Insights for selling alcohol on Amazon: An interview with Charlie Merrells, Molzi CSO
As a former Amazon category leader that focused on the beers, spirits and wines category on Amazon, Charlie Merrells understands the importance Amazon can have for alcohol brands selling online. In between his busy schedule as Molzi’s Chief Strategy Officer, we were able to sit down with him to discuss the potential that the Amazon marketplace may hold for BWS (Beers, Wines & Spirits) brands.
How has the Coronavirus pandemic changed the alcohol category on Amazon?
The alcohol category has seen a significant growth on ecommerce in general since Coronavirus, particularly following the start of lockdown and Amazon is well positioned as a key growth channel. As consumers have moved from consumption in pubs, bars and restaurants to more at home drinking, awareness that Amazon sell beers, wines and spirits has skyrocketed. I’ve heard from some BWS brands that they are now forecasting 2020 online sales volumes 3x to 4x higher than their original 2020 forecast. Looking at a post-lockdown world, I’d expect volumes to drop off somewhat as life returns to something a bit more like normal, but habits will definitely have formed across various demographics. People have become more aware of where they can buy alcohol online, as well as how convenient it is.
You mentioned convenience, do you think that Amazon will have a significant effect on online alcohol wholesalers after COVID19?
I think overall BWS ecommerce sales will be a larger share of sales post lockdown, with Amazon having a clear role to play due to the sheer volume of traffic that they attract on a daily basis. Convenience is critical and Amazon obsess over the customer. With a large proportion of people already having an Amazon account, it’s frictionless for them to explore the BWS category without needing to create a new account, or find a separate source for beer, wine or spirits purchases.
What are the issues Amazon is facing over COVID-19 and what can alcohol brands take from this?
The biggest challenge for Amazon has been their ability to quickly react to the surge in demand, an issue which has impacted all categories. Alcohol was understandably not designated high priority, leading to some supplier and customer frustrations over stock levels and delivery times. Thankfully these challenges eased relatively quickly as Amazon increased their capacity. To protect from this in future, brands can weigh up the various supply chain solutions available when working with Amazon including preferred carrier programs, Seller Fulfilled Prime or even Vendor Flex. The right solution will need to consider whether the brand is operating a 1P or 3P relationship with Amazon.
Creating a new fulfilment network takes time and commitment and most importantly money. Would you say the same for international brands which may have spent huge amount of money perfecting their supply chain?
The solutions Amazon make available are relatively low cost and easy to access, they should form part of a supplier’s wider route to market strategy, allowing them to choose the solution closest fitting their plans. I’d also encourage brands to explore new ground – ecommerce is still evolving and Amazon famously have peculiar ways. Brands who learn with Amazon through use of new models will be able to apply those learnings to other parts of their business if they so choose.
What makes Amazon a valuable channel for alcohol brands?
The opportunity is still huge, with BWS remaining a relatively young category for Amazon and with consumers still transitioning to online for their regular alcohol purchases. Getting the basics right today can make sure a brand is in a strong position to maximise the future potential that Amazon offers.
What do you mean the basics? What is the future potential that you can see?
Basics include going beyond listing the product, to creating perfect content, driving traffic and giving customers a reason to convert. Amazon is already a research destination for a lot of people, even if their final purchase is elsewhere, meaning Amazon can drive value to either the entire customer journey or just parts of it. The future potential is based purely on the fact that while the category is growing quickly, it still represents a small share of total off trade sales. This means there’s a lot of opportunity for high levels of growth for several years.
Why should brands not stick with just the channels they know already work for them?
The face of retail in the UK is evolving rapidly, with physical retailers pivoting quickly over the last few months to offer more of an omnichannel solution. By actively engaging in online, brands can learn, optimise and provide thought leadership to all of their retail partners as they tread a new path together.
Age verification has always been a difficult subject for alcohol brands to deal with online, do you believe this difficulty will become easier in the future? If so, how?
There is no easy solution here. Clearly responsible selling is paramount, to ensure alcohol doesn’t fall in to the wrong hands. For ecommerce retailers today that means age verification on delivery, which has both customer experience and cost implications. I would love to see a government backed online age verification system that eases this burden for both brands and retailers, relaxing the requirement to age verify on delivery.
In your experience, what key issues have alcohol brands struggled the most with when selling on Amazon and what advice would you give to them?
The top challenges are focussed around how to align ecommerce and Amazon strategy with the strategy of their wider business, where to invest to generate the greatest ROI and how to manage total portfolio plans when looking at an endless digital shelf. The portfolio side can become a brand’s biggest operational challenge, when developing the best customer experience in balance with Amazon’s economic guardrails. In general, the advice is that all of these challenges can be managed effectively. As a brand’s ecommerce share of volume increases, it’s critical to face in to these and other issues, developing plans to address them and any knock on consequences.
What is the 1st thing that brands or wholesalers should be aware of when selling under the BWS category on Amazon?
Amazon buy duty paid and don’t operate a bonded network. Brands will need to ensure they have a route to Amazon’s Fulfilment Centres while taking care of duty requirements themselves. Expansion to other Amazon countries therefore takes more effort than for most categories, but the opportunity still exists!
Need help selling alcohol on Amazon?
It is true, selling alcohol on Amazon is more complicated than many other categories but the struggle is well worth the end result. As ecommerce and shopping habits change in the wake of COVID-19, Amazon will continue to innovate and adapt making the marketplace the most resilient platform to sell on. Although other reliable channels should be utilised, it seems naive to avoid expanding your sales network to include selling on the world’s biggest online retailer.
However, from set-up to optimisation, Amazon takes time and skill to master which companies do not have. Brands of all sizes find investing in a full-service Amazon agency saves them time and resources. That’s time and resources they can spend improving internal processes and focusing on other areas of the business!