Quenching Indie Alcohol Merchants’ Thirst For Data

Bottoms up! Bottom lines, that is: With the right data and analytics, independent alcohol retailers could stop playing the guessing game and start seeing better sales.

Of course, the same could be said for any retail category. The more a merchant knows about customers and competitors, the better-positioned it is to attract and retain business. And just like any other category, the ones at the greatest disadvantage in terms of the data needed to do this are independent sellers such as small, local chains or standalone mom-and-pop stores.

Getting that data to merchants that need it, however, is never as easy as it sounds — and for some reason, it seems that indie merchants in the alcohol category are stuck even further behind than their counterparts in, say, grocery and convenience.

Brad Davis, director of product marketing, 3×3 Insights, said that is what 3×3 aims to solve.

The company pulls itemized transaction data directly from merchants’ point-of-sale systems, explained Davis. The data includes basket items only, as they appear on the receipt — no payment or personally identifiable information (PII) is collected or shared.

Then, 3×3 provides analytics back to participating retailers free of charge to help them make business decisions and optimize their inventory, while selling the aggregated basket data upstream to suppliers to help them optimize production and distribution.

Today, many independent alcohol merchants order by gut — that is, they stock whatever they feel will sell well that week. They run weekly laps around the storeroom, making sure to order anything that’s running low. It’s a strategy that may have worked for their father or grandfather when the store was founded, said Davis, but today, the time has come for a more efficient and exact method.

The Loyalty Piece

Davis acknowledged that many independent alcohol retailers do have loyalty programs with mobile apps that track purchases, push offers and collect and redeem rewards or rebates, and 3×3 can integrate into those programs to drive attribution back to the customer and build profiles over time.

However, he said the scale of what is needed in terms of useful data is much larger than that. It requires a view outside the individual retailer, while at the same time offering granular insights into that merchant’s specifics.

Neither of those views can be gained through loyalty data alone, because a mobile loyalty app is an opt-in experience for customers of that store only — so even if the merchant is able to learn a lot about John Doe and better serve him as an individual, no true insight is actually gained.

Moreover, Davis added, apps that drive activity through special deals and rewards opportunities are only collecting data on how the user behaves when offered a promotion. They aren’t learning about John Doe’s actual shopping habits.

Davis said the moment data really becomes powerful is when it’s analyzed in aggregate. Maybe local craft beers are selling better than national brands. Maybe people are buying Moet on Saturdays and single-serve beers on weekdays.

Whatever the trend, Davis said that data can shine a light on it, and loyalty is definitely one piece of the process — but once retailers start looking at the big picture, they can stop running those weekly laps around the storeroom and start stocking products based on how they will actually sell.

Unique Challenges

Alcohol retail has some distinct difficulties compared to categories like grocery and convenience.

In terms of legal challenges, there’s the legal drinking age, for starters. Then, there are different regulations in every single U.S. state. Some liquor stores can’t sell beer, while others can’t open on Sundays. There are 13 controlled states in the U.S.

In terms of competition, it’s likely no surprise that Amazon has created new challenges for brick-and-mortar merchants in this category, as it has in so many others.

Its acquisition of Whole Foods gave clout to a powerful player that already has the advantage of relative ubiquity. Plus, people are already at the grocery store for their other shopping needs; what could be more convenient than buying their wine at the same time? Walmart, too, is trying to get into selling spirits, at least in some states.

Then there’s eCommerce. Davis said platforms like Drizly may appear to be a great tool for independent merchants – and they do have their benefits, enabling stores to sell volume by way of an additional channel.

However, he said, eCommerce can be a double-edged sword. It eliminates the discovery aspect of alcohol shopping. In a store, people go in and explore. They may buy extra if they find something interesting. A well-positioned promotion for a trendy drink like a Moscow mule could inspire the customer to pick up some ginger beer.

Conversely, said Davis, when a customer shops online, “they’re just buying for the occasion. You’re taking people out of the store and that helps the platform more than it helps you.”