How Alcohol Delivery Methods Maximize Profits in DTC Business Models

By Erhan Musaoglu logiwa-blog-author | Tags: Inventory Management Warehouse Management eCommerce

The boom in ecommerce has impacted the wine and spirits industry in a huge way. According to recent Nielsen data, alcohol ecommerce sales were 6 times higher in April 2020 compared to the same time period a year ago, primarily driven by an increased number of new buyers. In June 2020 sales continued to be 3 times higher than a year ago.

For the beer, wine, and spirit industry, this trend represents new opportunities and new challenges. For the warehouse industry, booming online alcohol sales is another market to tap into. 

What are the best strategies to take advantage of robust online alcohol shipping activity? How can alcohol brands maximize their profits in this context? What can warehouses do to provide the best service and streamline operations? Let’s find out.

Why Wineries, Beer Makers & Distilleries are going direct to consumer

From the largest alcohol brands to small and medium sized businesses, the industry is increasingly adopting direct-to-end-buyer sales methods. This trend has also taken hold of many other sectors driven by new ecommerce realities. 

Today, online stores contribute to a large percentage of alcohol sales. This may compliment brick and mortar sales or can even replace them altogether. In many cases, distributors are no longer needed which can increase profit margins for alcohol producers.

One example of major direct to customer business success is Nike which now sells almost exclusively via its website, app, and company stores. The athletic wear brand even announced that it’s halting direct sales to Amazon. These moves have allowed for Nike’s sales margins to climb from 38% to 62%

Although traditional distribution costs may be reduced with this new trend, sneakers and bottles of wine still have to reach their destination. To meet this new demand, many companies outsource fulfillment tasks to third party logistic (3PL) providers.

Regulations exert cost pressures on alcohol industry

Alcohol regulations are another factor to consider especially with rising labeling and shipping costs which appear due to federal mandates.

For example, the Alcohol and Tobacco Tax and Trade Bureau (TTB) requires the labeling of every beverage with the corresponding alcohol percentage content for consumer safety purposes. When units reach into the thousands, labelling costs become a significant line item.

Plus, when alcohol is shipped to a consumer’s home, an adult must sign and approve of the delivery in-person. If an adult cannot sign at the time of delivery, repeated delivery attempts can dramatically inflate shipping expenses. 

Logiwa warehouse management software provides solutions for both alcohol labelling and adult signage requirements.

FedEx shipping alcoholic beverages

Some brands choose FedEx to ship their alcoholic beverages. To ship alcohol, FedEx has specific requirements, such as:

  1. Only FedEx-approved, licensed alcohol shippers with a FedEx Alcohol Shipping Agreement may ship alcohol via FedEx services.
  2. For US licensee-to-licensee shipments, recipients must hold appropriate alcohol licenses, and all shipments must comply with applicable laws. Shipments can move via FedEx Express®, FedEx Ground®, or FedEx Home Delivery® services.
  3. For US licensee-to-consumer shipments, FedEx only transports wine. Also, direct-to-consumer wine shipments are only available in some states.
  4. For shipping alcohol internationally, both the importer and exporter must be licensed entities.
  5. International alcohol shipments are shipped only via FedEx Express services. FedEx International Ground® service may never be used for international alcohol shipments. 
  6. FedEx international licensee-to-consumer shipping only transports wine and only to certain countries.

What about UPS wine shipping? 

UPS provides wine shipping services for approved customers who are licensed to ship wine. Also, shipping beer UPS, as well as spirits, are both possible. Here are some of the requirements:

  1. UPS allows for the shipment of wine, beer, and other alcoholic beverages on a per-contract basis.
  2. All wine shippers must enter into a UPS Agreement for Approved Wine Shippers.
  3. UPS provides shipping for other alcoholic beverages (beer and spirits) on a contract basis only.
  4. Shipments of wine from licensed shippers may be shipped to licensed recipients, where permitted by applicable law.

Also, when the wine is sent directly by UPS to the end consumer, these rules apply:

  1. The winery holds all required licenses and/or permits according to alcohol shipping laws by state.
  2. The winery verifies that the purchaser is of legal age to purchase wine.
  3. The wine is for personal use only and not for resale.
  4. The winery lists the purchaser as the consignee.

What about shipping wine USPS?

