Covid-19 prompts historic alcohol ecommerce trials in India

For the first time in the country’s history, alcohol ecommerce is being trialled in India. While the decision was prompted by public health concerns after overcrowding in liquor stores as Covid-19 restrictions eased, this could lay the groundwork for a permanent new sales channel in the world’s second-largest spirits consumption market.

On 4^th May, the reopening of the Indian alcohol brick-and-mortar off-premise was fraught with overcrowding difficulties, primarily due to the low density of liquor stores throughout the country. The resulting crowds ran counter to social distancing rules. Immediate reactions varied between forced re-closures to the imposition of a Covid-19 ‘surcharge’ of 70% to deter crowds. The situation has since calmed, but the overcrowding difficulties led several Indian states to concede that alcohol ecommerce would, in fact, benefit public health, while also offering taxation income at a much needed time. Ecommerce rules have already changed in several states, and the first trials have started.

“The emergence of the ecommerce channel in one of the world’s largest beverage alcohol markets will be keenly observed, not only by states that so far may remain reluctant, but by both the beverage alcohol industry and ecommerce platform providers as well,” notes Alastair Smith, Director at the IWSR.

The prevailing setup will differ from state to state, be that click-and-collect or home delivery. There are indications that at least in some states, India’s pre-eminent grocery ecommerce operators may be looped in to provide the necessary logistics while licensed liquor shops and state-run corporations will remain in charge of age verification and capping order volumes. In others, the setup will be more rudimentary, with state corporations issuing e-tokens and providing a time window for pick-up of online orders. This will allow licensed shops, especially in corporation states, to maintain their monopoly.

The emergence of the ecommerce channel in one of the world’s largest beverage alcohol markets will be keenly observed, not only by states that so far may remain reluctant, but by both the beverage alcohol industry and ecommerce platform providers as well.

“This model reflects that of the 3-tier system that underlies the structure of the alcohol industry in the US, where the relationship is held between the distributor and the liquor store, rather than the distributor and the consumer,” remarks Smith.

Currently, liquor stores in India may just offer click-and-collect, run their own home deliveries or will be working with general ecommerce platforms, but over time, we may see a development of alcohol ecommerce specialists, such as those in the US. These are the specialists that understand how to motivate repeat and larger purchases specifically for the Indian alcohol consumer. “Driving online alcohol sales is very much led by the content provided by brands. A brand’s investment in product descriptions, graphics, and crucially, online storytelling, has driven the most success in standing above the competition online,” says Smith.

Understanding consumer purchasing drivers will be key as well. IWSR research shows that in China, for example, consumers are extremely retailer/platform-loyal rather than being brand loyal. In other markets, consumers will specifically seek out their favourite brands online, regardless of platform. Brand owners need to understand how to adapt their marketing strategy based on whether they are targeting the purchase drivers for a specific ecommerce platform or for the product itself.

In India, the middle- and upper- class consumer will likely be the target segment for online shops, certainly for home delivery services. Not only is a home address needed to complete the transaction, but so is a credit card or another way to transfer money for purchases made. While cash on delivery could be a consideration here, the need for a specific street address means ecommerce may be out of reach for a large proportion of the Indian lower class.

The categories that will resonate most online will likely be the same ones that fuel consumer purchases in the off- and on-premise as well. IWSR data shows that whisky is the drink of India and remains aspirational to a growing middle class. Rum and brandy, the next two most consumed spirits in the country, are likely to resonate with online consumers as well.

A key consideration for ecommerce development will also be the requirement of age verification. While ecommerce platforms may initially ask for ID upon delivery, over time, especially if specialist online shops enter the market, proprietary apps for ID age verifications, such as those used by some in the US, may streamline this process for the Indian consumer. Caps on purchases may well be linked to registered government IDs in such an ecommerce environment.

Although very much in its infancy, the development of India’s alcohol ecommerce will be watched very closely, not only by the rest of the country, where additional states are known to be considering ecommerce expansion, but by brand owners across the world as well. The industry certainly hopes that trials that are currently happening are so successful that they will continue beyond the current crisis, and may persuade other Indian states to follow suit.

The findings from this article are based on IWSR’s report series examining the impact of Covid-19 on 12 key markets. This report series is updated every two weeks, in order to help the beverage alcohol industry stay on the pulse of the impact of the pandemic around the world. This report series is available complimentary for current subscribers to the IWSR Global Database.

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