How Liquor Retailers Can Beat Out Amazon and Total Wine

September 13, 2018 In Latest News

There is no question that e-commerce giants like Amazon and Total Wine are breaking into the alcohol sales industry and encroaching on local liquor retailers’ turf. But there are plenty of ways local shops can not only compete with warehouse sites—they can even gain the upper hand over them. By diving into the data for useful insights on purchasing habits and consumer behavior, as well as hot products and trends, you can keep your business on top and the competition at bay.

What you really need to be worried about with Amazon

In order to take on the competition, first we need to take a closer look at how and why Amazon is succeeding in the liquor industry. (Don’t worry, we’ll also be analyzing its shortcomings a little later.)

By acquiring Whole Foods in July 2017, Amazon instantly gained 330 wine and beer licenses across 41 states, seemingly poised for domination. This is on top of its 140 distribution warehouses across the country, which allow Amazon to scale its beverage alcohol branch much more quickly.

What’s more, Amazon is redefining shopping not only online but at traditional brick-and-mortar businesses as well, thanks to creation of virtually transaction-less Amazon Go stores that allow consumers to simply step out with their automated purchases. It’s a completely seamless omni-channel experience.

Plus, the company doubles down on its growth with all-time-high efficiency, low price points, ultra-fast delivery, and personalized service. Ultimately, Amazon has created a new retailer dynamic that its competitors must adapt to or risk facing losses.

What Amazon seriously lacks, and how you can leverage it

Yes, Amazon has thrived on frictionless commerce. But the beverage alcohol business hardly lacks friction: Selling alcohol in the U.S. is a complicated matter. So while mass online retailers like Amazon have the resources to make some waves, they continue to run into roadblocks left and right.

Industry regulations, and in particular the three-tier system, is tangled with differing state legislation and shipping laws that can impede massive retailers like Amazon and Total Wine from totally monopolizing the game. Essentially the three-tier system protects every party involved: producers, wholesalers, and retailers. For example, even though wholesalers control their own pricing and distribution, there are laws in place to prevent them from favoring specific retailer accounts. Laws also limit the power of retailers, barring them from dictating what is available to consumers in certain situations. Basically, giants like Amazon have to play by the same exact rules as everyone else.

And you can be sure that with the whopping $65 billion the alcohol industry pays in taxes every year—to both state and federal governments—there are well-bolstered organizations, such as the Wine & Spirits Wholesalers of America, in place to protect each tier along every step of the business.

Amazon struggles with logistics and marketing
With more than 178,000 alcoholic beverage SKUs added in 2017 alone, there is more than enough market demand for many, many retailers to thrive—not just the giants. But Amazon is also suffering from an advertising issue. Because of the three-tier system’s “Tied House Laws,” the online retailer cannot receive advertising money from alcohol brands. This means Amazon has to market all of the wine, beer, and spirits it carries on its own. This requires time, expertise, and a level of product familiarity that the company just doesn’t have.

Amazon can’t dodge complicated booze and border laws
To make matters even more difficult for Amazon, regulations change state by state, and sometimes even town by town. In some states, a retailer can only obtain one liquor license. In another, alcohol delivery is illegal. Shipping across state borders is, for the vast majority of the country, illegal. Simply put, these wildly varying regulations make scaling a model as vast as Amazon’s extremely difficult.

Amazon can’t cut it with slim margins
Items with market demand often have the lowest margins, which are already thin in the alcohol industry. This doesn’t particularly suit a player in the high-volume game, like Amazon. On the flip side of this, items with higher margins are harder to find a home for. So while Amazon has stake in the alcohol industry, it’s not the company’s largest arm. And it will definitely never compete with the company’s margins from categories like electronics.

What local liquor stores offer that Amazon could never

For consumers, buying alcohol is an easy, breezy affair. Most neighborhoods have a local liquor store that provides consumers with exactly what they need or want, at the moment they want it. No waiting for delivery, no extra fees, no scrolling through search results. Swinging by your local liquor store or wine shop doesn’t take much effort. And, in fact, the in-person experience often yields better results than searching solo online.

Unrivaled product expertise
Many local liquor stores, especially beloved mom-and-pop shops, have been in the business for decades, offering the most advanced and extensive knowledge consumers could ask for. Whether it’s details of the production process, the story behind a brand, or guidance in finding a new varietal, liquor and wine shop staff are an unparalleled resource.

Personalized service and stock
Store owners live in their market, so they have a firm grasp on what the neighborhood clientele is looking for, what their price points are, and how to engage with them. Above all, the established relationship with consumers goes a long way, building trust and elevating the overall shopping experience.

One-on-one connections
With the ever-changing landscape of consumer demands, it’s important to remain in touch with what consumers need and want. By making personal connections, local stores are able to remain nimble and pivot to those constantly evolving desires and necessities.

With the ever-changing landscape of consumer demands, it’s important to remain in touch with what consumers need and want. By making personal connections, local stores are able to adjust to constantly evolving customer preferences. Click To Tweet

Inspiring consumer confidence
Local liquor store owners are experts in their craft. Not only do they know the in’s and out’s of their entire stock, they know exactly what, where, and how their consumers shop. They align their stores to meet consumer demands, offer promotions to inspire exploration, and are single-handedly the biggest disruptors in the market. Because they live the experience every single day. Sorry, but even Amazon’s size can’t beat that.

How to go the extra mile

Now that you’re aware of what competitive advantages local liquor stores have over giant retailers like Amazon and Total Wine, you can harness that power and amplify it. Because consumers always need to find the latest and greatest, use your trade knowledge, new technology and analytics to stay abreast of new trends and product demands. And be sure they’re always easy to find.

Personalize every consumer’s experience.
Make them feel more like a friend rather than a customer. From there, you can start to better understand their behavior and build lasting relationshipsthat foster a loyal customer base.

Embrace analytics and data-driven decision-making.
You can easily maximize profits with the right tools. Using consumer-focused analytics, such as 3×3’s DataBar platform, you can take a closer look at key factors that influence purchases, which will help you make adjustments such as changing timing of tastings and expanding stock in different categories.

Help consumers explore new products.
Host tastings for the products your customers are actually demanding, and offer up drink recipe ideas, and introduce them to fun and engaging content like videos that showcase the brand story.

Don’t be afraid of technology, embrace it.
Test out new technologies that create a seamless and convenient experience for your customers. Better yet, engage with consumers on top-performing social media platforms like Twitter and Instagram through dynamic videos, interactive polls, and daily story content to keep users up to date and excited about your business and its offerings.

Yes, Amazon can be a scary giant. It’s a giant beast with enough money, market share and reach to disrupt any industry. But being that large also has its pitfalls. Those deficiencies can become your opportunities, but you have to go the extra mile—and be open to evolving your business—in order to make it happen. Retailers who understand and connect with their customers are in an ideal position to win.