For a start-up that’s done some pretty heavy lifting to successfully recruit merchants to join an innovative eCommerce platform, front-page news hailing its accomplishments is always great.
And Boston-based Drizly’s news yesterday of its $15 million in Series B funding was a noteworthy milestone, for sure.
“This round will help us really drive awareness. When I look at the last couple of years, our work has been focused purely on building technology and store infrastructure around the country,” Drizly CEO Nicholas Rellas told Karen Webster in an interview after their new funding was announced.
Wait – store infrastructure? Technology infrastructure? Aren’t these the guys who deliver alcohol on demand after a consumer has popped open and ordered from the Drizly app?
“We don’t do any delivery – never have. We connect consumers to a store in their area that sells alcohol, after that consumer has ordered from our mobile app which features the inventory from that store and then that store actually makes the delivery,” Rellas told Webster.
Drizly is an eCommerce marketplace that connects consumers who want alcohol delivered to them the same day with local retailers who are part of Drizly’s marketplace via a secure, user friendly interface. That makes Drizly nothing at all like a delivery company – an “Uber for Alcohol” – a point of confusion that has dogged them for a while, and a lot more like “Amazon for Alcohol.”
Given the heavily regulated nature of alcohol sales state by state and the lack of technology sophistication that the local purveyors of wine, beer and spirits have, Drizly’s job is easier said than done.
Most local liquor stores don’t have web sites, which means that they don’t have online product catalogues, for starters. Multiply that by the complexity of a variety of points of sale systems that inconsistently classify products, and you have a lot of work to get even one local retailer up and running – much less thousands in different states with very different regulatory i’s to dot and t’s to cross.
“Our system standardizes the information properly – which, when you think about the variety of ways small shops around the nation list and manage their inventory, is a huge challenge,” Rellas said. “This is why we spent years and tens of millions of dollars figuring that out – but not just how to do it, how to do it so well and so efficiently that consumers can order whatever they want without worrying about ordering the wrong bottle or wrong vintage.”
Drizly manages to get all of this done without interfering with the internal operations of the store, either. In fact, Rellas noted, after being vetted and accepted as a partner merchant, stores have only a one-day installation process that allows them to get on board the Drizly platform – and access the customers in their market who wish to order alcohol online and have it delivered right away.
And, because Drizly aims to be a true marketplace – consumers have the ability to customize their orders based on their preferences.
A customer in the markets Drizly serves signs into one of as many as five stores in their area and sees multiple choices, delivery times and store ratings for each. Consumers can then decide how to narrow their selection of store and delivery options. Rellas explained that if the most important thing for a customer is price, they can choose that store, but they might have to trade off delivery in 20 minutes. If a consumer wants their order right away, consumers will have to pay the price that store has set for that item. This, Rellas says, is what makes Drizly a true marketplace.
And that marketplace form is expanding as well given Drizly’s direct relationships with alcohol distributors. Rellas says that its new service, Drizly Connect, will make it possible for a customer – through a local retailer – to order wine that’s not available locally for delivery and have it shipped to arrive within 24 hours.
“When a customer places their order the retailer will use our software to bring it up to the distributor, who will then send it back down to the retailer by the next day – who then delivers it to the consumer,” Rellas explained. “We look a lot like what Amazon did with books and Kayak did with travel.”
Rellas is also the first to note that alcohol delivery and distribution is a massively complicated business. One of those concerns is, of course, the potential for a minor to commandeer mom or dad’s cellphone and use their Drizly app to order up a world of trouble. Game manufacturers, app makers, fantasy sports and even eCommerce giants like Amazon have had to deal with a number of issues related to sloppy controls to keep buying functions away from the underaged. And Drizly deals with a product that, rightfully, makes parents especially touchy.
It’s also an issue that Drizly takes particularly seriously – even though *technically* they don’t bear any liability. Remember, Drizly is just connecting suppliers – the local liquor stores – with consumers – those who want to imbibe. That said, they’ve developed proprietary technology, including mobile ID verification, to help retailers do background checking throughout the transaction to prevent the under-aged from ever even attempting to complete the purchase. They also have an army of lawyers on speed-dial, and a deeply ingrained enthusiasm for working with regulators.
All things that Rellas says has helped Drizly become successful where so many others have tried and failed – or haven’t even thought to step foot.
“There’s a reason there isn’t a lot of alcohol sold online.”
And though what Drizly has achieved so far as a new kind of marketplace where a different set of rules are required is, indeed, noteworthy, Rellas said that he and his team have only begun tapping its potential, particularly in the use of data for advertising purposes.
Despite the billions spent per year advertising alcohol to consumers – only about $272 million of it flows to digital, Rellas said, citing a recent eMarketer report. But that’s where Rellas says that there’s great opportunity to grow. He believes that the addressable advertising market is something in the order of $3 to $4 billion – annually – and that what he and his team are building is not just a consumer-facing marketplace, but the beginning of a different – and more targeted – advertising businesses.
So, the next time you see Drizly advertised as just a “delivery service for booze,” think again. And as flattering as it may be to be characterized as the “Uber of Alcohol,” the comparison that Rellas says he likes much better is Amazon.
While that comparison might cause most CEOs to reach for a few stiff drinks given Amazon’s size and strength, Rellas says he thinks Drizly is playing a game in which they feel they know the rules much better. For example, Rellas said that Amazon’s warehouse model won’t work for alcohol, and for Amazon to get a density of supply, they will have to do what he did state by state, liquor store by liquor store. Having access to drones and tens of thousands of engineers won’t make the process move any faster, either.
“This is one place where Amazon has to play on the same playing field as we do,” Rellas pointed out, emphasizing that he and Drizly, he feels, already have a running head start.