Liquor retailers toast online model in India
When Dhruv Khandelwal started working as an equity research analyst after finishing his MBA in the United States, he wanted to start an Indian financial services website. That changed when Khandelwal and his friends ran out of beer on a Sunday afternoon.
Letsbuydrink.com, a website launched by Khandelwal six months ago, offers imported alcoholic beverages for sale in India. The website has 2,000 registered members and averages monthly sales of 150,000 rupees ($2,460).
“It’s just a point of convenience for (customers) and that’s the target market,” said 29-year-old Khandelwal. “This is an industry where you need to build a brand image and you have to build confidence.”
Entrepreneurs and liquor vendors in India are betting on the online model to win more customers, while making it easier for people to order their favourite brands of beer or wine on the Internet.
With a $35 billion retail market that is growing at around 8 percent each year, India is the third-largest and one of the fastest-growing liquor markets in the world, according to Bangalore-based investment bank IndigoEdge.
Alcohol retailers have started noticing the untapped potential of the online market. Those with licences to sell alcoholic beverages in shops are expanding their online shopping services, while some entrepreneurs are adopting a model in which orders are routed to a retailer for delivery.
Websites such as letsbuydrink share margins on every order routed to a partner retailer, which in turn delivers the product to the customer. Licensed shops with an online presence manage orders and delivery on their own.
“It’s convenient, it offers you a fairly good variety and it is also reliable,” Sivakumar said. “If you are just shopping sitting at home and if you are craving a Corona as opposed to a Kingfisher, which your local guy will have, then you might want to look up this kind of a site.”
An increase in spending power and an emerging middle class has led to a rise in pub culture and social drinking in cities over the years, although many in largely conservative India continue to look down on those who smoke or drink.
The government also discourages alcohol consumption — advertising alcohol on TV or in print is banned while the legal drinking age in many cities is higher than the voting age. States such as Gujarat even prohibit sales of alcohol.
Despite the odds, a high demand translates to robust sales for alcohol vendors. Sagar Shetty, who sells everything from imported beer and whiskey to country liquor at his Chandreshwar Wines shop in Mumbai, clocks monthly sales of 10 million rupees ($163,000). Around 5 to 6 percent of sales are from winebazaar.in, a website he launched two years ago.
“The problem in a wine retail shop is you have visibility only in your neighbourhood … so the best thing we could come up with was a website,” said Shetty, 26, who wants to list more wines online and offer discounts on a revamped website.
With established players such as Flipkart and Snapdeal, the e-commerce retail market is growing at a steady pace in India. Research firm Mintel estimates the business will grow 30 percent annually to $29 billion (1.8 trillion rupees) by 2017.
Investors see potential in online retail and Flipkart, one of India’s largest e-commerce companies, recently raised $360 million in a fund-raising drive. Though Khandelwal’s letsbuydrink.com was self-funded, he plans to approach firms such as Indian Angel Network and SAIF Partners to raise about $2 million to expand operations.
“Because of the potential of growth in e-commerce itself, it makes a lot of sense for a lot of companies to start selling alcohol online,” said Ranjana Sundaresan, food and drink analyst (India) at Mintel, adding that online alcohol sales will grow as the country’s internet penetration improves.
(Editing by Tony Tharakan and Robert MacMillan; Follow Aditya on Twitter at @adityayk, Tony @tonytharakan and Robert @bobbymacReports. This article is website-exclusive and cannot be reproduced without permission)