How Does Drizly Make Money? Drizly Business Model

Drizly is a marketplace app that connects customers with local liquor stores, enabling them to have their favorite alcohol/drink delivered to their homes with a few swipes on the app. 

The more users of the app order alcohol, the more liquor retailers are interested in partnering to increase their earnings. 

Nick and Cory Rellas founded Drizly in Boston in 2012. The company has been aggressively expanding its seller network and client base. 

Three thousand liquor stores in the United States and Canada are currently part of the app’s vendor network.

Crunchbase reports Drizly has raised a total of $ 119.6 million through nine rounds of fundraising from 31 investors, including four lead investors. Additionally, it purchased a startup called Buttery.

The alcohol beverage market was worth $1493 billion in 2017. The market is expected to grow by 2% annually from 2018 to 2025 to reach $1684 billion. 

The growth is forecast to be more exponential due to the stress and alcohol use caused by pandemics. 

As a result, the alcohol industry is considered a Low-Risk, High-Reward enterprise. Early investors in the sector have already reaped great rewards, and demand for the beverage has been overgrowing.

What Is Drizly?

Drizly is an online alcohol delivery platform that allows consumers in over 100 cities in U.S. and Canada to place alcohol orders.

Drizly is a North American e-commerce platform for alcohol with its headquarters in Boston, Massachusetts. 

Spencer Frazier, Justin Robinson, and Nick Rellas created it in 2012 following their graduation from Boston College.

Drizly Business Model

Drizly’s primary source of revenue is licensing fees. These monthly fees are levied against independent liquor stores and sellers in exchange for using the Drizly platform.

Drizly generates revenue from licensing fees, delivery costs, service fees, and penalty fees, in addition to advertising on its site.

Drizly, founded in 2012, has risen to become one of the country’s most extensive alcohol delivery services. Uber acquired the company for $1.1 billion in February 2021.

Company NameDrizly
Company TypePrivate
FoundersCory Rellas, Nick Rellas, Justin Robinson
ProductAlcohol e-commerce platform
Founded Date2012
HeadquarterBoston, MA
WebsiteVisit Website

How Does Drizly Work?

Drizzle is an online alcohol delivery service with an app for Android and iOS platforms and a website.

It takes less than 60 minutes for beverages to arrive. There are currently more than 100 US and Canadian cities that offer this service.

Users can order alcohol from Drizly even if they don’t live in a serviced area, and it will arrive in the next 24 to 48 hours.

Drizly does not own the alcohol offered on the platform. Rather than that, the company partners with local stores that possess the requisite liquor licenses to sell alcohol. Retailers set the price for their products as a result.

It is very simple to use Drizly. Customers must first register by providing their address, birth date, name, and more information.

You can select your products and proceed to the order area once you’ve entered your payment method. 

The order page will inform you of the stores you are ordering, the cost of delivery, and the estimated delivery time.

Your age will also be verified by the driver when the alcohol is delivered. Therefore, identification is required.

Customers can order various beverages, including beers, wine, hard liquor, and specialty beverages such as energy drinks. 

Consumers can also purchase party appetizers, party supplies, and cocktail-making equipment.

The Drizly for Business division also offers alcohol delivery services to businesses at corporate events.

Drizly Business Model

Drizly is unique in comparison to other delivery providers. It does not sell alcohol and does not operate a delivery fleet. 

It’s a novel concept in that it simply gives customers an app through which they can place orders and liquor retailers with technology to fulfill those orders. 

It’s more of an advertising tool for booze businesses, bringing them additional orders. It provides clients with a diverse selection of alcoholic beverages at moderate pricing.

Drizly business model is unique. The start-up does not sell or deliver alcohol, which means it lacks its products and delivery fleet. 

It merely routes all orders to its partner retailers, completing all deliveries with their inventory and delivery employees. This is why Drizly openly refers to itself as a technology intermediate.

Collaboration with Retail Stores

Drizly has always placed a premium on partnering with high-quality suppliers. The company thoroughly vets local liquor stores based on various criteria, including the variety and availability of products, product prices, location, delivery crews, and points of sale. 

A Drizly inventory integration allows the software to connect directly to the POS systems of all selected liquor retailers, bringing their inventory online instantly once the initial inspection is complete. 

Drizly’s technology enables all of its partner stores to accept orders instantaneously and efficiently deliver them in less than an hour.

Drizly’s collaboration with these merchants is a significant benefit. Businesses that don’t have a website or an online product catalog can increase sales simply by using Drizly’s platform; otherwise, they wouldn’t be able to do so. 

Retailers have connected with thousands of new customers every day via Drizly’s broad reach, solid client base, and strong brand recognition. 

An online survey found that 50% of Drizly users reported shopping for a business after using the platform for the first time.

How Does Drizly Make Money?

Drizly earns money from the license, delivery, service, penalty fees, advertising, and aggregated consumer data sales.

The company generates revenue unusually and diversely.

Drizly’s primary source of revenue is probably licensing fees. These monthly fees are levied against independent liquor stores and sellers in exchange for using the Drizly platform.

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A store’s commission may range between $100 and $10,000, depending on the number of transactions, the location, and what kind of liquor is sold.

In the section below, we’ll take a deeper look at each of these.

Licensing Fee

The majority of Drizzy’s revenue comes from the licensing fees it charges to retailers and independent liquor stores.

A store’s licensing fees can range from $100 to $10,000 a month, depending on the store’s location, transaction volume, and products sold.

Drizly’s licensing model enables it to avoid the requirement of obtaining a liquor license.

The fee cap also encourages national merchants to join the platform since their marginal costs decrease with every sale made.

Advertising

Drizly generates revenue from its platform’s advertising as well. A company’s products may appear near the top of the page among those with preferential treatment.

