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Should alcohol businesses keep their e-commerce arm post-pandemic?

Alcohol Delivery

Above photo credit: Minibar Delivery

Bars, suppliers and retailers alike have launched or doubled down on their online offerings since Covid-19 hit. 

Even though on-premise (and for suppliers, on-trade) business has always been the main sales driver, it made sense to leverage on off-premise and direct-to-consumer digital platforms to sell their products for incremental revenue, especially during periods of lockdown.

But the trade-off for brick-and-mortar stores and suppliers have always been manifold. Sore points such as requiring the right staff and skill sets, suitability of products for delivery, and revenue cannibalisation, have always been an issue. 

[Read more: Spas, gyms and florists can tap on rising no- and low-alcohol trend, research says]

And even though the pandemic isn’t going anywhere anytime soon, the question of whether maintaining an e-commerce platform is worth the effort and the cost will always come up. 

According to a recent study released by drinks market analysts IWSR, the answer seems to depend on the businesses suitability with the psychology and behaviour of online consumers.

“A large proportion of e-commerce growth is likely to be cannibalisation. After all, people are not necessarily going to start drinking a huge amount more overall just because of the convenience of buying online,” states Guy Wolfe, strategic insights manager at IWSR Drinks Market Analysis. 

“But they may buy a bit more and, crucially, they may also trade up in terms of product. E-commerce purchases tend to be of higher value.” 

Brand owners concur with this point. Says Pierre-Yves Calloc’h, chief digital officer at Pernod Ricard: “Depending on the part of the portfolio, e-commerce will clearly provide additional sales. This is particularly true for the luxury portfolio. 

“Customers will not wait for premium or convenience products that they can find around the corner, but they can wait a few days to receive a very specific, high-end bottle they have ordered online.”

[Read more: New global campaign by California Wines focuses on sustainability, innovation]

In an investor call in November 2020, Diageo North America president Debra Crew also talked about how their luxury range is faring better online. “Our e-commerce business has a more premium mix of brands, and the rate per case is typically 15-25% higher than our business in brick-and-mortar.”

She adds: “E-commerce consumers tend to be younger, more urban and very interested in discovery, which [favours] whiskeys, tequilas and higher-priced products.”

This phenomenon could perhaps be attributed to how online buyers have a wealth of knowledge and choices at their fingertips. Education about a niche product, and questions on whether the merchant he or she is shopping from is the best provider in terms of value of the product, can be found in just a few clicks.

The thought of having something expensive (and perhaps heavy and bulky) delivered to you, rather than having to carry it home yourself, is also a strong convenience factor.

Ultimately, while some cannibalisation is to be expected, e-commerce can give brands a platform to build incremental sales by focusing on higher-value, niche and limited-edition products, IWSR asserts.

[Read more: 2021 alcohol beverage trends to look out for]

Beyond generating revenue, the additional plus point of going direct is that consumer data can then be leveraged upon for future marketing purposes.

States the IWSR report: “Consumer marketing and communication can be enhanced by conveying a wealth of brand information to purchasers and, in return, valuable consumer data and insights can be harvested.”

View the full IWSR report here.