Online Retailers Ready to Tap Rising Demand for Booze Delivery

(Bloomberg) -- Companies from Amazon.com Inc. to Walmart Inc. are finding that fresh-grocery delivery is challenging. But there’s one niche of the market that seems ripe with opportunity in 2020: booze.

The opportunity is clear: The volume of liquor sold online in the U.S. should more than quadruple by 2024, reaching an estimated value of $13.4 billion, according to researcher IWSR. To take advantage of it, retailers will have to navigate thorny U.S. regulations that make scaling up tough. Liquor sales are governed by a legacy three-tier system that separates manufacturers, wholesalers and retailers. Companies also need to take into account age verification and complicated sales restrictions -- known as “blue laws” -- that vary state by state.

Perceptions also represent an obstacle: Close to half of all consumers think that buying alcohol online may be illegal, according to one survey, a big reason why only about 2% of sales now happen over the web.

Still, things are starting to move. Leading the push is Drizly, a Boston-based startup founded in 2012 that delivers from nearby liquor stores in 31 states, allowing customers to comparison-shop for their vodka, gin and other spirits. Chief Executive Officer Cory Rellas expects to add another 2,500 stores to Drizly’s network next year. Instacart, the grocery-delivery service, now serves up beer and wine from almost 7,000 supermarkets in 22 states and Washington, DC. It just added product reviews for wines and spirits.

“As more people move online for their weekly grocery shop, it’s important they’re able to get everything they need -- from fresh groceries and pantry staples to wine, beer and spirits,” Instacart president Nilam Ganenthiran said.

Even Costco Wholesale Corp., the warehouse retailer that’s been reluctant to embrace e-commerce, has bellied up to the bar by recently expanding same-day delivery of alcohol via Instacart from a pilot test in California to 11 states plus the nation’s capital. New outlets like Costco with its legions of loyal shoppers could help Instacart grow its alcohol sales “dramatically,” Ganenthiran said.

Of course, as in most emerging e-commerce markets, Amazon looms large as well. The Internet giant sells liquor in about a dozen cities through its Prime Now service and can deliver from its Whole Foods Market stores in some states as well.

As with fresh food, though, the web alcohol market hasn’t succumbed to Amazon’s logistical prowess just yet. Like the open bar at a holiday party, the environment for now is both tantalizing and treacherous.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder

©2019 Bloomberg L.P.