The Last Frontier: The Online Economy And Alcohol

Photo credit: AlcoholReviews.com

Alcohol chain retailer Total Wine & More recently announced a partnership with the app Minibar Delivery to launch an on-demand booze delivery system in Arlington, Virginia. The service, which includes free two-hour delivery, contained a notable exception: no hard spirits. Amazon Prime likewise started delivering beer and wine last month in Portland, Oregon. But again, the service did not include hard spirits.

Beltway millennials and Portlandian hipsters may be left wondering why their on-demand experience is being restricted in a way that seems so totally arbitrary. The answer is outdated alcohol laws that need updating. Virginia and Oregon are both states in which the government controls the sale of all distilled spirits. This handicaps other retailers, including on-demand ones, from selling hard liquor as part of their offerings. Until states and localities begin to modernize alcohol laws such as these, consumers will continue to be deprived of the benefits of a truly online and on-demand booze economy.

Presently, 13 states control liquor sales at the retail level, meaning the government is the sole entity capable of selling hard spirits in those states. This precludes other private retailers from selling these products and delivering them to customers, a restriction that almost no other industry has to deal with—for example, Uber Eats delivers nearly every food under the sun.

 Even in states where the government does not control liquor sales, a properly functioning on-demand booze economy is still a long way off. That’s because numerous states cap the number of retail liquor outlets a single owner can own, which effectively prevents larger chain retailers from doing business. This presents problems for alcohol delivery apps that tend to want to partner with these larger retailers—as seen in the recent partnership between Total Wine and Minibar in Arlington—for reasons of both logistics and economies of scale.

For Americans who live outside the urban enclaves where drivers could feasibly deliver booze on-demand, the main concern is being able to purchase alcohol online and have it shipped directly to one’s door. When it comes to alcohol shipments, the laws are nightmarishly anti-consumer, creating a maze of uncertainty. The first problem is that the U.S. Post Office does not allow the shipment of booze at all. But even when private carriers are used, only five states permit the shipment of all forms of alcohol and only eight allow the shipment of beer. Further, the states that do permit the direct shipment of alcohol to consumers have additional strictures in place, such as limits on how much booze can be sent during a certain time frame.

 These burdensome retailing and shipping laws did not spring up out of the blue. Almost all of them trace their heritage to the post-Prohibition era, in which states rushed to regulate their alcohol markets in an effort to replace the federal government’s authority over booze. The results are outdated mid-20th century laws trying to effectively govern a 21st century marketplace. Unsurprisingly, these post-Prohibition legal relics hurt consumers in the form of higher prices and reduced choice.

The good news is that there’s hope. Evidence suggests that millennials prefer online shopping to the brick-and-mortar alternative, and many younger Americans have grown accustomed to having the world at their fingertips. It’s unlikely that a young mom hosting a weeknight barbeque in Portland will be sympathetic to rules that say she can have extra hamburgers delivered to her house in under an hour, but not a spare bottle of rum to add to the punch. Likewise, a recent college graduate working in Arizona’s solar fields may wonder why she’s unable to have her favorite small batch Kentucky bourbon delivered to her door within two days, just like the rest of her purchases.

As frustration with these arbitrary restrictions rises, consumers may start prodding government officials to adapt. It’s clear that regulations and the online economy are on a collision course, as companies like Amazon are expected to continue expanding their alcohol delivery options—particularly in light of Amazon’s recent acquisition of Whole Foods, which gives it a network of licensed brick-and-mortar stores that could facilitate alcohol delivery.

Rather than wait for the inevitable blowback, state and local lawmakers can jumpstart this process by reviewing their laws governing alcoholic beverages and updating them to reflect modern technologies and consumer preferences. Priorities should include privatizing government-controlled alcohol sales, repealing state retail caps and liberalizing shipping laws. The federal government can also play a role by freeing up the Post Office to ship booze and by encouraging states to enter into interstate alcohol-shipping compacts.

The online and on-demand economy already has transformed many industries. Unfortunately, alcohol remains a stubborn exception, and policymakers need to move quickly to modernize its legal structures. Sooner than later, millennials will demand it.

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