Check out the full transcript below.

Richie: [00:00:03] Hey, it’s Richie Siegel, the founder of Loose Threads. I hope you, your family and your team are hanging in there during these challenging times.  

Richie: [00:00:09] In our new podcast series, Offense vs. Defense we’re talking with leaders across the consumer economy about how they’re managing their business, balancing playing offense with playing defense. Defense is about cutting back as much as possible to preserve cash. Offense means making calculated investments and taking risks to put your company in a stronger position. Just like in sports, a team can’t win by only playing defense and the companies that can weather the storm and make opportunistic investments will emerge in a stronger position than where they entered. 

Richie: This week we spoke with Lindsey Andrews, co-founder of Minibar, a marketplace for wine, liquor and beer. The company aggregates inventory from tons of retail stores around the country and it facilitates local delivery. While at home beverage consumption grew rapidly over the last three months, the products people were consuming and the level of demand kept changing. 

Richie: [00:00:54] Lindsay and I spoke about how the crisis unfolded from her point of view, how the company shifted into customer service mode, and how the pandemic has changed the mini bar for the long haul. Here’s how Lindsay and her team have managed the crisis so far.  

Lindsey: [00:01:08] COVID really started to impact our business around the time Trump canceled travel into the US or announced that. So I think that was about March 11th. We started to see the uptick and business kind of took off pretty quickly within a couple of days. And we were seeing, you know, five hundred, six hundred percent growth and new buyers and it was crazy. So we definitely were not staffed appropriately from, for example, a customer service point of view. We were staffed for our normal business, not staff for three, four times our business.  

Lindsey: [00:01:42] And on top of that, there was additional complexity because a lot of liquor stores were inundated as well with delivery requests. A driver, as you know, maybe not wanting to show up for work, so they were scared. So we did have an impact on service levels in terms of late deliveries. And then as it kind of prolonged the entire supply chain, it was a little bit messed up and there were more out of stocks as well. There were definitely more orders plus more issues, so a very large load on our customer service team. And what we found was we kind of diverted a lot of our tech team to building tools for our customer service team, as well as building to make sure that our site was stable and could handle all the additional traffic.  

Richie: [00:02:27] What was Q1 before all this looking like? Because it’s probably an interesting juxtaposition to that.

Lindsey: [00:02:35] Yeah, I mean, Q1 was looking like normal Q1. It’s not the best quarter for alcohol sales. Q4 is always the best with holiday and stuff like that. It’s a little slow. The Super Bowl is there, but it’s nothing remarkable. And actually, April is usually a pretty slow month for us because there are a lot of holidays. And on holidays, people leave their homes in the cities and usually go to their parents or family’s homes. So we actually see a dip in sales in April, whereas this April was our biggest month in history. So it was insane. We were basically spending nothing to acquire customers and they were coming in droves. So I think by early April, we had already acquired more customers than we had in all of 2019.  

Richie: [00:03:24] Wow. So what’s your first thought? I mean, again, it makes sense, right? Beverages is like one of the first things people react to and you can feel the reaction very quickly. Is the thought, “wow, we’re not prepared for this.” Is it like this is going to be a crazy ride? Like what’s going through your head during the first two weeks of this and I guess the middle of March at this point.  

Lindsey: [00:03:44] I mean, it was a lot of putting out fires and being like, what can we do to help? What can we do for the customer service team? What can we do for our store partners? How can we make this easier? So it was definitely kind of focusing everyone there. And then on top of that, we had tons of inbound requests, which is so good, like tons of stores reaching out to get on our platform.  

Lindsey: [00:04:05] So we were trying to onboard them as fast as possible. Tons of advertising partners wanting to make sure their products were in front of the consumers. Since all of their on premise spend had basically gone to zero. All areas of our business were picked up in a meaningful way. It was fun. It was exciting. It was a horrible time and I would rather there was no pandemic and no drastic increase in our business, but obviously I can’t control the pandemic. So we’ll take the silver lining. We are one of the very, very few lucky businesses that have seen an uptick during this horrible time.  

Richie: [00:04:43] I’m curious about what you saw from your retail partner side in terms of what were the different levels of response from them. You mentioned some were like sign me up as quickly as possible and I’m sure others shut down and others were slow. Talk a bit about how that played out on the field, so to speak.  

Lindsey: [00:05:01] We kept a running list of all the stores that were turned off for a period of time. I think close to 20 percent of our stores at one point were off. Whether that was for two days or two weeks or a month, it varied widely. Some stores reduced their hours and some stores increased their minimum to make sure that the orders were making sense as they could only do so many.  

