The Delivery Booze App Business Goes Boom

Over the last year a crop of booze delivery apps—from Drizly to MiniBar to Swill—have sprung up, begging the question: Why now? Will Gordon ponders the boom's merits and future.

Anyone who’s ever offered a cat $20 to please, please, please, just bring me a cup of coffee in bed, I feed you every single day and I really need a little help before I can face this particular Tuesday knows how hard it can be to get precious liquids delivered. And while it’s still tough to find good help at 7 a.m., a slew of new booze delivery apps have arrived to provide drinkers with an errand-free transition into happy hour.

From Drizly in Boston and New York to Lasso in San Francisco and Los Angeles—with Booze Carriage, Minibar, DrinkDrivers and Swill among the competition quenching thirsts in between—a growing population of city livers with smart phones, credit cards and between 30 and 60 minutes’ worth of patience can now do their booze shopping without the indignity of leaving the futon.

It makes perfect sense that liquor delivery has finally joined the convenience-seeking, app-based segment of the economy. The success of food delivery outfits such as Seamless, Fresh Direct and Foodler proves the demand for well-organized clearinghouses focused on solid comestibles. Why would the boozers be any less inclined toward the wonders of pants-free shopping? Since alcohol is almost always paired with leisure, it seems an even better candidate for home-delivery, particularly since your next drink often closely follows your last three drinks, making travel less advisable. But why so many liquor-delivery apps all of a sudden?

Drizly’s January announcement of $2.25 million in investor funding was a clear signal that some people who get paid to predict these things see a bright future for at least one liquor delivery app. The investment received a wave of media attention that surely sparked other would-be app entrepreneurs to think, “Oh yeah, why not?” The real question might not be “Why so many all of a sudden?” but rather “What took so long?”

One obvious hurdle is the regulatory and licensing morass that attends any effort to exchange alcohol for money. If you need proof of how complicated and capricious liquor licensing can be, just ask your friendly neighborhood tavern owner why she doesn’t offer outdoor seating. Her head will explode, and then the busboy who cleans up the mess will explain that the city (name a city, any city) rejected the application because the bar has a three-word name and karaoke on Tuesdays, and the community board will only allow outdoor seating for establishments with two-word names and trivia on Wednesdays.

Then there’s the small matter of how to make any money as a middleman in a business with such transparent retail pricing. Since these delivery services are almost universally focused on dense urban areas, they need to offer both convenience and price competitiveness: Everyone in Manhattan walks by 20 liquor stores a day, so even though it’s more convenient to have it brought to your door whenever the mood strikes, it’s still pretty easy to acquire your gin the old-fashioned way.

Due to the relatively low overhead associated with running a virtual business with no inventory to maintain and few employees’ pockets to line, the barriers to rapid expansion are lower than in most other industries. Drizly has already expanded from its Boston base into New York, and Minibar is also eyeing other markets with high concentrations of what Crystal identified as their “core users,” tech-savvy urbanites between the ages of 21 and 45.

Minibar, which was launched in 2013 by business school friends Lara Crystal and Lindsey Andrews, follows what has become the industry-standard business model of routing all sales through existing brick-and-mortar shops. This means Minibar does not sell alcohol: It provides a portal through which users may purchase alcohol from a traditional liquor store, which then delivers said alcohol.

Thus, Minibar does not have to deal with the logistical and regulatory headaches that come with running a retail liquor business, and the stores they partner with don’t have to hire software developers. It may not be worth the hassle for a mom and pop liquor store to promote their delivery service beyond a sign in the shop window, never mind build and maintain an app that would encourage repeat business among their geographically limited customer base, but it’s relatively painless for them to sign on as a Minibar affiliate.

Minibar’s revenue comes from charging its retail partners a fee for each order processed. They declined to say how much that fee is, but it is likely quite modest. Liquor retailing is more of a volume game than a margin one, so a store can only afford to forfeit so much off the top of any given transaction. This means the liquor delivery app game is a volume one as well.

Minibar’s minimum order is $25, though Crystal says their average transaction “is much bigger.” This makes sense, as the city-dweller who walks by 20 liquor stores a day might have no problem popping into one for a single bottle, but may lack convenient means of hauling home a party’s worth. To that end, Minibar offers event-planning advice to further simplify a host’s duties. Other liquor deliver apps also seek to provide enhanced customer service: Drizly’s frequently updated blog contains recipes and other home-bartending tips, and Lasso sells party packages such as “Wine and Beer Happy Hour for 20” and “Pizza and Beer Blast for 10.”

Due to the relatively low overhead associated with running a virtual business with no inventory to maintain and few employees’ pockets to line, the barriers to rapid expansion are lower than in most other industries. Drizly has already expanded from its Boston base into New York, and Minibar is also eyeing other markets with high concentrations of what Crystal identified as their “core users,” tech-savvy urbanites between the ages of 21 and 45.

Drizly has also opened up a second revenue stream by partnering with Pernod Ricard (which owns Absolut, Beefeater and Jameson among others) to promote their brands to shoppers, which could be a key advantage in the struggle to stay afloat while waiting for a sustainable market to emerge. It may be hard to go broke betting on a thirsty nation’s love affairs with alcohol, convenience and avoiding eye contact, but the companies that emerge from this initial miniboom in the liquor delivery app industry are likely to be those who can profit from both ends of the transaction.

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