New research from alcohol market analysts IWSR predicts that while growth in the alcohol e-commerce market will slow over the next five years, it will continue to outpace total beverage alcohol (TBA) growth.
IWSR says the alcohol e-commerce channel is entering a period of normalization following the Covid boom, but is expected to be worth $40 billion globally by 2027. This represents a value CAGR of 4.5 percent over 2022-27, compared to TBA (on-trade plus bricks-and-mortar off-trade plus e-commerce), which is expected to see a CAGR of two percent over 2022-27.
The findings of the IWSR Ecommerce Strategic Study 2023 predict that the total ecommerce value share of TBA will stabilize at around four to 4.5 percent. Previously, the share had increased from 2.1 per cent in 2018 to 3.7 per cent in 2021.
“After the pandemic boom, the value of e-commerce experienced a slight correction in 2022 (minus two per cent) as restrictions were lifted in most markets and shoppers returned to the on-trade and bricks-and-mortar stores,” said Guy Wolfe, head of e-commerce insights at IWSR. “Online growth will pick up in the near term, but will remain depressed by a weak macroeconomic outlook, before returning to more stable growth from 2024.”
IWSR tracks 16 markets, including Australia, for its research, and analysts said that while the percentage of alcohol buyers using e-commerce has declined, the frequency of those who do shop online has increased.
“In the post-Covid environment, the behavior of alcohol buyers is moving in different directions,” Wolfe said. The overall proportion of consumers shopping online is down, but those who continue to do so are increasing their frequency.
“This suggests that the channel is losing ‘transient’ users who only adopted it out of necessity during the pandemic, but is also maintaining or even gaining appeal among e-commerce loyalists.”
IWSR also said that while the pace of alcohol ecommerce growth is expected to slow, it should still remain an important channel for brand owners.
“Online sales value is still forecast to outpace TBA through 2027. Furthermore, IWSR’s Q3 2023 consumer research confirms that the digital space is a critical source of information, influence and engagement for shoppers across all channels,” said Wolfe.
“As such, e-commerce remains a key element in the overall value picture.”
CONSUMER BEHAVIORS
IWSR’s COO Consumer Insights, Richard Halstead, also said there are two key behaviors of online alcohol shoppers that brand owners should be aware of.
The first is that value-seeking behaviors will continue as economic uncertainty and cost pressures persist.
“As disposable incomes continue to be squeezed and e-commerce shoppers in most markets show greater price sensitivity, it is more important than ever for brand owners to offer strong value propositions in the online space,” said Halstead.
“However, this does not necessarily mean discounting, but rather offering consumers a solution, such as free shipping, or a reason to treat themselves, such as limited-edition products.”
In addition to looking for value, online shoppers are also looking for information, with Halstead saying that online alcohol shoppers spend significantly more time conducting pre-purchase research than those who shop in brick-and-mortar stores.
Halstead said: “The extent of pre-purchase research, the sources used and the information sought varies greatly by market and demographic. It is therefore critical that brand owners tailor their content and forms of digital engagement accordingly to ensure they have maximum impact.”
The IWSR Ecommerce Strategic Study 2023 surveyed 10 core markets and six secondary markets, which together account for 90 percent of global e-commerce alcohol sales. Consumer research was conducted in the 10 core markets of Australia, Brazil, China, France, Germany, Italy, Japan, Spain, the UK and the US, while the secondary markets were Canada, Colombia, Mexico, the Netherlands, Nigeria and South Africa.
