Alcohol eCommerce sales across 10 key global markets will exceed $40 billion by 2024 – ISWR. What’s going to be your share of this growing billion-dollar market?
The alcohol industry has been in eCommerce race for almost a decade. Now, the industry has witnessed unprecedented growth, forcing manufacturers and partners in the supply chain (grocers and marketplaces) to evolve better digitally to make the most out of the growing market.
In this blog we will be looking at
- Alcohol eCommerce market growth statistics
- The top categories spearheading alcohol eCommerce sales
- Key drivers of Alcohol eCommerce growth
- Reasons why alcohol manufacturers should look beyond just ‘DTC’
- Challenges in alcohol eCommerce – Shipping, legalities and more
Alcohol eCommerce growth statistics
Alcohol eCommerce is growing. The change started couple of years back and it’s accelerating right now. Here’s the number crunching from the trusted research firms and niche market specialists.
- Global Alcohol eCommerce market will hit $42 billion by 2024 – ISWR.
- Revenue in the Alcoholic Drinks market amounts to US$261.10bn in 2022. The market is expected to grow annually by 10.51% (CAGR 2022-2025). – Statista
- Global ecommerce market for spirits and wine increased by nearly 43% from 2019 to 2020.
- Alcohol eCommerce market in the USA will increase 3X from 2020 to 2025 – Statista.
- Average annual growth rate of alcohol eCommerce in the US is about +20% – Beveragedaily
These statistics clearly suggest that the alcohol eCommerce market is growing and the US market will soon be leading the change. With that said, let’s look at the top categories spearheading alcohol eCommerce sales.
Top categories spearheading alcohol eCommerce sales
Wine leads the alcohol eCommerce sales contributing 62% of online sales – Rabobank
The number crunching indicates an upward trajectory of alcohol eCommerce in the upcoming years. How did this market segment, which was way behind in the eCommerce race, suddenly gain the spotlight? Certain factors have accelerated the growth in alcohol eCommerce. Let’s have a look.
Key drivers of Alcohol eCommerce growth
Like any other market segment, alcoholic beverages also saw a surge in the growth of online buying during the pandemic. 44% of American consumers ordered alcohol online for the first time during the pandemic, leading to a 42% growth in alcohol eCommerce in 2020.
Wine sales peaked during the pandemic. Online wine sales were up by more than $3 billion in 2021 compared to just $ 1 billion in 2018.
Millennials and the legal drinking age (LDA) population in the US is steadily increasing. By 2023, millennials will contribute to almost 45% of the LDA population under 80. By 2030, the younger crowd will be nearly 54% of the legal drinking age population.
These younger crowds are digital natives who have different expectations in terms of the online purchase experience. Considering the expectations of tech-savvy buyers and other operational and legal factors, wineries and alcohol brands will have to align their digital strategies to win over consumers.
Reasons why alcohol manufacturers should look beyond just ‘DTC’
Customer preferences – DTC is just another channel, not the only channel
Most of the consumers who opted for this model were connoisseurs of wine and a bunch of special edition collectors. They were ready to wait for a long delivery time and were very particular about the choice of wine, which is offered only by select wineries.
With few other options, consumers were ready to adjust to a cluttered and poorly organized online experience to get what they wanted. The scene is different now. With more options like online marketplaces, grocers delivering alcohol online, consumers will choose faster, easy and smooth online experiences drifting away from just DTC sites.
The collective strength of other sales channels – Marketplaces, grocers
Online sales in the alcohol industry started off in a DTC (Direct to Consumer) model where wineries directly sold to customers via their websites or portals. Despite the strong DTC foothold, most online sales of wine, in particular, are happening through the three-tier ecosystem. A three-tier system is where manufacturers sell to licensed wholesalers (Tier 1), wholesalers sell to retailers (Tier 2), and retailers sell it to consumers (Tier 3). 75% of online wine sales are happening through the three-tier system
Apart from DTC, the three major channels through which online wine sales happen are ‘Specialty retail’, ‘Online Grocers’, and ‘Marketplace websites’. All three eCommerce channels witnessed a significant increase in sales between 2019 and 2021.
Specialty retail – (e.g., Total Wine & More, Wine.com): +85%
Online grocery – (e.g., Costco, Target, Walmart): +235%
Marketplaces – (e.g., Drizly, Instacart): +280%
These statistics indicate that alcohol and wine manufacturers will have to start focusing on B2C more to bank on the rise of alcohol eCommerce.
Multiple digital presence earns brand popularity
Alcohol manufacturers and wineries prefer offline advertising as their prime source of branding. Now, their audiences are looking elsewhere. The millennial lot ordering alcohol online is influenced by what they see on their smartphones. The more they find your alcohol brand on a marketplace website or a grocery store, the more they get aware of your brand.
They expect clear product information, clear product images, persuasive product descriptions, and more to make their purchase decision. Only 5% of wine suppliers are proactively working to manage their products’ images and descriptions on Wine.com.
Your consumers aren’t buying only alcohol
Your brand or product might be one of many reasons your customers shop online. They mix it up with their other purchases. Adding a rare wine to their cart in a month’s first bulk grocery purchase or adding a whiskey alone with a family dinner meal has become commonplace. Your brand should be prepared to cater to other intents like these that result in a purchase of your product.
Though shopping for alcohol online is not the first preference, it’s a cocktail of opportunities you can’t afford to miss. As an alcohol brand, you can partner with grocery stores or restaurant chains to recommend your bottle of wine or spirits to their regular customers. However, it needs a lot of strategic planning, management, and demand forecasting to keep the partnership running smoothly.
Challenges in alcohol eCommerce
Like the Cannabis industry, licensing is a challenging part of the alcohol industry as well. You might have a variety of products like wine, beers, and spirits. It is important to know what you can sell online and what marketplaces allow online sales. By understanding the licensing in your locality and the markets you plan to sell, you can handpick your portfolio of products.
8 states in the USA still don’t allow alcohol delivery – Jaci Flug, Drizly’s vice president of regulatory affairs. Understanding the shipping regulations of each of the states and the carriers you can choose to deliver alcohol to is important to stay compliant with the shipping rules. As many states have started opening up alcohol delivery regulations, it’s a fine opportunity for companies to utilize.
Sellers are responsible for paying the taxes levied for alcohol, be it federal, state, or local taxes. Like shipping regulations, the taxes also differ from state to state. Due to this, often tax calculations can get complex as there are so many layers of tax regulations to consider. Using tools like Avalara to automate tax calculations can help you set the right price for the products you ship directly to consumers.
The future for Alcohol commerce
The pandemic served as the turning point in opening up a wide online market for the alcohol industry.
The future looks promising for alcohol manufacturers. They can now invest in delivering new digital experiences with confidence as their consumers have started demanding B2C-like experiences.
Soon, alcohol manufacturers who have their digital experiences scattered across sales channels like online stores, grocery stores, marketplace websites, and so on will have to start gathering intelligence by analyzing customer behavior. By leveraging first-hand data, alcohol brands can – make smart business strategies and predict demands and merchandise products. Most importantly, build a truly omnichannel presence that delivers personalization at every level.