The US Postal Service (USPS) does not allow for the shipment of alcohol, domestically, or internationally. Also, if you plan on reusing packaging that was previously used to carry alcohol, all labels or branding associated with alcohol must be covered or removed to properly process the package. Otherwise, USPS may assume there's alcohol inside the package and reject it.

Does GLS ship wine?

Another shipping service for wine is General Logistics Systems (GLS). They offer next day regional delivery and have a 99.8% delivery success rate. Other benefits to using GLS include:

  • Automatic discounting and palletized shipment options
  • Saturday delivery at no additional cost
  • 100% digital signature capture

You can find more details on the GLS website

How Third Party Logistics & Warehouse Automation improve Beer, Wine & Spirits business outcomes 

As we have seen, companies that sell alcohol are quickly embracing alternative business models to remain competitive and boost profits. However, simply understanding the value of direct to customer sales is only part of it. The real challenge is finding the right partners that can quickly and effectively bring these initiatives to life.

While regulatory and logistical factors might appear difficult, the right 3PL and warehouse automation providers can make D2C online business management much easier. Streamlined warehouse operations can lower shipping costs and improve service. The best software should include:

Rate shopping capability

Rate shopping software automatically identifies the lowest carrier rate, and cost-effective labels are automatically printed to meet carrier requirements. This can translate into thousands of dollars of savings for shipping alcohol.

TTB Regulatory Compliance

First and foremost, any fulfillment or logistics partner must be fully licensed to ship alcohol. Also, regulatory agencies, like the TTB, require all alcohol, wine, and beer sales to keep track of alcohol percentages. 

Suppliers must also keep a record of attributes such as producer, vintage, and lot numbers. These item attributes provide companies insight into inventory status, value, and location. The best warehouse solutions will have these capabilities already built in with the data available on-demand.

Ability to scale up to high volumes

Shipping alcoholic beverages at high volumes requires expert logistical and technological know-how. Handling stock, printing labels, and pick & pack issues all come into play for companies to be able to scale with time and seasonal demand.

Advanced picking and packing

While we’re on the topic, smart picking strategies such as wave picking, zone picking, batch picking, and cluster picking also save on resources and shorten product lead times. Intelligent fulfillment can implement different picking strategies to keep up with demand and operational changes.

Seamless sales channel connectivity

The ability to integrate an alcohol vendor’s business sales channel with their warehouse solution is critical for fast, seamless service. Plus, integration eliminates order errors that are more common with non-integrated methods. With a connected sales channel, orders are sent automatically to the warehouse, and order fulfillment occurs faster.

Same, next day, or free delivery

McKinsey reports that customer satisfaction increases dramatically with same or next day delivery, which also applies to alcohol delivery services. Plus, buyers are willing to pay more per product for faster delivery. 

According to PwC, over 40% of consumers will pay more for same-day delivery, while almost a quarter of shoppers are willing to pay more to receive orders within a specified one- or two-hour window. Meanwhile, over 60% of buyers say that free delivery is a leading consideration for all their online purchases.

Improved data for segmentation

One of the biggest wins in selling directly to your customers is the data you own. This means you can more accurately identify trends and preferences. For the alcohol industry, knowing who likes to buy at a store vs. online can help improve sales tactics. Integrated warehouse data is a big help to improve the quality of segmentation reporting and insight.

Advanced inventory management

An efficient warehouse software can identify your high demand products on various sales channels. These product sales trends can also be used to optimize warehouse layout. By placing fast moving inventory closest to the shipping area, this boosts shipping efficiency.

A quality inventory system also optimizes factors such as lot number, expiry dates, multi-matrix item variants, and other complex measurement units. Additionally, profits can be impacted by storage fees, deadstock, taxes, and insurance. All these costs can be driven down with the right warehouse management technology.

Conclusion: Shipping alcoholic beverages in the new era

Today’s beer, wine & spirits industry is changing dramatically. New paradigms are appearing faster than ever. Like every other industry, the new leaders will be the ones that can adapt to changes faster and position themselves favorably. 

Some key areas of success will be in inventory management, delivery times, sales channel integration, and optimizing warehouse operations. The final goal is to provide the best customer service and generate larger profit margins. 

Move your wine, beer, or alcohol business up to the next level. Logiwa offers cloud based 100% inventory accuracy.

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Erhan Musaoglu

Written by Erhan Musaoglu

Erhan Musaoglu is the CEO and Co-Founder of Logiwa.