Supermarkets Poised to Lose USD 3.9bn in Annual Alcohol Sales by 2022
Grocers have long recognized the value of a strong beverage alcohol program in their brick-and-mortar stores (B&M). However, with retailers expending their resources and attention towards getting their basic online operations off the ground, the importance of alcohol sales seems to have been overlooked.
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Report summary
In a B&M supermarket, alcohol accounts for 4.6% of total revenues.1 When consumers shop online, however, alcohol sales fall to 0.7% of total revenues. If the disparity between in-store and online purchasing continues, supermarkets could miss out on USD 3.9bn in annual alcohol sales by 2022.
Some retailers don’t offer any alcohol sales online despite promoting them heavily in-store. In an industry defined by narrow margins and facing pressure from new competitors like Amazon and meal delivery services, beverage alcohol represents a high-growth, higher-revenue department that can draw in wealthier consumers and vastly increase spending per visit. Getting online alcohol sales working properly should be a no-brainer.
Alcohol Is a Major Boon to Supermarket Revenues
The poor performance of alcoholic beverages should present a major concern to grocers. Between 2011 and 2016, beverage alcohol sales in supermarkets grew by 25.3%, more than any other department. Furthermore, if a consumer buys wine, they spend nearly 60% more per trip, with half of that additional spending coming from non-alcohol items. If we add these lost sales outside of alcohol, the total impact of poor online performance surpasses USD 5bn.
Where Are Those Lost Sales Going?
Most consumers will continue to buy alcohol, they just won’t be buying it in supermarkets. According to Nielsen however, only 69% of alcohol purchases are planned. Without a physical shelf to remind consumers that beer, wine, and spirits are an option and retailers failing to effectively promote beverage alcohol online, people could just buy less alcohol.
Supermarkets account for 44% of wine sales and 25% of all beer and spirits sales in the U.S., and problems with the supermarket channel can have widespread implications throughout the industry. In fact, we believe poor online sales in grocery could explain some of the slowdown in alcohol sales in 2017.
What’s Wrong With the Website?
It is somewhat surprising that alcohol sales are lagging in online grocery. Most indicators suggest consumers should be buying more alcohol when they shop online, not less. Online shoppers are more urban, wealthier, and more educated –characteristics associated with higher rates of alcohol consumption – than the general public. To get to the bottom of this conundrum, we looked at the websites of major grocery chains in the U.S. Here are some things that could be impacting alcohol purchasing in online grocery.
Lack of Functional Search and Filter Criteria
One website we looked at only had four categories for wine: red, white, kosher, and vegan. Only one retailer allowed consumers to filter results by price. Other online alcohol retailers make it easy to find the right product, so supermarkets must do the same.
Where’s the Content?
Product pages typically contain a stock photo and a very dull and generic description. Retailers should have videos, tasting notes, third-party reviews, description of wine-producing regions and varieties. In other words, they should make it fun to buy wine, beer, and spirits online.
That Steak Would Go Great With a Cabernet!
In-store, supermarkets have a robust promotion program around their beverage alcohol department, often placing alcohol alongside other categories and in prime retail real estate to boost sales. Online, however, only one retailer was promoting beverage alcohol “out-of-department”, i.e. alongside steaks, tortilla chips, or cheeses. If a consumer of legal drinking age is buying grass-fed beef, they should be presented with a premium red. If they’re buying hamburgers, why not present a nice clean lager or IPA.
What Can Be Done?
There are some regulatory challenges to selling alcohol online, but the department has become a cash cow for grocery retailers and warrants the extra effort. As retailers do move forward with improvements to their beverage alcohol aisle, they won’t have to work alone. Suppliers have long worked with retailers to improve sales within the alcohol aisle. With category captains and more experience operating in an online environment, suppliers are the best asset in the grocery retailers’ push to create a seamless and enjoyable user experience.
If retailers can’t offer consumers a better experience online, there are only two possible outcomes: consumers buy their alcohol elsewhere or they don’t buy alcohol at all. For grocery retailers, neither is particularly desirable.
1 Data from 2016 source: FMI
