Why Uber’s Drizly Deal Deserves a Toast

Two days after Dry January ended, ridesharing platform Uber announced plans to buy on-demand alcohol marketplace Drizly for $1.1 billion. It’s a deal that reflects how much shopping has changed during the pandemic—and how many ecommerce players continue to emulate Amazon’s model for success. Two orders, one delivery When the transaction closes, anticipated in the first half of the year, Drizly will become a wholly-owned subsidiary of Uber. A distinct Drizly app will remain, but the alcohol platform will also eventually be integrated with food delivery platform Uber Eats. According to Chelsea Gross, senior principal at Gartner, that integration is what consumers want. “If you look in the direction of Amazon and others, the more consolidation we can do of packaging and orders and delivery, the better for the consumer,” she said. However, Sucharita Kodali, vp and principal analyst at Forrester, noted restaurants will also want to sell their own alcohol, so there could be some tension. “I’m not sure if there’s a partnership opportunity there that is win-win and not cannibalistic,” she added. The clear frontrunner Gross said she’s been waiting for consolidation in the alcohol delivery space—which now includes players like Minibar Delivery, Saucey and ReserveBar—for quite some time. But Drizly is the clear frontrunner. That’s in part because the platform increased overall site traffic 75% from 2019 to 2020, including 104% growth in July 2020, per Gross’ figures. That expansion is thanks in part to “massive media investments that have really converted consumers over time,” Gross said. Gartner also found Drizly has increased its visibility with alcohol delivery keywords from 8% in 2019 to nearly 30% in 2020, which helped the platform get in front of consumers searching online for alcohol delivery options. “They've been on a growth tear for a few years and it's just been the right time for them to meet the needs of the stay-at-home consumer,” Gross added. "Really strong growth, a lot of consumer interest, a lot of repeat user-ship [and] strong ownership of the millennial consumer.” Another arrow in its quiver In turn, Drizly makes Uber Eats a more compelling offering among food delivery platforms like DoorDash, Grubhub and Postmates. “I think Uber has done a great job of expanding its restaurant delivery network,” Gross said. “But what you'd notice, especially in the key metro areas, is that for many of their Uber Eats partnerships, they don't have the proper licenses in place to be able to serve alcohol as part of those orders as well—where Caviar and others were able to add in some of those cocktail kits where certain metro areas were enabling that over the course pandemic.” In a way, Uber is again following the lead of retail giants Amazon and Walmart by broadening the range of products and services it offers to entice customers, said Zach Weinberg, vp of ecommerce at Reprise Digital. “Walmart already had a very wide range of assortment with the physical locations and so they had a large customer base,” Weinberg said. “But now when they've added curbside delivery [and] all these other services, you can see … as you go broader, more consumers are willing to come in to shop with you.” That’s why he called the deal “a really smart long-term investment for Uber” as consumers have permanently changed the way they buy food and alcohol. We also see that in the purchase price, which he noted is a “relatively high multiple” of Drizly’s $60 million in estimated annual revenue. WWAD And what of the 800-pound gorilla of ecommerce? Amazon shut down its Restaurants delivery service in June 2019, but still offers some alcohol delivery. And it seems likely Amazon will eventually be tempted to compete here more forcefully as alcohol is a high-margin category with a lot of recent online growth. “I would have tagged them as someone who was going to acquire a Drizly,” Gross said. Weinberg, however, said he suspects to see alcohol delivery as an eventual extension of Amazon’s formidable fulfillment network rather than the result of an acquisition. “There may be in two to three years an opportunity for Amazon to compete because they've already built to scale that entire delivery economy for themselves,” he added. “But at this point, I don't think it's something that they want to get into—and if it is, they typically will just launch something themselves and build it better.” Another category to watch: cannabis delivery. “That seems to be growing in California,” Kodali said. “I do wonder if Uber will make a play in that space, too.” 2021 Could Usher in a Golden Age of Cannabis Marketing

Ecommerce News

Why Uber’s Drizly Deal Deserves a Toast

Taking a page out of Amazon’s playbook

Two orders, one delivery

Lisa Lacy

About

Subscriptions

Events

Publications

Two orders, one delivery

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Lisa Lacy