As Russia has enacted the new law on viticulture and introduced new liquor licenses with protected designation of origin and protected geographical indication, Russian winemakers’ positions have become stronger in the domestic market. Moreover, projects to start new vineyards have grown by 70% in recent years. However, large producers continue to determine the industry’s policies and take up space in stores because they supply relatively cheap wines to the mass market. At the same time, the best quality wines are made at small wineries. Russian Post is launching an alcohol retailing experiment to give small producers access to customers, which will de facto legalize online trade in alcohol in Russia.
Challenges an alcohol retailer is likely to face going online
The first and most obvious difficulty in serving a customer remotely has to do with observing the legal age limits. The seller is required to make sure that their buyer is at least 18 years old, and from March 2023, the legal drinking age may be raised to 21. Russian Post is going to launch a website where alcohol buyers will choose, order and pay for their purchases online. The orders will be delivered in special packages to ensure safety of the bottles. Before handing over the order, the delivery person will have to check the buyer’s age in their passport or via the Gosuslugi identification system.
Orders will be delivered in special packages to ensure safety of the bottles. Before handing over the order, a delivery person will have to check the buyer’s age in their passport or via the Gosuslugi identification system.
Online alcohol trade is also hindered by the lack of clear guidelines regarding what kind of information about this type of product can be published online. In its clarification, the Federal Anti-Monopoly Service allows publishing information about the variety of alcoholic products sold by a store on its website without singling it out in terms of homogeneity, which basically cancels out any tools of online promotion even on the same platform. The ban on alcohol advertising online makes it impossible to attract visitors through search engines.
Other mandatory requirements include requirements of the Federal Service for Supervision of Communications, Information Technology and Mass Media and the Federal Service for Alcohol Market Regulation with respect to the information that must be included with any mention of an alcoholic product, as well as requirements concerning any websites where this information is posted. Violations can result in website blocking.
Online sales of alcoholic products are currently prohibited, this market segment being represented online either on websites of retailers or websites offering information only. The Russian Post experiment may overturn this situation. New game rules may emerge that will allow alcohol manufacturers and traders to operate online.
Possible scenarios
It is obvious that if selling alcohol online becomes possible, major alcohol brands will repurpose their websites to create online stores and will try to conquer the market in the format of online extension of offline points of sale. Meanwhile, producers of niche products such as top Russian wines already find it challenging to get a place on retailers’ shelves. It will be equally difficult to win over customers online considering the promotion and advertising restrictions and the actual lack of expert knowledge of online trade.
Even those producers who decide to develop their own websites will have to maintain their offline store chains, which will significantly affect the price of already expensive wines and limit the geography of offer.
Marketplaces can be an alternative to major chains or own stores, thanks to the fact that marketplace owners take charge of expert online promotion.
What can alcohol marketplaces be like?
In 2014, after Crimea reunited with Russia, domestic wines became a hot topic. However, there is still certain lack of information about them. What kind of wines do we produce? Who produces them? What makes them special? Mass consumers had no idea and there seemed to be no way to find answers to these questions.
This is how the website krasnostop.ru came about. Running on CS-Cart for marketplaces, it focuses on Russian wines and commits to fully educate prospective buyers. Website visitors will find answers to all their questions about available Russian wines, winemakers, special features, prices and points of sale. This website is particularly useful thanks to its typical marketplace approach: it provides winemakers with a platform where customers can book unique wines and buy them out from a store in a convenient location. If we forget the fact that the actual sale takes place offline, as law prescribes, Krasnostop can be considered an MVP of the alcohol marketplace business model. One can come to certain conclusions by analyzing the experience of developing and maintaining this kind of websites.
Niche offers to have advantage over widely available wines
As law prohibits comparing two alcoholic products and any promo campaign can be considered advertising, marketplace owners and sellers are faced with the issue of variety as it seems to be a drawback rather than an advantage. The more items of the same category are available, the fewer impressions one specific product will get.
Specialization seems to be the solution — in particular, developing several niche platforms, each focusing on its own product type. It is important to maintain a balance: with a modest variety, a marketplace will fail to achieve a proper turnover while too big of a variety does not benefit sellers.
Marketplaces can’t do without physical stores
Given our state’s deliberate attention to alcohol sales, it seems hardly possible that it could allow the dark store format. It means that to launch a marketplace, businesses will need offline points of sale. By far not every potential partner has premises to locate the entire assortment of products. As for wineries, they in most cases will find it unviable to place wine made by other producers in their store. Therefore, each marketplace will have to create its own offline network.
Less freedom for the seller, more work for marketplace tech support
Technically, it is easy to provide sellers with the ability to fill in the information about items, but there’s a risk that the entire resource is blocked if a partner submits their proposal in violation of the current law or the requirements set by supervisory authority. To avoid that, one will have to either formalize the description by limiting the number of text and description fields, or shuffle off the work to present the goods on the marketplace managers.
Impartiality equals partners
Blogs are one of the most efficient tools to promote online resources related to alcohol. But what works well in the format of a single store can cause problems for a marketplace due to a conflict of interests of various producers.
To sum up
The experiment to sell alcohol through the Russian Post that was launched this spring has a chance to open the national online market for this kind of products. At the same time, amid the launch of online stores by large players demand will be formed for niche alcohol marketplaces that will create their own ecosystems and offer platforms to sell products to a wide audience.
By Ilya Makarov, CEO of CS-Cart