Delivering booze is a tough business. It’s heavily regulated, only customers of a certain age can buy it and the sale of it is governed by a three-tiered system wherein producers can only sell to wholesalers, who can only sell to retailers, who are the only ones allowed to sell to consumers.
And that’s before you throw in the esoteric liquor laws of state and local jurisdiction. Take, for instance, that nearly 100 years post-Prohibition, there are still eight towns in Massachusetts where the sale of alcohol is illegal.
But for Chris Vaughn, CEO at Saucey, those idiosyncratic regulations weren’t the first thing that he and his team focused on when thinking about disrupting the still very analog alcohol ordering and delivery business.
The first thing was whether or not most consumers shopped for alcohol the way he did, based purely on convenience and need.
“And what we found is that the majority of the time, that is, in fact, the driving consideration for shoppers,” Vaughn told Karen Webster in this week’s The Matchmaker Is In. “Consumers didn’t so much care where that was — grocery store, liquor store or corner convenience store. What consumers wanted, over and over again, was the easiest, most direct route … to buy a bottle of wine or spirits.”
So, Saucey knew that if it could offer alcohol delivery fast — within 30 minutes — they had a winning product based on the way consumers tended to shop.
Next, Vaughn and the team zeroed in on the regulatory hairballs by talking to the regulators themselves, with an idea of how they could innovate beyond simply operating within the letter of the law.
“We wanted to fully understand the rules before we started building technology,” Vaughn said. “More than just being compliant, we wanted to know what problems regulators were facing, beyond compliance, and whether what we were building could provide more visibility and better tools for an industry that was very antiquated.”
Lesson One: partner with existing retailers whose inventory Saucey could deliver.
Recruiting partners was challenging at first, mostly because they ran into lots of brick-and-mortar retailers that were already offering free delivery and didn’t see the benefit of signing on with an untested platform to enhance a service their customers didn’t use much.
But after 30 or 40 rebuffs, Vaughn said they finally got a yes — from a new owner in his 30s who’d just inherited a liquor store in West Hollywood that had no delivery service at the time.
“He didn’t want to deliver, so my co-founders and I did like the first thousand deliveries ourselves,” Vaughn said. “And [we] learned a huge amount, like how to get in and out of stores, how to build paths for maximum efficiency and how to run our service so that it was the best value for retailers and customers.”
They also learned that working with a retailer that already had its own delivery business, complete with drivers and dedicated vans, also wouldn’t work for their business. Within a very short space of time, it became clear to Vaughn that relying on someone else’s delivery networks caused them to fail on the delivery of their core value proposition: getting the delivery to the door in 30 minutes.
“We saw that if we were having this kind of trouble on a handful of deliveries a day, we were never going to scale to the point where we could send these folks hundreds of orders a day,” Vaughn said, adding that he knew early on that Saucey had to build a logistics network to really be a partner to local retail.
A logistics network that now employs 3,000 couriers, most of whom come trained by another gig economy business, like Uber or InstaCart.
Bringing in the Customers
With business on board and a delivery team at the ready, the challenge was to get customers to use the service. The good news, Vaughn told Webster, is that alcohol consumption is social by nature, which means there is a good chance that the person receiving a delivery has friends or family over to see the wonder of 30-minute alcohol delivery in action.
That, he said, is word-of-mouth-friendly, particularly because the company so strictly adheres to their fast delivery guideline.
“I think a lot of our competitors say that the 30-minute part doesn’t really matter; customers will drink it when they get it,” Vaughn said. “But we have found that when customers are waiting past 45 minutes to an hour, they are starting to brush up against the amount of time it would have taken them to just get it themselves at the store.”
Convenient, he noted, but not the really “magical” experience that customers have when they click a button on their phone and, half an hour later, just as they are getting ready to plate dinner, the bottle of wine arrives to accompany the food.
Vaughn said Saucey will oftentimes do some pretty eye-catching things to get the customer’s attention. He recounted a story of a partnership with the Sinatra family and Jack Daniels when they first started, where anyone ordering a bottle of Jack Daniels from Saucey got it delivered by a Frank Sinatra impersonator who serenaded the customer upon delivery. Saucey has also created “sleepover packs” that were delivered by underwear models.
All of these things, Vaughn said, traded on the fact that alcohol is a social lubricant and marketing in the space often misses that point.
“A lot of what you see out there today is ‘buy this bottle because it is discounted this much,’’’ Vaughn said. “That’s a terrible way to structure marketing for brands that sell a product that lends itself to marketing around what people are doing,” adding that since Saucey already has someone at the customer’s door, that’s a great time to create a message that really carries.
Plus, he pointed out, every customer who uses the Saucey platform has the same experience, right down to the ID they have to present and have scanned with every order to complete the transaction.
“We built that directly into the driver application: Every single order does an ID check and can’t be completed without one,” said Vaughn. “The customer can be 100 years old, but their order won’t be completed without an ID.”
And while that might seem like something that scares customers off, in fact, he said, it actually enhances the experience because it is so consistent.
The problem with alcohol sales and delivery is that once you figure out all the compliance stuff and the “chicken and egg” parts of the platform ignition, the pressure to expand quickly mounts.
But it’s pressure that Saucey is avoiding. They aren’t looking to have a toe-hold in a lot of states and spread themselves thin. Instead, they are looking to dominate a single market. Granted, that would be California, which is the nation’s largest market for alcohol consumption. And to that end, Vaughn noted, they’ve been successful.
The other problem is that competitors abound in the field, including some rather big and scary ones, like Amazon. With its recent acquisition of Whole Foods, Webster pointed out that Amazon is now a much more competitive player.
Vaughn, though aware that one should always be cautious of Amazon, said that simple surrender is a huge overreaction, because Amazon doesn’t win every jump ball.
Amazon is great for shopping a lot of things, he noted, and they are great at delivering groceries, but their interface for actually using their grocery-ordering system is cumbersome. Alcohol sales on the web — done right, Vaughn contended — presents a similar challenge to Amazon and lots of other players looking to stride onto the field.
“Amazon has been doing this in our market for some time, and what we see so far is that they have struggled to build it out as a category,” Vaughn said, suggesting that can also always change. Still, Vaughn believes that Saucey maintains an advantage because so many alcohol order and delivery players are focused so much on the B2B distribution side that they lose focus on the need to deliver an easy, seamless consumer experience.