drizly-business-model

How Does Drizly Make Money? The Drizly Business Model In a nutshell

Drizly is a North American alcohol eCommerce platform headquartered in Boston, Massachusetts. It was founded by Justin Robinson, Spencer Frazier, and Nick Rellas in 2012 after graduating from Boston College. Licensing fees are the most significant source of income for Drizly. These monthly fees are charged to independent liquor stores and retailers in exchange for using the Drizly platform.

History of Drizly

Drizly is a North American alcohol eCommerce platform headquartered in Boston, Massachusetts.

It was founded by Justin Robinson, Spencer Frazier, and Nick Rellas in 2012 after the trio graduated from Boston College. Rellas is the man credited with providing the idea for the company after trying to purchase beer in the middle of the night.

Inspired to learn more, he would later spend hours researching the intricacies of the alcoholic beverage industry. Rellas discovered a tightly regulated industry controlled by various tiers of producers, distributors, and retailers. Importantly, those holding expensive liquor licenses had so far avoided developing an eCommerce presence.

As a result, the co-founders had to adapt. They adopted a revenue model that would bypass the need to acquire a liquor license and developed proprietary technology to verify the age of customers. In 2013, Drizly launched in the Boston area. A year later, it released an Android app and expanded into New York.

The platform underwent a major revamp in 2016, becoming a marketplace where consumers could compare liquor prices and delivery options. A cannabis delivery service was also added in 2020.

In February 2021, Uber acquired Drizly in a stock and cash deal worth $1.1 billion. The company continues to operate as a standalone app under the Uber app ecosystem.

Drizly revenue generation

The company has an interesting and varied means of generating revenue.

Licensing fees are perhaps the most significant source of income for Drizly. These monthly fees are charged to independent liquor stores and retailers in exchange for using the Drizly platform.

They range from $100 to $10,000, depending on the total transaction volume, store location, and the type of liquor sold, among other things.

Delivery fees

For the vast majority of Drizly markets, there is a flat $5 delivery fee applied to each order. This helps Drizly retail partners offset at least some of the delivery cost. In some locations such as New York City, delivery is free. 

Service fees

Drizly also charges a $1.99 service fee on each purchase. According to the company, this fee is used to improve its products and services.

Cancellation fees

Under certain circumstances, canceled orders will also attract a fee:

  • A $20 restocking fee will be charged if a cancellation is made after an order has left a Drizly retail partner store. This includes orders made through a third-party courier.
  • A $5 cancellation fee will be charged if the cancellation is made before the courier picks up the order.

Advertising

Drizly also earns advertising revenue from brands that wish to advertise on its platform. Here, there is a high likelihood the company earns money on a fixed fee basis.

Key takeaways

  • Drizly is an American eCommerce platform headquartered in Boston, Massachusetts. Co-founder Nick Rellas got the idea for the company after attempting to purchase beer in the middle of the night.
  • Drizly collects a licensing fee from retail partners in exchange for being featured on its platform. These fees are based on several factors, including transaction volume, product type, and store location.
  • Drizly also collects delivery, service, and cancellation fees under certain circumstances. Furthermore, the company sells advertising space and potentially, consumer buying data.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"