This company is almost certainly compensated on a flat fee basis. Gopuff and Instacart are other delivery platforms that have similar business strategies.

Drizly may also sell aggregated user data to other businesses and brands. 

Its platform generates a wealth of valuable data points, such as the frequency with which specific product categories, such as vodka or whiskey, are sold or the gender and age of consumers. 

Businesses that purchase the anonymized data can use it to inform product introductions.

Penalty Fee, Delivery, and Service Fee

Drizly also charges clients a variety of fees directly. The firm charges $5 delivery fees on most of its marketplaces, which helps offset costs for retailers that execute deliveries.

Second, Drizly charges a $1.99 service fee. This fee covers the costs of producing and maintaining the company’s products and services.

Finally, if a user has under 18 years of age decides they would like to try their luck, an unsuccessful delivery will result in a penalty price. The cost is $20.

What Is The Funding and Valuation of Drizly?

The venture capital firm Crunchbase reports that Drizly has raised $119.6 million total in nine rounds.

Drizly Business Model

Cava Capital, Polaris Partners, Tiger Global Management, Accomplice, and FJ Labs are notable investors.

Drizly is currently worth $1.1 billion — at least according to Uber, who spent that amount (in cash) in February 2021 to purchase 100 percent of the company.

What Is The Revenue Of Drizly?

Drizly is not required to reveal its revenue to the public as a private corporation. Uber may opt to include those figures in future earnings reports.

Success Story Of Drizly

Justin Robinson, Nick Rellas, and Spencer Frazier founded Drizzle in Boston in 2012. His cousin Cory Rellas, formerly of Bain’s consulting firm, joined the firm a year later as COO.

Robinson, Rellas, and Frazier founded the company immediately following their graduation from Boston College. 

When Rellas was winding down his final semester, he tried to get some alcohol late at night. In the process, he produced Drizly.

A few hours of research into the legalities and restrictions of the alcoholic beverage industry followed this initial spark.

He rapidly realized that the sector was highly regulated, with producers, distributors, and retailers tiered. 

Liquor licenses are often necessary for businesses that sell alcohol. Many businesses pay a substantial fee to obtain one.

There has not been much change since these laws were passed following the repeal of prohibition. 

Businesses that had been operating for decades were resistant to e-commerce and online delivery.

Thus, the break-thing-fast approach favored by most Silicon Valley startups was unsuitable for our market. They made a few highly clever adjustments that enabled them to get into the space despite obstacles.

Their platform is licensed, not commissioned. At first, they did not charge a commission for its use. This revenue model allowed them to avoid the high cost of obtaining a liquor license.

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Second, the company created a now-patented verification technology (dubbed Mident ID) that enabled its liquor shop partners to validate a customer’s age using their smartphone.

Drizly launched in May 2013 after more than a year of development. The iPhone application is available for download on the company’s website as well. Drizly was initially only available in Greater Boston.

The company raised $2.25 million from Boston-based Atlas Ventures in its first external round of funding in January 2014. 

Drizly also released an Android app and expanded its presence into New York, the company’s second market, at the same time as the fundraising round.

The second round of financing ($2.5 million) was raised in May 2014 and expanded into new markets. The Drizzly app had expanded to more than ten US cities by the end of 2014.

Drizzly increased that number to almost 40 cities a year later. Additionally, the corporation formed significant alliances to ensure it could provide the necessary supply.

A 2015 agreement between Drizly and Wine & Spirits Wholesalers of America (WSWA) gave Drizly access to WSWA’s distributor network.

Drizly entered its first international market in February 2016 with the expansion to Edmonton, the capital city of the Canadian province of Alberta. That same year, Grizzly suffered a significant shift in its business model.

Drizly successfully relaunched its platform as an online marketplace in September 2016. Customers may now compare liquor prices and delivery possibilities from multiple outlets using the new look.

Before the redesign, customer orders were processed in a first-in, first-out manner, which resulted in some merchants unable to fulfill orders.

Drizzly continued to expand its platform and raise further capital throughout the subsequent years.

That increase occurred in the absence of co-founder and long-time CEO Nick Rellas, who stepped down in August 2018. Nick was succeeded as COO by his cousin Cory Rellas.

Regrettably, it was not the end of the story. Drizly sued Nick Rellas in March 2019, alleging that he broke a non-compete agreement.

Rellas initially intended to develop another cannabis delivery service. The issue: Drizly was already working on a similar product, which Rellas was intimately familiar with.

Drizly Group’s now-defunct Lantern, an online cannabis delivery business, was born in May 2020. A similar service originally began in Boston but quickly spread across the country.

The year 2020 has proven to be exceptionally successful for the organization. Many people were forced to buy alcohol online due to the Coronavirus. This resulted in a 350 percent increase in Drizly’s revenue in 2020 alone.

However, not all went smoothly. The corporation announced in July 2020 that it had experienced a data breach that affected 2.5 million customer accounts.

Drizly’s users launched a class-action lawsuit against the company even though less than 2% of accounts contained sensitive information.

Uber announced in February 2021 that it would acquire the company for a staggering $1.1 billion (in cash and shares). Drizly will be integrated into Uber’s app ecosystem but will continue to operate independently.

Drizzly now collaborates with nearly 4,000 independent shops.

Further, the company has several offices in the United States, where it employs nearly 300 workers.

Key Takeaways From Drizly Business Model

Drizly is an e-commerce platform based in Boston. The company’s co-founder, Nick Rellas, developed the concept while buying beer in the middle of the night.

Drizly charges retail partners a licensing fee in exchange for appearing on its website. The cost of these transactions is determined by several factors, including the volume of transactions, the type of goods, and the retailer’s location.

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Drizly may also charge delivery, service, and cancellation fees under certain circumstances. The company also offers advertising space and, in some cases, consumer purchase information.

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