This column was submitted by Norrelle Goldring, retail strategy, marketing, and experience industry expert, for the July issue of National Liquor News.
During the first dotcom bubble in 2000 I briefly worked at Wine Planet, one of the Australian liquor industry’s first online pureplays, and one for which CUB received flak from the major bricks and mortar retailers due to its stake in the company. So what’s changed since then?
To begin with, the bricks and mortar big boys are now some of the biggest in the online space, Dan Murphy’s and BWS in particular.
The size of online liquor sales has been growing steadily. According to a KPMG 2017 Global Online Consumer Report, alcohol was the third most purchased category online after ‘women’s apparel’ and ‘books and music’ – beating out online sales of men’s apparel and electronics. KPMG indicates that bricks and mortar retailers have opportunities in the online space due to consumer familiarity with and trust in them.
In Australia, according to IBISWorld’s Online Beer, Wine and Liquor Sales Report released in January this year, online liquor sales are were worth $446 million, or approximately four per cent of total liquor in the current year. This is in line with online grocery sales, which are currently around four per cent of total grocery. Industry revenue is expected to increase by 11 per cent in the five years through 2017-18, and forecast to grow by eight per cent each year through to 2022-2023. (Note that as the size of an industry increases typically the growth rate slows in percentage terms as the growth is coming off a higher base the bigger it gets).
NAB’s April 2018 Online Retail Sales Index backs this up, stating that online grocery and liquor are growing at 18.9 per cent, vs 14.1 per cent 12 months ago.
IBISWorld attributes the forecasted growth is partially due to ‘operator improvements in sales systems and delivery methods.’ BWS’ 1.5 hour delivery using Sherpa is an example of this.
With 142 businesses stated as being in the online liquor sales space, it feels quite small (but that may just be the online pureplays). At any rate there’s plenty of room for more players, particularly independents. Banner groups such as Liquor Legends, Cellarbrations and Liquor Stax don’t typically appear to do e-commerce at the group level, but their independent member bottle shops may; The Crafty Club is an example of this. Although there is an opportunity at the group level as a sale can be attributed to the store fulfilling the order closest to the customer’s specific catchment area. (Harvey Norman have tried this with their franchised stores, for instance). There are also regional opportunities if the shipping costs can be figured out. Craft beer lovers in Wagga for instance may currently buy from Plonk in Canberra.
Online pureplays include outfits such as BoozeBud, Jimmy Brings (inner city, but may expand), Hops to Home, Vinomofo, Cracka Wines, Naked Wines, and The Booze Exchange. MyBottleShop.com.au bill themselves as ‘Australia’s #1 online drinks shop’, although it’s not clear by what measure (sales volume?)
Bricks and mortar retailers operating in beer online include Beer Cartel, International Beer Shop, and SlowBeer (one of the first to go online meaningfully in the craft beer space).
Shoppers buy online because they’re looking for range size, convenience, price and product quality (freshness). Typically the current retailer offers above are split into either what I would term ‘core range convenience’, or niche, premium, rare and hard to find products. Those doing the core range convenience also look at speed and convenience of delivery (such as crowdsourced deliveries), and price.
Positioning options for bricks and mortar retailers considering e-commerce include:
- Category specialisation: Bourbon, Japanese whisky, saké, soju
- Rare and/or interesting/niche/premium specialisation
- Basic core range: Good price, convenient and fast low/no cost delivery options (eg free delivery over certain spend levels, typically $50-$100).
A note on premium: While online sales might not be for cashed up punters looking to hide cash by buying premium products (they can’t get cash discounts online), it has a role as a service channel for these consumers. (Cash is dying. According to the RBA’s Consumer Payments report in 2016, the cash transaction rate had dwindled from dominance in 2007 at 69 per cent to minority status at 37 per cent just seven years later, and continues to decline. Australia is one of the world’s top 10 most cashless countries.)
From my personal consumption experience, I still think the evening ‘I’ve run out of wine’ occasion is an opportunity, outside of typical business hours and when the physical liquor stores have shut. There’s an opportunity for retailers to think about the drinking occasions and work to those. If you look at pairing with dinner, for instance, commercial opportunities include add on/partnership with pizza companies and meal delivery platforms such as Menulog for instance. Local independents could buddy up with the local pizza, Chinese, Thai, Indian, and Italian takeaway joints.
Even if you elect not to go the e-commerce route, a website is still virtually mandatory. Aldi don’t yet sell online in Australia (they do in the UK) but they use their website to demonstrates range, promote their special buys, and for branding. Liquor retailers can also use their websites to promote their physical store catalogue tie-ins.