Did Amazon Just Kill Liquor Retail As We Know It?

Last month, Amazon moved one giant step closer to world domination. With the purchase of Whole Foods it is clear Amazon intends to disrupt several new industries at once — including the beverage alcohol industry.  Overnight, Amazon gained more than 330 new liquor licenses across 41 US states. This will undoubtedly shift the way consumers acquire and engage with beverage alcohol. I met with Amazon recently at their Seattle Headquarters and it was made crystal clear to me that they are a mobile first company. Initially this gave me pause — I mean, Amazon is SO huge on the web. It’s an enormous audience to transition to a mobile platform. Were they able to do it this quickly? The short answer is: yes. As it turns out, more than 72% of Amazon’s customers buy on mobile today.   Let’s consider the impact of this. Amazon accounts for 40% of all e-commerce. So, when Amazon says they are mobile-focused, you can be certain your competition is not just down the street, or on the web, it is in your customers’ pockets.

But let’s take it back to brick and mortar for a moment.

Amazon’s purchase of Whole Foods also aggressively furthers its development into physical retail. Amazon is poised to redefine brick and mortar shopping, making it a seamless omni-channel experience — they have already started with Amazon Go stores in test markets, like Seattle.

And consumers want this: 77% of U.S. shoppers are already using their smartphones to help them shop while in a store.

Let me paint a picture for you:

Imagine your local Whole Foods with products 40% cheaper than they are today and no lines at checkout. In fact, there is no checkout at all. You simply walk out the door with bags full of groceries and your credit card gets charged automatically.  When you enter the store, you are alerted on your phone to products on special related to previous purchases, and then are directed to their location within the store. Produce is weighed, bagged and tagged, and those tags wirelessly tell the store how much to charge you. Every product has a digital price tag on the shelf with dynamically updating prices, based on demand, market conditions, sales, brand offers, etc. Coupons, rebates and affiliate points in your account are credited when you leave the store.

Alternatively, you do all of this from your home and everything comes to you in a few hours. Or, you order online and run down to the store and pick your pre-packaged groceries up at a drive-through kiosk. Regardless, you just spent 50–75% less time shopping for your weekly groceries at a fraction of the price.  Convenience and low-pricing — enabled by efficiencies, economies of scale, ultra fast delivery, and personalized service: THIS is the new retailer paradigm and Amazon is taking us there, whether we want to go or not. Let’s now take a step back and put this in broader perspective: I’ve witnessed many major societal “tipping points” in my time — moments in time where technology and new thinking have caused a substantial shift in the way humans interact with the world around them. Think the PC, the Internet, the web, the mobile phone, iPhone & apps, Amazon & ecommerce & Prime, Uber, Tesla, etc. With each advancement and paradigm shift we do more with our time and money, while regular tasks become easier. What Amazon did last month will have similar, far reaching implications for generations to come in terms of convenience, spend, and how we interact with brands. So, what does this mean for beverage alcohol? First, let me re-iterate that 330 Whole Foods across the U.S. sell wine. If one is near you (and by “you” I mean you, the owner of a liquor store), it is time to start thinking hard about how you are going to keep your customers. For several years Amazon has been perfecting the art of local delivery with Amazon Fresh and Amazon Prime Now. The Whole Foods acquisition gives them delivery hubs nationwide to aggressively compete on grocery and alcohol delivery.

Their market saturation dwarfs even the largest same-day grocery delivery competitors like Peapod and Instacart (10% owned by Whole Foods, btw), not to mention the smaller alcohol delivery players. And with 80% of Amazon users purchasing at least once a month, their user retention blows just about everyone out of the water.  Even your most loyal customer can’t resist the temptation of convenience at a good price. How in the world do you compete with that? The short answer is: customer experience. 89% of executives believe that customer experience will be their primary mode of competition this year. With new competitors, new legislation and new technology quickly changing the game for liquor retail, making your customer experience the best it can be is more essential than ever.  Consumers not only expect their shopping experience to be seamless and pleasant — they expect to be “wowed.” A clean and organized store, friendly and knowledgable staff, interesting selections and attractive deals are mandates. To stand out, you have to go above and beyond. To do this, you need to be where your customers are, which in large part is on their phones. Americans spend a whopping 90% of their digital time on their phones, and 87% of that time they are using apps.

Capturing an audience through your own mobile app, gives you a way to connect with customers outside of the store and provides valuable consumer insights that will help you stock the shelves with items that sell and target offers to consumers based on their interests.  Having a mobile app also allows consumers to buy quickly, easily, and at their convenience, and drives incremental customer spend. We have seen Drync-powered apps increase top-line sales by 4% YoY — a meaningful number for most retailers. (Read: 67 Wine Case Study) There are several mobile opportunities out there — and there are plenty of companies that would be happy to use your store as a resource to sell wine through their app. You might want to do this, but you also need to build your own brand and your own audience on mobile.

Mobile is where your customers are. If you are not there, they will find someone else.

About the AuthorBrad Rosen is the Founder and CEO of Drync, a venture-backed mobile SaaS platform designed specifically for beverage alcohol retailers to drive lift and loyalty through their own, branded mobile apps.