Retailing Liquor Online

Developing an E-Commerce Strategy

You can buy almost anything online these days. As e-commerce continues to grow, liquor retailers looking to enter the online marketplace have to make some big decisions regarding cost, delivery, labour, delivery and shipping, inventory management and your competition’s strategy.

Cost
The single biggest factor in developing an e-commerce strategy is cost. Online retailing is a considerable investment even when done on a small scale. Juanita Roos, owner of Color de Vino in Edmonton, is launching a new e-commerce website in early 2017. She jokes that she could have bought three cars with the amount of money she’s invested in the site, which was developed by a local web design firm. “It’s so expensive–it’s a huge investment,” she says. She notes that they are hoping online sales will account for at least 10% of their total sales revenue to recapture the initial investment cost.

There are many e-commerce platforms available and they often look inexpensive on first glance, though the monthly price tag doesn’t take into account the costs associated with building and maintaining a website from scratch. Roos notes that she first experimented with a do-it-yourself model that only cost a few hundred dollars to set up, but was very limited in its flexibility.

Elliot Porozni, managing director of Highlander Wine & Spirits in Calgary, echoes Roos’ sentiments about the high cost of developing an online sales platform. He notes that there’s a lack of software sophisticated enough to handle the unique requirements of selling liquor online and that many programmers don’t understand the significance of unique aspects of the liquor industry, such as the importance of wine vintages.

 

“While we’ve been online for four years, we’ve been constantly evolving and we’ve changed our software multiple times,” Porozni says. “As we speak, we’ve got a company working on improving the customer experience, improving the shopping cart. We don’t love the template; we don’t love how it’s interacting. So it’s been four years of non-stop capital investing and trying to tweak it so that it works.”

We’ve been constantly evolving and we’ve changed our software multiple times.

Labour
Websites need people to run them and the more sales done online, the more staff is required. Labour is another significant consideration for an e-commerce strategy, as staff are required to build orders, handle shipping or delivery, respond to customer inquiries, update online information, and respond to any technical issues.

Bin 104, a small wine boutique in Edmonton, has offered online sales for several years. Owner Bill Tanasichuk maintains the site himself, though he’s currently reconsidering this approach due to a lack of customer uptake. “There is a lot of work to maintain that database and I don’t have the staff to do it,” he explains. “It’s actually not something that a lot of people use, I’ve found. We’re not getting a great deal of response from it.”

Delivery and Shipping
As people become more accustomed to having products delivered straight to their door, delivery capabilities must be factored into e-commerce.

Liquor Depot, one of the brands under the Liquor Stores N.A. portfolio, began offering on-demand liquor delivery in early 2016 through a partnership with Drizly. A US-based firm, Drizly promises delivery within one hour during a set time period, seven days a week. The product is pulled from the shelves of one of four Liquor Depot stores in the city and delivered for a flat fee of $5.

“You’ve got to recognize that e-commerce is a component of retailing today,” says Stephen Bebis, CEO of Liquor Stores N.A. “All we’re doing is listening to our customers. We try to take care of our customers as best we can, and they like buying from all different channels.”

Handling delivery in-house means that most retailers cannot offer it on-demand, as online sales could quickly outpace delivery resources during peak times. Color de Vino offers free delivery within a 15-km radius of the store, and a reasonable surcharge outside that boundary. Highlander offers free delivery on orders over $150 and a flat $25 fee for any orders under that amount. Both offer free pick-up at their locations, of course, as many customers prefer the convenience of shopping online, but choose to avoid delivery fees.

Highlander is also integrated with Canada Post, which comes with an additional premium, but allows them to easily ship province-wide. However, Porozni notes that the size and weight of liquor makes it very expensive to ship–it costs about $90 to send a case of wine from Calgary to Fort McMurray. He notes that they also get a lot of inquiries from outside the province, but Alberta’s current liquor laws do not permit cross-border shipping.

Tanasichuk has also received numerous requests to ship outside the province and notes that it’s a shame to lose out on that potential revenue. However, he also notes that it strengthens the need for retailers to maintain a strong local presence in their community.

Inventory
Keeping online stock in sync with actual warehouse inventory is a critical component of e-commerce. While a manual-entry system is the most cost-effective means of selling online, keeping that database updated takes a considerable amount of time and effort.

Keeping online stock in sync with actual warehouse inventory is a critical component of e-commerce.

Because they are hoping to make e-commerce a significant revenue stream, Roos opted for an e-commerce platform that’s fully integrated with the store’s point-of-sale system. This ensures all online stock is real-time and prevents the risk of selling out in-store before filling online orders. This also allows her to make her entire inventory readily available for online purchase.

Highlander takes a different approach, choosing instead to keep online inventory separate from in-store stock. This offers the advantage of not having to worry about updating the system if something sells out at one of their locations, but also entails additional overhead costs including extra inventory and warehouse space.

Competition
As the online market becomes inundated with retailers, standing out from the competition is key. Offering unique and interesting products is one way to stand out from the crowd. “We do a lot of importing with some agents for exclusive products and we do a lot of restaurant work,” Porozni says. “So we have a lot of products that are unique to us and wanted to offer those online.”

Similarly, Roos plans to offer their unique selection of barware as well as beer and wine programs, which rotate on a monthly or quarterly basis.

Ultimately, e-commerce is both a huge opportunity and significant challenge for all sizes of liquor retailers. “We’re trying to get access to customers that don’t live in this community and don’t shop here,” Roos says. “There’s a whole other market that we could reach.”