Welcome to Scaled and Failed! My name’s Amil Naik and I’m an aspiring VC and founder at The University of Texas at Austin. I write about startups that scaled and startups that failed to draw insights about the patterns of startup failure and how to avoid them. Everything is clearer in hindsight, so it’s worth looking back.
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TLDR
Today’s Topic 🍷: Wine Delivery
Scaled 📈: DRINKS; Started out as a D2C marketplace then expanded into enterprise technology platform offering that helped other businesses launched D2C wine.
Failed 👎: Rewinery; Had couriers delivering cheap wine across San Francisco until shut down a year after starting.
Lessons Learned 💡: Use consumer and B2B offerings to inform each other and aggregate data across different products to deliver the best experience. The higher the barrier to solve the problem you’re selling the solution to, the easier it will be to sell
Today’s Topic: Wine Delivery 🍷
As far as delivery startups go, alcohol delivery tends to be pretty popular with people nowadays. It seems every time I talk to someone about them, a new player has entered the space with significant funding. Alcohol startups go far beyond delivery too, with companies like Vivino helping people make decisions about their taste in wine as well as get bottles shipped to them. Wine delivery tends to be different than the on-demand orders from drunk college kids looking for more cheap stuff fast. Talk about wine with anyone who knows their stuff and you’ll quickly discover the culture around drinking wine is far more complex than most other types of alcohol. You can discuss varietals and pairings for days with an educated wine snob but would be unlikely to have a deep conversation about seltzers with anyone. Most customers also probably aren’t ordering 6 bottles of wine at midnight expecting delivery within the hour.
DRINKS is a little different from most D2C alcohol delivery players, instead operating a Wine as a Service (WaaS) platform that lets existing companies quickly start marketing and delivering their own wines in addition to operating the marketplace Wine Insiders for D2C delivery within a few days. Rewinery focused entirely on a D2C offering touting bottles delivered within an hour for its customers. After a year of running with no external capital, the company closed down. While wine delivery was the core for both of these businesses, their audiences and business models contrasted greatly. Let’s dive into these two to see what led them down their paths.
Scale: DRINKS 🍸
DRINKS was founded in 2013 with a similar foundation to many alcohol delivery marketplaces that exist today rather than the B2B offering it now provides. Martha Stewart Wine Co. and Wine Insiders are the two brands under its D2C umbrella that powered its D2C focus early on, operating under its own WaaS platform. In 2017, the WaaS platform became the B2B offering that DRINKS uses to facilitate D2C for other businesses. The platform essentially serves as a modular offering for existing businesses to streamline the process of sourcing and selling wines both digitally and in-person, with shipping available to customers’ homes, offices, and pick-up locations across the country. CEO Zac Brandenberg saw an opportunity to streamline the existing market using technology:
What we saw with the wine industry and alcohol, in general, is that the players that are existing are entrenched and behave in an archaic fashion. The interaction between the retailers and the marketing community with the wine producers or the distilled spirits producers hasn’t really changed much either.
Crunchbase summed up the structure of the platform quite nicely:
DRINKS facilitates the relationship between alcoholic beverage licensees, like a winery, and retailers–both e-commerce-based and brick and mortar–and between those retailers and their customers. Think of it like the middle man that could power an online wine delivery service for a company like Sun Basket or Boxed, or even a local store.
In late 2018, the company raised a Series B to expand focus on the WaaS platform, bringing total funding to $28.3M. Unlike many other digital wine sellers of the day, DRINKS wanted to be more of a recommendation-driven true retailer rather than following a wine club subscription model. Between the WaaS platform and its own D2C selling, the startup had more than enough data to provide great curation for customers to drive sales and retention. 2020 was a good year for DRINKS as well; the pandemic really pushed adoption for digital alcohol sales and delivery. Collaboration with InstaCart kicked up a notch to seriously expand alcohol delivery across the US using the WaaS platform, adding to several big brands already heavily using the technology like Kroger and Thrive Market. While lockdowns may have lifted, alcohol e-commerce is here to stay; DRINKS is here to empower the shift towards digital. Regulation in the space is a complex beast to tackle, so a safe solution taking care of it is an easy choice for many businesses. As more and more established brands get into the game, DRINKS will power even more of the wine online space. I’ll close with some wise words from the CEO that summarize his strategy with D2C:
The three tenets of D-to-C tend to be curation, convenience and value. Look at the value Warby Parker, you see the same value proposition each time. Consumers looking for what are the best items, the best eyeglasses, the best wines, the convenience of getting it at home, which resonates now more than ever and the value proposition of being able to get a great deal for it.
Fail: Rewinery 🚴
Rewinery was formed in 2012 and aimed at a different type of audience; the type of audience that wanted wine now. The concept was simple, with couriers (often on bikes) delivering discounted wines within an hour across the city for a fee. The wines available would change so that no Rewinery experience had to be quite the same. Things seemed great in the beginning, with stock being sold out in the early days and growth having to ramp up to match demand. However, Rewinery’s story came to an abrupt end the next year. The startup never raised outside capital, and key supplier issues led to the decision to shut down. Most delivery startups begin as capital-intensive growth machines, making it likely that a lack of capital made it difficult to pursue the opportunity. Wine on demand sounds like a great deal in the office, but very difficult to execute in a way that builds a sustainable business. Looking at the graveyard of delivery startups both recently and long ago makes it clear that this isn’t the easiest space to take on, especially last-mile delivery. Unfortunately, fast last-mile is what Rewinery was selling.
Lessons Learned 💡
The regulation and compliance surrounding alcohol is a very difficult maze to navigate, especially when crossing state and even city lines. An out-of-the-box solution that solves that is invaluable for many brands that rather wouldn’t invest heavily into the space with no idea how it’ll work out. Add on all the other wonderful features of the DRINKS WaaS platform and it’s no wonder several large logos have signed on to use its solution. With hands directly in D2C wine and feet in enabling other businesses, the opportunities to learn from one business line to improve the other is also valuable given that the end consumer for both services is likely similar: people who don’t mind waiting a few days to try a new decently priced wine. While some other startups are also aboard the curated e-commerce of wine nowadays, the integration of this with the B2B platform and enabling all of its customers to have that same power is a critical offering; building up the dataset to make good recommendations is no easy task for a newcomer brand. If you’re starting a consumer and B2B separated product line, cross-pollination of knowledge is a great way to synergize the wisdom gained from running each. The larger the barrier to solving the problem you’re selling the solution to, the easier it’ll be to sell it. The more data you have to enrich that service, the more refined it’ll be.
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Thanks for reading! What’s your favorite service for getting alcohol delivered? If you found this interesting, consider sharing it with friends and subscribing if you haven’t already!
Cheers,
Amil