During the pandemic, as purchasing moved online, the online sale of alcohol also increased drastically. According to new research by IWSR, the eCommerce sale of beverage alcohol is expected to reach $42 Billion across leading markets by the end of 2025.
That is a growth of +66%.
The report studied 16 markets across the globe including the USA, UK, Canada, Spain, and others and it shows that alcohol eCommerce sale increased by 12% in 2019 and jumped to a whopping 43% in 2020. That means almost half of the global drinkers are now ordering online.
That’s a lot of potential and businesses are capitalizing on the opportunity in a very well-rounded way. Although the biggest alcohol eCommerce market across the globe is China, the USA is growing faster and is expected to surpass China in the coming years, as per the same report.
So, if you too plan to do something in the alcohol delivery space, this article is for you. In this blog, we will discuss the business model of the US’s biggest alcohol delivery platform (Drizly) to help you gather some invaluable insights on how it works and brings money to the table.
So, let’s get started.
But, hold on! If you are still wondering whether it is the right time to launch an Alcohol Delivery App, check out 3 Reasons How Launching an Alcohol Delivery App Can Help You during this time when COVID cases are rising again and the history is expected to repeat itself.
Getting back to Drizly, let’s check out Drizly Business Model here.
As per the success story published on Drizly’s official website, the app started after a simple text from one friend to another that said “Why can’t we get alcohol delivered?” and the rest is history. The founders of Drizly detected a real-world problem and the wish of people to get alcohol delivered to their doorsteps and they capitalized on the opportunity without wasting time.
Even before the inception of Drizly, local stores were delivering alcohol but not many folks knew about the option as it was expensive, inconsistent, slow, and full of hassles for stores as well as customers. However, it was legal.
So, all they needed was a solution to figure out the problem.
Even the founders of Drizly were shocked when they came to know that alcohol delivery is legal in the USA and still there was very less competition in the market. After discussing the conceived idea with a few lawyers, they invested their time in ID verification – that was the main hurdle that was expected to come in their way but they solved the same before even launching the solution very carefully.
That’s where technology came into play. They created Mident – a mobile ID verification system that allowed store owners to verify a customer’s age using a mobile phone. It verified users’ ID and age before delivering alcohol to them. They wanted to do everything in a way that doesn’t disrupt the existing industry framework but provides added convenience to everyone involved.
You do not disrupt a $155 Billion per year industry. You basically kneel at the altar and say, let me in – Nick Rellas, Co-founder, Drizly.
Sometimes, this is the kind of attitude you need to build something amazing.
After everything was sorted, Drizly was launched in 2012. In 2015, Drizly raised a $13 Million Series A round from various investors and there was no looking back after that. They expanded their operations to Canada through partnerships and again raised a $15 million Series B round.
At present, Drizly is the biggest alcohol delivery online marketplace in North America. They are committed to their purpose of being there for customers when it matters. The main strength of Drizly is its partnership with thousands of retailers in 1400+ cities across the world.
The app is available to more than 100 million customers across Canada and the USA and the number is still growing. They are committed to offering an exceptional customer experience with customized content, transparent and competitive pricing, and an unrivaled selection – the secret sauce behind Drizly’s success.
Drizly is an alcohol delivery platform that can be used via its website or mobile app for Android and iOS. It promises to deliver alcohol in less than 60 minutes and also commits instant delivery in more than 100 cities across Canada and the USA.
Let’s check out Drizly Business Model Canvas for more details:
1) Drizly is an app with an amazing user interface and features. Customers first sign up for the service by entering all the required information. After adding a payment method, they can simply select the products they desire and head to the order section.
2) The order page then lists all the details for the customers like from which store they want to order, how long the order will take, and how much it is going to cost them.
3) The business model of Drizly is a bit unique. The alcohol they sell is not actually owned by them. In fact, they never even touch a bottle of alcohol or the amount customers pay for their orders. They partner with local alcohol retailers who have the required license to sell alcohol and because of this reason, the price of the product is also set by the retailer.
4) Prior to adding these stores to the platform, Drizly leads a quality check to check whether standards like product storage, distribution system, and pricing are maintained. After the quality check, Drizly then lists these stores to its platform and coordinates their delivery framework with the application.
5) The alcohol store’s POS is also integrated with the app, which ensures the stock that the store has is updated on the platform. When the store begins delivering by means of the application, Drizly increases its reach by providing them exposure to a wider audience – that’s Drizly’s value proposition for store owners.
6) In addition, the application offers an appealing UX that lets customers search for their favorite beverages. It has simple navigation that permits the customers to look for the products they need, the brand they like, and the price tag they can afford, everything in a hassle-free manner – that’s Drizly’s value proposition for customers.
7) Drizly also works for organizations that need to have liquor delivered to their events (through Driz for Biz). If an area is not served by Drizly, customers can still order alcohol but the delivery can take 24 to 48 hours.
Drizly makes money with the help of not just one but many revenue streams. Let’s have a closer look at each of its revenue streams to analyze the potential of the industry and ways an entrepreneur can use to make money in the alcohol delivery industry.
This is the main revenue driver for Drizly. It charges licensing fees to retailers and liquor stores, which can range between $100 to $10,000 per month. The precise amount depends on the store’s location, the types of products it sells, the volume of transactions, and many other factors. It leverages the licensing model as it eliminates the need to purchase a license.
The app also utilizes the advertising model when it comes to making money. Basically, it shows a few products and retailers at the top of the page so that they attract consumers’ attention and charge extra from partners for this exposure.
3.Delivery, Service & Penalty Fee
In addition, Drizly also collects fees from consumers in various ways. It charges $5 for the delivery, which helps its retail partners arrange resources for the delivery. Next, it applies a service fee of $1.99. This fee covers the cost associated with modifying and maintaining the platform and overall services.
Furthermore, whenever a consumer who is below the age of 18 tries to order alcohol from the app and then fails when it comes to ID verification, it charges a penalty fee, which is $20.
According to the data by CrunchBase, Drizly raised a total of 119.6 US dollars in nine rounds of venture capital funding. It means it made a lot of money by catching the attention of investors. It is presently valued at $1.1 billion, that’s what Uber paid in cash to acquire 100% of Drizly in 2021.
Every success story has some lessons behind it and you can use them to build your own venture. Here are three key takeaways from Drizly Business Model for budding entrepreneurs:
1.Do Not Hesitate to Iterate
Innovation is not just solving an unsolved problem. You can also solve an already solved problem in a better way to get the required traction. Even though alcohol delivery was possible before the inception of Drizly, it was expensive, full of troubles, and nobody was using this service because of the problems associated with it. The founders at Drizly just re-solved the problem by innovating the traditional model.
2.Disrupting the Industry is Not Always the Solution
It is not always necessary to disrupt the industry. Sometimes, you have to embrace the years-old practices and give them a new shape to get success. Alcohol stores were doing ID verification prior to Drizly as well and the founder team at Drizly did not change this practice but just gave it a new shape with the help of technology. That’s what one of the app’s founders said in the above-mentioned statement.
3.Superior CX is the Key to Success
Customers must come first. Therefore, it is crucial to ensure that you provide an exceptional customer experience – may it be in terms of UI/UX, app features, security, and customer privacy. Drizly’s strict quality check procedures are an example of how much its team cares about its customers.
We hope you are now inspired to create your own venture in the online alcohol delivery market after seeing how Drizly became a success. But, hold on! What worked for Drizly, may never work for you. So, instead of copying the idea, you should focus on learning from the success story and innovate according to your target market and audience preferences. Let Apptunix help you amid the process and we can create wonders together.
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