By Emily Black, Content Executive and Analyst at IMRG
Online alcohol sales saw a boom during the pandemic, which dropped off around April 2021, as high streets reopened. Like most categories after the lockdowns, it hasn’t been possible for beers, wines, and spirits (BWS) to sustain the exponential growth it saw during this time, as it’s tough to build on extreme growth using the YoY measure. This leads onto the question of the current condition of the BWS market, and customer appetite for alcoholic goods.
BWS has reported positive growth three times since the start of 2022, but these have only been fleeting in individual weeks. At a monthly level, no single month overall has reported a positive YoY figure yet; like most of the categories in our index, 2022 has been tough, due to the cost of living crisis, war in Europe, and energy prices soaring. BWS it appears is not immune to these difficulties, as shown in the graph below. 2022 has reported consistently negative growth, starting off against very high growth of +141% in January 2021. However, as of April, growth could be measured against data which wasn’t affected by the lockdown for the first time in years. The results fell flat at -12% in April and -18% in June, highlighting poor post-pandemic recovery.
However, within the context of the market, this is not abnormal at the moment. Year-to-date (YTD) the sector is down -15.6% compared to last year (i.e. Jan to Jun 2022, versus Jan to Jun 2021). The only category to get positive YTD at the moment is clothing; womenswear, menswear, and footwear performing well after a lockdown slump. Home & garden, health & beauty and electricals are 10 percentage points, or more, worse off than BWS at this stage throughout the year. As of our latest results, June 2022, BWS wasn’t performing as poorly as home and garden, or makeup, for example.
The average basket value (ABV) for online BWS has remained fairly consistent so far across 2022. Some other categories (namely furniture and electricals) have seen excessive increases in their ABV, since the start of the year. Comparing January’s ABV for BWS with June, the sector has actually seen a £6 drop. This is noteworthy, given the inflationary pressures in the market at present. This could mean that BWS retailers are relying on discounting to keep stock moving, or it could be a sign that people are switching to lower-cost products.
Finally, what does cross-border BWS commerce look like? In a survey of 300 UK retailers, conducted by IMRG, we found out which categories deliver abroad, and the average number of destinations based on the category. There was only a small number of BWS retailers in our sample, but of them, 6 did not deliver abroad; only 2 did. The average number of category destinations was the lowest within our data set, at 19.
Currently, retailers may not be shipping internationally because of liquid restrictions and the fragility of glass containers, however, this suggests there’s room for the international BWS market to develop as it could be an untapped space.
We asked industry experts about their thoughts on the BWS market, to find out how retailers can grow in this area.
Sacha Wilson, Senior Director at Avalara, said that, “As beer, wine and spirit sellers know – between the time the product is bottled and the moment it reaches the hands of the customers, a lot has to happen. Even more so when trading cross-border. When selling into the US, for example, we’re seeing shipping verification rules for interstate sales becoming increasingly complex and verifying age is more difficult than ever for off-site purchases. In addition, there’s different tax types (sales tax, markup tax, excise tax, and liquor-by-the-drink tax) that apply in states to which you ship. There are solutions available. If alcohol sellers can overcome challenges to reach new markets – like the US – successfully, they can sell to new customers and grow at a faster rate”
Fergal O’Carroll, CRO of Scurri, said, “The UK’s booze industry, deemed one of the most crisis-proof, was not immune to the negative impacts of the pandemic. As off-licences, and bars in particular, witnessed a significant slump due to covid restrictions, sales volumes, though not staggering, began to grow online. In continental Europe alcohol eCommerce value went up by more than 12% in 2019 and then by more than 43% in 2020 during the peak of the pandemic.”
Marc Jiggins, Commercial Director at Yodel suggested, “During the pandemic, the volume of Beers, Wines and Spirits parcels delivered by Yodel increased by 71% as consumers turned to online purchases whilst hospitality locations were closed. As the world returned to normal, consumers have returned to these venues and parcel volumes in this category have subsided – albeit still higher than pre-pandemic levels. A key opportunity going forward for online, alcohol retailers will be price. As the cost of living continues to rise there will be increased pressure on disposable income for consumers who may choose to drink at home once again, rather than incur the increased costs of a night out.”
Richard Illingworth, Business Development Manager at Huboo, observed, “An increased consumer appetite for beers, wines, and spirits over the past few years. With this increase has also come a transition from in-person purchases to a boom in ecommerce sales for BWS. The pandemic certainly accelerated this shift, but even now, in a downward-trend market, we are seeing year-on-year growth at Huboo in our BWS category which is made up of customers selling alcohol online.
As more and more consumers are buying directly from brands online, they’re increasingly keen to understand who they are buying from – and they want to know more about the people behind the brand. I feel this has stemmed from the widespread adoption of social media and the direct interaction with brands that it provides to consumers. At Huboo, we directly help brands stay ahead of the curve by supporting them with customer market strategies and forming direct relationships with their clients to better understand and support their needs.”
Sanjay Mehta, Head of Industry, Lucidworks, said, “The use of data and shopper insight can make a critical difference to the consumer shopping experience. If my basket typically contains Côte de Rhône reds or Provence dry rosé wines in a particular price bracket, this insight should inform the selection curated for me by the merchant – especially for out-of-stock scenarios. Advanced technologies such as semantic vector search can augment the work of the merchandiser. The tech captures a shopper’s search and browse behaviour to understand their goal and what’s in-stock that could meet that goal. The recent IMRG Customer Connect highlighted the challenges faced by BWS retailers with many rules based platforms unable to fully utilise customer data, impacting the consumer experience. AI and semantic vector search is unlocking customer data in a way and at a scale that was previously impossible. Now that’s something to drink to!”