Lindsey: [00:05:25] But then some stores decrease their minimum and increase their hours because they really want to capitalize on it, so it was a really mixed response. Things have certainly, like in the past week or so, leveled out, people can now handle the demand. Our stores are back running. Customer service is staffed appropriately. We increased our customer service team by about 30%. We had to turn off some customer service features like our chat and our phones for a little while just because they couldn’t handle everything. But everything is back on now. So we’ve definitely seen a leveling off. I mean, the demand is still way, way, way higher than pre-COVID, but it’s dropped a little bit since April, especially as like the shelter-in- place orders have been lifted in some locations.  

Richie: [00:06:09] For the landscape, talking about New York specifically. There’s Amazon Fresh, there’s Fresh Direct, there’s Mini Bar, there’s some of your competitors. How did you see the customer choice kind of play out? Was it because stuff was stocked-out and people were just going to the first place they could find it? Other people had preferences. Because I guess, that stuff is available in a lot of places, but also not at the same time, it seems.  

Lindsey: [00:06:33] I think most people didn’t know about alcohol and I think a lot of people went to the alcohol specific sites. So we saw huge growth, but we actually saw the least amount of growth in Manhattan because so many people left. We saw tons of growth in other cities and then New York suburbs. Staten Island grew a ton, New Jersey grew a ton and Long Island grew a ton. So people were definitely leaving and going to other places in the surrounding areas. And then we would also see spikes. At one point they thought they were going to deem alcohol non-essential in Colorado and our sales in Denver went crazy for 24 hours. But then they were like, no, no, never mind, alcohol is essential. So it leveled off and was ok after that one spike, which kind of stayed at a steady state.  

Richie: [00:07:19] Does that change some of the internal thinking on who we’re for? Did you think of it before as more of an urban thing versus something that happened in the suburbs? How did that migration of people shift, if at all?  

Lindsey: [00:07:35] We do have a very small shipping business where we work both with vineyards and with some liquor stores to ship within state. And we saw shipping kind of grow as a percentage of our business by almost six times. So people in places we didn’t have a ban were definitely turning to us to get alcohol shipped, we saw a spike in that business. And then about 15% of our business is corporate sales, so like office happy hours. That obviously went to zero, basically. So there was mixes of what did well and what didn’t do well.  

Richie: [00:08:08] We talked a little bit about mid-March as that progressed into April, what was changing or evolving in terms of managing to demand and what else kind of arose?  

Lindsey: [00:08:20] We were able to get new customer service people onboard and start training by the first week or two of April. And the first week of April was our absolute peak and so that really helped. And I think we had to obviously put everything on our roadmap that we were planning to build on hold. And we just focused everything on dealing with the growth and building the tools for the stores and for the customer service team to help with that. We’ve seen our business shift. We’ve seen a huge spike in spirits sales. So I think it goes much towards the cooking craze. The cocktail craze kind of hit. 

Lindsey: [00:08:57] Liquor sales really increased a ton on Minibar and we also saw a lot of the things you would use to mix cocktails like Cointreau, Grandma Nieh, Apparel, Campari, all of those grew more than many of the other liquors in the category.  

Richie: [00:09:14] What about the delivery person side of this? Do you employ them or do the stores employ them?  

Lindsey:  [00:09:20] Generally, the stores employ the delivery drivers. We also work with some third party logistics firms, if stores want to use those we integrate. We tried to educate both the stores and the consumers on don’t hand your I.D. to the driver, just hold it up, put the bag down and then let the other person pick it up. But, this is a regulated item so you can’t really do drop off without interacting with someone, which was a challenge because people didn’t want to interact, obviously. We’ve tried to send tips and guidance to both the stores and the consumers on what to do and also, hopefully, people were staying at home so that the delivery drivers were on the streets alone and they weren’t at risk doing the deliveries. So that hopefully created a whole system of people being a little bit safer with everyone at home and just delivery drivers for FedEx, UPS and all the amazing workers that went to work while we all got to work from home.  

Richie: [00:10:19] In terms of customer communication, how did you determine how much you wanted to share about his growth and the stuff that’s working, versus maintaining your normal communication strategy and cadence? How did that evolve, if at all? 

Lindsey: [00:10:36] On Minibar we started testing out different messaging. We started with a little bit more passive messaging, like some banners across the site. Orders are running late, but we’re getting inundated with customer service inquiries about where’s my order? So we kept escalating the messaging. And finally, we added a pop-up to the home page that was basically like service alert orders are running very late and then added a service alert in the confirmation emails. We tried to add tons of messaging to our entire site, which obviously isn’t the most customer friendly shopping experience, but we sent emails about tips like, “please order early in the day,” and “hopefully you’re staying home, so you’re there to receive it at any time” because everything was running so behind for a couple of weeks.  

Richie: [00:11:25] Were there times where you wished you had your own warehouse and your own retail store? What goes through your head thinking the supply chain is kind of aggregated and everywhere, which means you have limited control effectively over parts of that equation?

