Everything You Need To Know About The Drizly Business Model
Everything You Need To Know About The Drizly Business Model
It’s 8 pm on a Saturday night and your friends have decided to invite themselves to your house for a party. Tomorrow is a Sunday and you are sure that the party will go on for a long time. As you go to your kitchen to see if you have anything to eat, you realize that you don’t have any alcohol in your house. Like any good host would, you decide to buy some alcohol for your friends. Obviously, you can’t leave your house unattended, but thankfully you have Drizly to deliver your alcohol right to your doorstep.
Alcohol consumption has become a staple for most bachelor parties on the weekend. Most people get drained from working till Friday and then Saturday is their day to have fun with friends and drink casually. But when you decide to have parties last minute, it can be difficult to leave the house to buy the alcohol. This is when an app like Drizly comes to mind.
Drizly is one of the world’s leading alcohol marketplace which connects alcohol consumers to sellers (liquor stores) with the help of an e-commerce app and website. Since its inception in Boston 2012, Drizly has carved an established name for itself in the industry and has been able to grow constantly, to eventually transform the way alcohol is purchased throughout the world. The people behind the success of this company are the co-founder’s Cory Rellas and Nick Rellas. Currently, the app has more than 3000 liquor shops associated with them all over the USA and Canada and offers different spirits and alcohols.
The app has observed immense growth and has managed to become a dominant player in the market with the second-largest share amongst all on-demand alcohol delivery providers. Although the company doesn’t handle the delivery itself, but the popularity it has gained among customers has influenced many liquor stores to join the platform. Drizly’s revenue model of charging membership fees has also helped the company add on more sellers.
A look into the alcohol beverage industry shows that the industry is expected to reach $1,684 billion by 2025 in comparison to $1,439 billion in 2017, i.e., a CAGR of 2%, but the growth is expected to be more exponential over the next few years. The ones that have invested their time and investments in the industry have already observed fast returns and there is a huge demand for these drinks. In addition, there is a huge scope for improvement in the distribution system which will later add on to the profits.
How An App Like Drizly Works?
In simple terms, Drizly allows customers to shop for alcohol from their smartphones with the help of just an app. The two parties involved in Drizly are the customers and the business (liquor owners). The reason why Drizly is famous is because of the convenience it provides. The app works with more than 3000 liquor stores in New York, Miami, Los Angeles, Chicago, California, etc, and offers a wide range of drinks including beer, wine, whiskey, non-alcoholic beverages, mixers, and many more types of alcohol drinks.
In order to make the delivery actually possible, these steps are followed:
- The customer goes to the app and places an order for the beverage he wants to purchase and chooses a liquor store near him
- The order is then directed to the store which takes care of the delivery. The store makes sure that the order is fulfilled before an hour
- Customer is well informed during the entire delivery process and can easily track his/her order via the app
With Drizly, although the order reaches the customer within an hour in most cases, the company does not assure one-hour delivery. This is because the delivery is handled by the store and not the app. Additionally, conditions like traffic, poor signal, rain, etc can also affect the time.
Drizly acts as an intermediary between the sellers and buyers, and with the help of its technology and streamlined efforts; more and more customers have been added to the app. This is exactly what forces the stores to join the app. Because order delivery is fulfilled by the store itself, it would seem better for these sellers to just bypass the app and ask customers to order directly. However, Drizly has been able to provide top-notch functionalities and great incentives in order to make sure that this does not happen. On one hand, Drizly asks the stores to pay a monthly membership and not per order fee which would mean not taking an order through Drizly will lead to no change. On the other hand, Drizly provides sellers with an app designed just for their drivers which has an ID verification feature in it. It also plays the role of an advertiser for the liquor store, providing them with a bigger audience.
Another reason why Drizly is preferred is because of the kind of quality checks it has before working with any liquor shop. It carries an extensive quality check on these stores and their inventory, storage space, distribution system, etc.
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Funding for Drizly – Growth Timeline
Since 2012, Drizly has been a part of seven rounds of funding. In its funding conducted in December 2018, Drizly was able to secure $34.5 million from 17 investors, some of them being Baird Capital and Polaris Partners. Apart from this, as of August 2020, Drizly has collected a sum of $120.3 million over the years. The company has been a huge success when it comes to funding because of its unique concept and business model, which translates amazingly from paper to real life.
Additionally, as of January 2021, Uber has announced that it plans to acquire Drizly for approximately $1.1 billion in cash and stock.
Drizly Business Model
Unlike most of the on-demand delivery apps; Drizly neither sells its own alcohol nor does it have its own fleet. Drizly is built on a unique concept where the app only acts as an intermediary between the sellers and buyers. It just redirects all the traffic it gets to a particular store and lets them take care of the delivery. Drizly is more like an advertiser for these sellers/stores. It just acts as a tech intermediary that brings the necessary parties together and offers them functionalities that the sellers themselves would not be able to provide. Drizly’s business model focuses on offering an exclusive and extensive range of alcohol at affordable prices. Drizly has integrated these stores and their delivery management system in an efficient manner that allows delivery between 20-60 minutes.
