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.
Table of Contents
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.
Convenience: Drizly provides customers with the convenience of ordering a wide range of alcoholic beverages from local liquor stores and having them delivered to their doorstep. It eliminates the need for in-store visits, especially during late hours.
Extensive Selection: Customers can access an extensive selection of alcoholic products through the Drizly platform, including beer, wine, spirits, and more. This variety caters to different preferences and occasions.
Age Verification: Drizly’s proprietary technology ensures age verification, promoting responsible alcohol purchasing and delivery. It provides a secure and compliant platform for customers.
Price Comparison: The platform allows consumers to compare liquor prices and delivery options from multiple retailers, helping them make cost-effective choices.
Retail Partner Growth: Drizly offers an additional sales channel and online presence for liquor stores and retailers. Retail partners can expand their customer reach without the need to acquire a liquor license for eCommerce sales.
Customer Segments:
Consumers: Individuals of legal drinking age who seek the convenience of ordering alcohol online and having it delivered to their homes. This includes busy professionals, party hosts, and those looking for a wide liquor selection.
Independent Liquor Stores and Retailers: These businesses partner with Drizly to extend their reach to online customers. Drizly’s platform offers them a way to increase sales and compete in the digital marketplace.
Distribution Strategy:
Mobile App: Drizly’s mobile app is the primary distribution channel, allowing customers to browse products, place orders, and track deliveries.
Website: Customers can also access Drizly’s services through its website, providing an alternative channel for online orders.
Retail Partners: Drizly partners with independent liquor stores and retailers, integrating their inventory into its platform. This partnership model enables customers to access a wide range of products available at local stores.
Marketing Strategy:
Digital Advertising: The company leverages digital marketing channels, including online ads, social media, and search engine marketing, to reach potential customers and drive app downloads.
Partnerships: Drizly collaborates with liquor stores and retailers to increase its network of retail partners. These partnerships are essential for expanding the platform’s reach.
Customer Incentives: Drizly offers promotions, discounts, and referral programs to incentivize customers to use its platform and refer others.
Responsibility Messaging: Given the nature of its business, Drizly emphasizes responsible alcohol consumption in its marketing messages and age verification processes.
Advertising Revenue: Drizly earns additional revenue through advertising from alcohol brands and products featured on its platform. Advertising partnerships contribute to its overall income.
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.
Element
Description
Value Proposition
Drizly offers a compelling value proposition for its users, including: – Convenience: Providing a convenient platform for ordering alcohol beverages and related products. – Wide Selection: Offering a broad selection of alcoholic beverages, including beer, wine, spirits, and mixers. – Fast Delivery: Ensuring quick delivery to customers’ doorsteps, often within an hour. – Choice: Allowing customers to choose from a variety of nearby liquor stores and their available inventory. – Price Transparency: Displaying transparent pricing and offering deals and discounts. – Age Verification: Implementing strict age verification to ensure responsible alcohol sales. – User-Friendly App: Offering a user-friendly mobile app for easy ordering. – Customer Reviews: Providing customer reviews and ratings for products and stores. – Safety: Promoting responsible drinking and discouraging alcohol consumption by minors. – Personalization: Offering personalized recommendations based on customer preferences.
Core Products/Services
Drizly’s core products and services encompass: – Mobile App and Website: Providing a user-friendly mobile app and website for customers to browse and order alcoholic beverages. – Alcohol Delivery: Enabling customers to order alcohol products from nearby liquor stores for home delivery. – Inventory Management: Offering liquor stores a platform to manage their inventory and fulfill orders. – Age Verification: Implementing age verification measures to comply with legal requirements. – Delivery Partnerships: Collaborating with local delivery partners for fast and efficient order fulfillment. – Customer Support: Offering customer support to address inquiries, issues, and order tracking. – Retailer Dashboard: Providing retailers with a dashboard to manage orders, inventory, and customer interactions. – Promotions and Discounts: Featuring promotions, deals, and discounts on select products. – Gift Delivery: Facilitating alcohol gift deliveries for special occasions. – Loyalty Program: Implementing a loyalty program for repeat customers.
Customer Segments
Drizly serves a range of customer segments, including: – Consumers: Targeting legal drinking-age consumers who want the convenience of alcohol delivery. – Liquor Stores: Partnering with local liquor stores to expand their reach and offer delivery services. – Event Planners: Assisting event planners and organizers in sourcing alcohol for gatherings and events. – Restaurants and Bars: Providing restaurants and bars with a convenient way to replenish their alcohol inventory. – Gifting: Catering to individuals looking to send alcohol as gifts for special occasions. – Corporate Gifting: Offering corporate clients a solution for alcohol-based corporate gifts. – Party Planners: Assisting party planners in sourcing alcohol for parties and celebrations. – Hospitality Industry: Serving the hospitality industry, including hotels and resorts, for guest services. – Convenience Seekers: Attracting customers seeking convenience in alcohol procurement. – Legal and Compliance: Assisting liquor stores in complying with legal and age verification requirements.
Revenue Streams
Drizly generates revenue through various revenue streams: – Delivery Fees: Charging customers delivery fees for alcohol orders. – Retailer Partnerships: Receiving a portion of sales from partner liquor stores for using the platform. – Markup on Products: Earning a markup on the sale price of alcohol products offered on the platform. – Subscription Service: Offering a subscription service, Drizly Express, with benefits like free delivery. – Promotion Fees: Receiving fees from liquor stores for featuring their products or promotions. – Loyalty Program: Earning revenue through the loyalty program by encouraging repeat orders. – Advertising: Offering advertising opportunities for alcohol brands and related businesses. – Data Insights: Providing data insights and analytics services to liquor stores and alcohol brands. – Licensing Fees: Earning licensing fees for compliance-related services and age verification. – Marketplace Fees: Charging fees to third-party vendors who list products on the platform. – Corporate Partnerships: Collaborating with corporate partners for special promotions and revenue-sharing agreements.
Distribution Strategy
Drizly employs a strategic distribution strategy to reach customers: – Mobile App and Website: Offering a user-friendly mobile app and website for convenient access to the platform. – Local Partnerships: Partnering with local liquor stores to expand the selection and fulfill orders. – Delivery Network: Collaborating with local delivery partners for efficient and timely deliveries. – Marketing and Advertising: Implementing digital marketing and advertising campaigns to attract users. – Customer Referrals: Encouraging customer referrals and word-of-mouth marketing. – Promotions and Discounts: Featuring promotions and discounts to incentivize orders. – Customer Support: Providing responsive customer support for inquiries and assistance. – Loyalty Program: Encouraging customer loyalty through a rewards program. – Feedback and Reviews: Utilizing customer feedback and reviews to improve services and offerings. – Legal Compliance: Ensuring strict adherence to legal requirements related to alcohol sales. – Geographic Expansion: Expanding its presence to new cities and regions for broader coverage.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a businessmodel. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
In a franchained businessmodel (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
