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Regulatory bug bites e-tailing of alcohol

On a Sunday afternoon, three friends ran out of beer, but the thirst could not be pacified as they decided not to drive after drinking. That’s how Dhruv Khandelwal, an equity research analyst, got the idea for online retailing of alcohol in Delhi. Khandelwal then started letsbuydrink.com last year.

Khandelwal’s counterpart in Bangalore had a different reason to venture into online retailing of alcoholic beverages. The owner of Madhuloka Liquor Boutique, which has 17 stores across Bangalore, noticed a trend that young consumers, mostly the technology professional, tend to keep a stock at home, because of their unusual working hours. Madhuloka then started its online platform that offers its consumers the “convenience of shopping in your own time in your own space when you need to stock up or for an event or replenish your fridge with your favourites”.

A handful of online retailers have started offering alcoholic beverages through the e-commerce route since then. Letsbuydrink.com caters to Delhi, Gurgaon, Faridabad and Mumbai and offers imported alcoholic beverages for sale in India. There are Madhuloka in Bangalore, winebazaar.in and hopscorkenbottle.com in Mumbai, boozzr.com in Delhi among others.

The phenomenon is of course still in its infancy with volumes very limited. And of course it’s metro-centric. But it certainly has the potential to grow. Sagar Shetty of winebazaar.in, who sells almost everything from imported alcoholic beverages to country spirits at his retail outlet shop in Mumbai, gets about six per cent of his monthly sales of about Rs 1 crore a month from online orders. Another retailer in Bangalore, who also sells through online, but prefers not to be named, says that it gets orders worth more than Rs 2 lakh a month through its online portal. “This is small compared to what we sell in the shop. But, this is a new revenue stream,” adds the retailer.

The business model they follow is of the marketplace – where they connect the buyers with the sellers. Yet it’s pretty clear that they are living on the edge of the law, which could be a serious challenge for growth. A buyer can go and place the order, and the site connects them with the local retailers it has arrangements with. But unlike companies like Amazon or Flipkart, which provide the logistics and delivery directly, liquor portals face a regulatory block. They cannot sell or deliver liquor at homes as they do not hold any liquor licence which is mandatory to do so. In fact, some experts say that there is lack of clarity whether liquor can be delivered at home or has to be bought from earmarked licenced retail outlets.

As a result, the onus for delivering the product lies entirely on the retailer, which also means there e-commerce sites do not make any money on logistics at all. However, some of them say that they are circumventing the law by tying up with independent individuals as delivery boys, who get paid a commission for delivering it at home, which is entirely off the book. They get paid in cash after delivery.

The liquor e-commerce sites have also found ways to circumvent the dry days in a city. They say that even if orders are made on October 2 (Mahatma Gandhi’s birthday), they register a non-dry day as the date for the delivery because the delivery has been made on a dry day. As there is no real time tracking, they escape scrutiny.

There is of course another challenge – liquor cannot be sold to anyone below the legal drinking age (the legal drinking age in India varies state to states from 18 years to 25 years), so that has to be ensured. To ensure that the buyer is not underage, some of the portals such as letsbuydrink.com have included a checking mechanism asking the buyer to upload identity proof while placing the order. Letsbuydrink, however, has more than 2,000 registered members.

Most experts agree that while there is a huge potential for liquor online retailing, there are serious legal hurdles which need to be resolved. “There are legal hurdles, and alcohol being a state subject, online retailing of alcohol may not be scalable until the Government changes regulations. And, drinkers tend not to wait. They want it when they may order it. So, delivery would be an area of concern. On the other hand, this model is unlikely to go beyond metro cities,” says Anil Talreja, partner, Deloitte Haskins & Sells. In fact, globally too, retailing of alcohol is also not very successful to date, he adds.

But those who use it say that online liquor retail is convenient. “It’s convenient, it offers you a reasonably good variety and it is reliable,” says Ajay Chatterjee, a technology professional in Bangalore, who buys from madhuloka.com regularly. “My wife can easily buy alcohol online of her choice, while she does not prefer buying from a retail outlet,” he adds.

According to industry estimates, Indian liquor market is pegged at around Rs 1 lakh crore, of which about a fifth is imported liquor. IndigoEdge, a research firm, stated in a report that India is the third largest market and one of the fastest growing liquor markets in the world.


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