And we thought Amazon’s acquisition of Whole Foods was big news for the beverage alcohol industry. Not so much.
Amazon is now buying liquor licenses for warehouses dedicated to Amazon Prime alcohol deliveries — with one of its more recent coups being the aquisition of a liquor license for its new warehouse in Colorado.
This is notable for several reasons.
First, Amazon has 140 warehouses throughout the United States (Business Insider 09/2017). While Whole Foods gives Amazon 450 licenses to sell wine out of the grocery stores, having dedicated alcohol warehouses lets Amazon scale their liquor business much more quickly.
Amazon can buy and store more product, sell more alcohol, and service larger areas — all without the overhead of having to stock shelves, merchandise, staff stores, etc. It’s an ultra lean, ultra scalable liquor retail model. As a result, they can sell product at lower margin *and* offer consumers home/office delivery at very low cost.
Of the 30 cities that offer Prime Now delivery, these 12 deliver wine, spirits and sometimes liquor in 2 hours or less: Cincinnati, Chicago, Columbus, Los Angeles, Minneapolis, New York City, Phoenix, Portland (OR), Richmond, San Diego, San Francisco Bay Area and Seattle. Sounds like Denver will soon be added to that list.
In some cases, Amazon fulfills orders through local retail partners, such as Surdyk’s in Minneapolis, but this is not a long-term solution. Seeking to maximize efficiency and minimize costs, Amazon will continue to gobble up liquor licenses for its own warehouses as quickly as it can.
In case that wasn’t obvious by now, Amazon is positioning itself to make a huge play in local delivery and this very much includes beverage alcohol. In addition to warehouse and liquor license expansion, they have also been experimenting with a new streamlined local delivery network, Amazon Flex. Currently in PA, NJ, AZ and San Francisco, this is an Uber-esque crowd-sourcing program that employs part-time local drivers to amp up their courrier network for local delivery.
Fast forward to the not-so-distant future, Amazon’s warehouse network is ripe for wholesale distribution, which would directly effect suppliers, wholesalers and retailers. Envision uber efficient sales and delivery for private label Amazon brands offered at unbeatable prices. And if you really want to push this visioning exercise, imagine all of these millions of deliveries happening without humans — autonomous vehicles (Uber just bought 24,000 of them so it’s really happening) and drones.
Pay close attention to what Amazon is doing in your state. Staying ahead of the game is the only way to play right now.
About the Author Brad Rosen is the CEO of Drync, a mobile commerce and loyalty platform for beverage alcohol retailers. www.drync.com