Ecommerce may be a major channel in the US in many retail sectors, but for the sale of alcohol, it has historically been very underdeveloped.
The pandemic has triggered a change in this dynamic. Multiple states temporarily relaxed laws governing alcohol delivery and some of these changes look set to become more permanent. Control states such as Virginia and New Hampshire are now testing the online sale and delivery of alcohol via the state monopoly retailer. Additionally, Kentucky allowed direct-to-consumer alcohol sales, including from producers outside the state.
Coupled with this, consumers faced with lockdown restrictions have been forced to turn to ecommerce as a lifeline, creating a huge spike in awareness of ecommerce as a channel for alcohol, even in states where this was already legal.
As a result of these factors, retailers and brand owners are heavily investing in the channel – take Uber’s acquisition of Drizly for example. IWSR forecasts alcohol ecommerce sales in the US to have risen by around 80% in value in 2020, having experienced three to five years’ normal development in just six months.
While it is unclear whether eased regulations will become permanent or more widespread, what is certain is that new technology is helping brand owners and retailers to navigate the regulatory landscape more efficiently. This is perhaps best illustrated by the rise of ‘white label’ storefronts that enable brand owners to offer consumers a D2C experience while staying within the three-tier system.
“The white label storefront is perhaps one of the most interesting developments to come out of the rise in ecommerce,” remarks Adam Rogers, Research Director for North America at IWSR. “Essentially, a company builds a ‘store’ on a producer’s website that seamlessly takes a consumer from the brand’s website to a transaction site. Think of it as a branded storefront.”
White label technology allows consumers to make what appears to be a D2C purchase, while remaining three-tier compliant. Fulfilment of the order is then passed onto retail partners, typically omnichannel players (retailers with bricks & mortar sales at the forefront) or online specialists. There are a number of white label offerings currently in the market, such as Thirstie, Bottlecapps, Barcart and Speakeasy, to name a few.
“White label stores operate under the radar from a consumer’s point of view and are an area of opportunity for brand owners – especially smaller players – to ‘own’ the entire buying experience,” remarks Rogers. “For most brands, marketing and driving traffic to a brand site is what they do best, and white label stores allow them to focus their efforts on this without worrying about legal or logistical hurdles. Furthermore, they retain ownership of all customer-transaction data,” he adds.
White label storefronts tend to be leveraged most often by premium brands and craft offerings, compared to mainstream products with full distribution networks and/or larger budgets to spend on premium placements in 3rd party ecommerce platforms.
Ron Inmortal, a new premium aged rum from Colombia that launched in the U.S. in late 2020, for example, uses Speakeasy as part of its ecommerce strategy. Luis Fernandez, Founder and President of Yotomo Imports, brand owner of Ron Inmortal, told IWSR, “Right now, as a small start-up brand, Ron Inmortal is only available in a few areas, and so ecommerce is enormously important. Working with Speakeasy, people across the US are able to discover and purchase my rum. I don’t have to wait until I have full distribution in those states where they deliver. That’s a huge advantage for a new brand – to broaden awareness and access to my product – it’s crucial to building consumer loyalty and excitement.”
Craft and premium products often use a white label solution to expand their geographic distribution reach while sharing the brand history and heritage to potential customers. Brands are able to offer consumers their limited releases through the storefront, whereas finding them in the normal bricks and mortar distribution channels would be more difficult.
For example, in an effort to reach more consumers with its rare and limited release expressions, The Macallan partnered with Thirstie to create an online e-boutique. The e-boutique provides educational information and interactive technology that allows consumers to discover and learn about The Macallan releases. They are then able to purchase directly through the website as well, with orders fulfilled by local retailers.
Many brands are also leveraging the white label storefront as an opportunity to talk directly with a consumer to develop brand loyalty – for example by offering discounts with multiple purchases or by including brand assets in the delivery, such as recipe cards, swag or personal messages.
Brands do need to remember, however, that building a white label storefront is only part of the puzzle. “Just because a consumer can go to a ‘brand owned’ store, it doesn’t mean that a wide and receptive audience will be waiting,” cautions Rogers. “To drive traffic to an embedded store means planning, digital and social media support, a database, strong brand PR, and more.”
As technology continues to make it easier for brand owners to navigate the three-tier system, online alcohol sales in the US are expected to increase rapidly from their current low base, significantly outperforming the wider drinks market. IWSR expects online alcohol sales in the US to jump to 1.6% of total off-trade volume in 2020, and reach 6.9% by 2024.
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