For an on-demand alcohol delivery business to survive, liquor stores are necessary. For an app like Drizly, these stores make sure that the demand is fulfilled and that too within an hour. Hence, having sufficient suppliers is necessary for Drizly. Before adding these stores to the platform, Drizly conducts a quality check on them to check whether standards are maintained for certain parameters like product storage, pricing, distribution system, etc. After this quality is thoroughly done, Drizly then adds these stores to its platform and integrates their delivery system with the app. The liquor store’s POS system is also integrated, which makes sure the inventory that the store holds is updated on the platform. Once the store starts delivering via the app, Drizly provides them with a wider audience and makes sure they reach more customers.
The company also sells stores with a zip-code subscription which makes sure they become the preferred alcohol provider for a specific area.
Charges For Joining The Platform
Liquor stores that join the platform need to pay a monthly subscription fee which is directly paid on the app. On the other hand, a customer pays a delivery fee of $5, this goes to the liquor store. A customer also needs to purchase products worth $20 at least for one order.
The alcohol delivery market comes with its own set of rules and regulations. The sheer number of laws involved acts as a barrier for companies to enter the market. It is a great thing that Drizly has a clear understanding of the complicated regulations that are applied to alcohol.
When it comes to the US, alcohol distribution works in a three-tier system that is regulated at all levels. Here, bars/restaurants selling these buy the alcohol from the distributor and not the manufacturer. Also, in a similar manner, consumers can only go to distributors or bars to buy alcohol, but cannot go to the manufacturer. If this wasn’t enough, multiple taxations, requirements, varied age limits add to the complexity of the industry.
While this complexity might seem daunting, Drizly has managed to turn it into an opportunity. It has been able to gather information regarding the industry and use the same to build a business model that works best in the industry. Drizly doesn’t hold possession of the alcohol, it doesn’t offer delivery on its own and it also doesn’t take any margins on the individual sales, hence it manages to only what is needed and still has a model that works best for everyone. Drizly is not just about delivery, but it is about much more.
Now that we have understood how Drizly basically works, it is also necessary to understand how the company earns money. Drizly’s main source of earning revenue is through its liquor store partners. The app charges a monthly fee from its partner stores. This fee ranges between $100 to $10,000 and depends on various factors including area, delivery value, affordability, etc. Additionally, Drizly doesn’t ask its partner stores to pay a margin from individual sales. In this way, Drizly manages to stay out of the actual alcohol delivery but still manages to offer unbeatable features.
When it comes to the customers, Drizly charges a delivery fee of $5 which is directly given to the liquor store. The app doesn’t add any additional charges to the price of the alcohol, and the prices listed are the ones decided by the store. In addition to this, Drizly also has its age verification framework that can be offered to other companies for monetization purposes.
What Makes Drizly So Unique?
Drizly has a full-proof business model that doesn’t just look good on paper, but it also translates seamlessly into real life. It offers various functionalities that others in the industry are still trying to perfect, some of these include:
1. Ease of use- Drizly’s application has a simple and easily understandable user experience that allows customers to look for drinks of their choice. It has easy navigation that allows the customer to filter out the kind of spirit they want, the brand they like, and the price point they are willing to pay
2. Knowledge of customer preference- Through its operations over the years, Drizly has been able to collect information on user preferences which allows the app to provide better services. This kind of knowledge is unmatchable
3. Ample choice- The app has more than 2,000 products listed on the platform that offers customers with a huge range of choice. Because Drizly does not add additional costs to these products, the alcohol is also provided at the best prices
4. Reach- Drizly operates in more than 100 markets across the USA and Canada and offers services in multiple countries.
5. In-app experience- With its easy to navigate UI/UX, Drizly offers a great in-app experience for the customers as well as the store owners.
6. Quality of alcohol store owners- It is extremely important to make sure that the sellers in your alcohol delivery business are providing the best products. Drizly makes sure of this with the help of its quality check process. This is done before a store is able to join the platform.
Apart from the ones mentioned above, it is also necessary to ensure that a top notch customer experience is offered to each and every customer that buys from the app. These experiences can lead to long term relationships with customers who will keep coming back to buy more. It is also necessary to ensure that deliveries are made as quickly as possible. People only prefer home delivery because of its fast nature, and hence an app like Drizly needs to ensure that its customers’ needs are fulfilled in the assured time.
This was everything that you needed to know about the Drizly business model. If you are looking to become the next Drizly of your country, make sure you understand the regulation and laws of your country. The industry is becoming competitive as more and more players are starting to see this as a viable industry. It is important for a company like Drizly to understand the trends of their industry and become the first one to act on them.
Frequently Asked Questions For Drizly Business Model(FAQs)
A1) Apps like Drizly generate revenue through the following methods:
A2) Although the cost of building an app varies on the basis of complexity , building an app like Drizly can cost between $40000-$50000 including everything, from idea to delivery.
A3) To assure the safety of your idea we will sign a non disclosure agreement with you.
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