Since the proliferation of on-demand transportation apps– Uber and Lyft, more and more startups have entered the on-demand service arena. For example, there is “Uber for food,” e.g. DoorDash, Eat24, and GrubHub. “Uber for drycleaning” e.g. Washio and NimNim, and even “Uber for massage,” Zeel and Soothe. Investors are frenzy about these “Uber for xyz” startups. Just DoorDash alone, raised $40 million series B in March, 2015. Given the fact that mobile users are more likely to choose such on-demand service, it’s obvious that someone has come up something totally unoriginal, Drizly —“Uber for booze.”
How does Drizly work?
Similar to how you call a Uber, you use an app. Download and log in Drizly app. Add your favorite beer, wine, and liquor to cart. Enter your address, check out, and Drizly delivers to your door in less than an hour.
You may wonder: why it’s Drizly or any “Uber for booze” startups different from the rest on-demand apps. Here is the biggest caveat – alcoholic beverage business is one of the most regulated businesses in the United States.
Notorious 3-Tier System
When you go to your local corner store and grab a 6-pack, have you thought about how the beer got to the store? Most people would guess: “Obviously, the breweries wholesale beers to grocery stores as how other stuff, such as ice cream and frozen pizza, get here.” Well, you know, of course it’s different. Otherwise, why am I wasting my time writing this?
“The three-tier system of alcohol distribution is the system for distributing alcoholic beverages set up in the United States after the repeal of Prohibition. The three tiers are producers, distributors, and retailers. The basic structure of the system is that producers can sell their products only to wholesale distributors who then sell to retailers, and only retailers may sell to consumers. Producers include brewers, wine makers, distillers and importers.” – Wikipedia
In reality, since many states stop issuing distributor licenses and producers have to sell their products to distributors, these distributors virtually became monopoly in the business. Big distributors virtually control the livelihood of many breweries. Under some state laws, only licensed liquor retailers are legally to sell alcoholic beverage to consumers.
So, is Drizly legal?
Yes, in fact, during the entire shopping experience, Drizly never touches any alcoholic beverage you order.
Really?? How does it work again?
What Drizly actually does is just sends your order to the closest partner store. The liquor store, which is a registered liquor retailer, fulfills the order. The driver who delivers your beer is also employed by the partner store, not Drizly. In fact, Drizly never touches a cent from the transaction.
Wait, what? I noticed that Drizly doesn’t even charge a delivery fee in New York City. How does it even make money?
“Retail partners of Drizly pay a monthly license fee, which is based on a myriad of factors including the value of the delivery zone served.Drizly never touches a bottle of alcohol or a cent from the transaction; the Drizly retail partner fulfills the order and receives 100% of the money from that order.” –Drizly site
In summary, Drizly just functions as a marketplace that connects liquor stores to you!
I see. But seems the entry barrier is quite low, doesn’t Drizly have a lot of competitors?
You are absolutely right. Saucey, Thirstie, Minibar, Swill, etc. The list goes on! Since the entry barrier is relatively low and people love booze (for better or worse), this industry is booming! All of these startups operate under similar models. Some bring in revenue through the transaction-based technology fees they collect from partners. Others charge delivery fees to consumers or licensing fees to retailers. Although Minibar is one of the largest players in the space, it’s not clear who is going to win this war. However, regardless which app you use, you can well sit back, relax, and order your next drink among thousands of selections directly from you palm!