Old economy and new trying to catch the holiday spirits

If you’re planning to serve rum punch, mulled wine, or Harpoon Winter Warmer at your holiday party, how will you procure the booze? Will it be from a neighborhood liquor store? A “big box” retailer or grocery store? Or a mobile app that brings the bottles directly to your doorstep?

December is the biggest month for purveyors of liquid cheer — a $70 billion annual business in the United States, according to the Distilled Spirits Council, an industry group. And while most of us still make purchases at the local packie, startups and big players like Amazon.com and Total Wine & More are trying to shake things up.

In Boston alone, at least three apps — Drizly, Buttery, and Drync — make it possible to assemble a shopping list on your mobile phone and pay with a credit card, allowing you to either get liquor delivered or pick it up at the store of your choice. All three partner with local liquor stores that hold the inventory, but there are some key differences.

Boston-based Drizly is the choosiest about the stores with which it works. For instance, the stores need a modern inventory control system — so the app can display only what’s in stock — and they need to be capable of making deliveries in their defined zone within 20 to 40 minutes after an order is placed.

Stores pay Drizly a monthly fee in exchange for the business that the startup generates. But the service also adds a $5 delivery fee to every order, which goes to the store to cover delivery costs. Drizly chief executive Nick Rellas says the average order is $68, but adds that stores can make money on “any $20 delivery order,” which is the app’s minimum. And since Drizly works with stores in nearly 20 different cities, Rellas says it’s possible or someone in Boston to send a bottle of Champagne to a friend in Seattle.

Buttery and Drync offer apps that allow users to choose which store they’d like to patronize (Drizly assigns your order to a retailer based on your location), but the stores can decide whether they want to deliver, ship, or stick with in-store pick-up.

In gentrifying East Boston, Stephanie Nguyen of Clipper Ship Wine & Spirits says her shop has offered delivery for nearly two years as way to respond to the changing demographics. Earlier this year, she began working with Buttery, a Brookline startup that, like Drizly, charges a monthly fee to retailers. Nguyen, the store’s business manager, describes the Buttery relationship as a test that she’ll evaluate after several months to see if it is helping her sales.

“Everyone is on their phone,” she says. “For us, it’s definitely about reaching a different kind of customer –the young professional demographic.”

Customers who have tried the delivery apps appreciate the ease, though they concede it is still sometimes easier to pick up a six-pack or a few bottles of wine while out running errands. “Drizly is an actual godsend for people who are too lazy to put on real pants and go to the liquor store,” Caroline Holland of Boston quipped on Twitter. George Thomas of Medford says Drizly’s $20 minimum sometimes spurs him to just go to a neighborhood shop. But, he adds, “I’m sure I’ll continue using it here and there — especially as the temperatures continue to drop and I don’t want to go outside.”

E-commerce top dog Amazon began making beer, wine, and liquor deliveries within an hour this year in two cities, London and Seattle. Unlike the apps partnering with existing retailers, Amazon applied for its own liquor licenses, and dispatches product from its distribution centers. While state laws governing liquor licenses will make it complicated for Amazon to flip a switch and instantly serve the biggest metro areas, Drync founder Brad Rosen predicts that “Amazon will be a player. They will continue to throw spaghetti at the wall until they figure this out.” (And this week, Amazon launched liquor delivery in Manhattan — this time partnering with local retailers.)

A more urgent threat may be large retailers that can hold a growing number of liquor licenses in Massachusetts (the number rises to seven from five next year, on its way to nine in 2020), including chains like Trader Joe’s, BJ’s Wholesale Club, Walmart, and Total Wine & More, a Maryland company that operates 130 stores around the country, including one recently opened in Natick.

Igor Ostrovsky, who owns four liquor stores around Boston, predicts that two things will happen. When large players can open seven or more locations each, “they can support a lot of volume,” which will hurt smaller local shops. “Either you’re going to get bigger, or you’re going to go out of business,” he says.

As for the startups that offer apps, he says funneling orders to liquor stores may not prove to be a massive business. But for apps that can accumulate enough users, they may be able to charge beer, wine, and liquor companies to advertise their products to mobile-savvy consumers.

Not everyone is stressing out this holiday season over changes on the horizon. Michael Dupuy, owner of Streetcar Wine & Beer in Jamaica Plain, says he isn’t worried about national retailers or his customers suddenly defecting to an app that may direct their beer money to a different shop.

Booze-buying apps are “more for the generation of folks coming up looking to avoid personal experiences whenever possible,” says Dupuy. “We’re an old-fashioned shop. People enjoy coming in and looking at wines and talking about them with our staff members.”

Dupuy is betting that a segment of the population still wants guidance and advice from an actual human being, and “rejects the notion that we have to buy everything on our phone.”

Figuring out how to cater to that segment may be the key to the future, not just for purveyors of alcohol, but also for all retailers.

Scott Kirsner writes the Innovation Economy column every Sunday in the Boston Globe, in which he tracks entrepreneurship, investment, and big company activities around New England.
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