sold together, so an order of each would need to be processed by multiple stores. This means separate deliveries with individual minimum orders – certainly not an ideal situation for either party.

Many of these on-demand providers offer incentives to try their service, similar to how Uber gives free rides for signing up your friends. They also offer ongoing discounts and promotions to remind the consumer there’s a more convenient way to purchase alcohol at home.

While these on-demand providers are dwarfs today, they are vying for market share in major cities across the country. It’s only a matter of time before leaders emerge and get the funding they need for operating on a mainstream scale.