Lindsey: [00:11:39] We very closely tracked the stores that were getting inundated with orders. And if they had to be turned off early or they were having tons of lates, then our sales and operations team worked really hard and did a great job of adding more stores in those neighborhoods to help with the demand and that served us well. We did that very proactively in parts of Brooklyn because there was huge demand and in some other areas as well. We tracked it very closely and put all resources behind adding stores in the areas that had tons of demand.

Richie: Has this situation changed or confirmed the longer term vision for the company? Like you see coming out of this, different than you would have continued.  

Lindsey: [00:12:22] Yes. I think alcohol ecommerce has lagged behind many other sectors for online penetration and we’ve all been waiting for the catalyst. I don’t think any of us knew this would be the catalyst. So we’ve been in this business for almost seven years, we 100% believe more bottles of alcohol are going to be sold online as time goes by, but it was a slow adoption. This was finally the moment we’ve been waiting for and I think everyone’s really excited and reinvigorated, It’s our moment. The entire team has really stepped up and gotten behind it and are firing on all cylinders, which has been awesome. And I feel like it’s brought the team closer together. Everyone is really behind the mission.

Richie: [00:13:11] I’m curious to talk more on the marketing side. You mentioned, obviously, customer acquisition has increased and you didn’t really pay much for that. How have you approached marketing over the last kind of two or so months as you’ve seen CPMs drop and channel shift and so forth?  

Lindsey: [00:13:24] We’re very direct response driven. We’re very conscientious of our cost per-customer versus our lifetime value. So we’ve been inundated with sales emails from different places and I feel like now we’re just a little bit more bold. We’re like, “will you do a cost per customer model, like performance based?” And a lot of people now are saying yes. So it’s very low risk spend as opposed to paying for impressions, but not knowing if those will convert to customers. You know, we’ve seen a huge increase in spend, but mostly in terms of  promo code costs, because now we’ve seen so many consumers coming in and obviously the volume of people searching for alcohol deliveries. So Google AdWords traffic and costs have gone up. But I think a lot of it is thanks to word of mouth and PR.  

Richie: [00:14:14] You also have your own marketplace, in terms of sponsored listings and so forth on the site. What’s it like to have both sides of that equation?  

Lindsey: [00:14:24] The brands flocked to Minibar as well, which was nice since their retailer spend kind of was no longer making sense because people weren’t going to stores. On premise spend went to zero because bars and restaurants were closed, unfortunately. So we saw tons of outreach from the brands wanting to work with us, which was great. I think they also see the world is shifting like we do, that this is finally the catalyst for ecommerce. So they’re buying in for the long run as well. It’s not just like let’s buy ads for April and May. They’re buying ads for the next twelve months and doing annual campaigns, which is great.  

Richie: [00:15:03] What have you seen in terms of new brand discovery? Are you finding  customers are trying to just go back to the staples? Are you finding them very open to try new things? 

Lindsey: [00:15:13] I feel like it’s more what I was saying before about the cocktails. I feel like a lot more people are buying more variety and other liquors and stuff like that to make more complicated drinks. Tequila has grown a lot. Mostly the other liquors have grown a lot in terms of wine. We still see red and white as the top sellers. We’ve actually seen a pretty large decline in sparkling because no one’s celebrating anything, sadly. And then we’ve also seen a large decline in beer.  

Richie: [00:15:44] Why do you think that is? 

Lindsey: [00:15:46] I think people want different stuff. Also, if they’re stocking up on paper towels and toilet paper, they have less room in their house. And beer is the bulkiest item among wine, spirits and beer. So it just seems like fewer people are buying beer, at least on Minibar.  

Richie: [00:16:03] I’m just looking on the site and seeing cocktail recipes and booking a bartender. Explain those offerings and then have those been in play or have some of those been pulled back?  

Lindsey: [00:16:13] A bartender really came from customers requesting. Can I get a bartender? Where would I get a bartender? I’m ordering for a party. Do you have a bartender? So we realized that was a need and we really want to provide everything to the cocktail occasion. We provide bartenders, ice cups, mixers like lemons, limes, all of that. So we started adding that in the cities we were in. And obviously right now it’s pretty much off since no one wants a strange person in their home or having large gatherings because that would be irresponsible. And so bartenders pretty much went to zero and then cocktail content, we’ve had that for maybe a year up on our site and we’re always building out that content and hopefully people are using it to satisfy their cocktail cravings and try new stuff.  

Richie: [00:17:04] Do you have any thoughts on it? Like, I saw it in the city this weekend a lot of restaurants are trying to open up at bars now just to get some sort of revenue in. There are no dinner parties happening or shouldn’t be happening, etc. Does that cultural shift  impact your business in a good way? In a bad way? Do you guys think about how we can be a part of virtual gatherings and parties? 

Lindsey: [00:17:31] Yeah, we’ve worked with a lot of businesses because now they’re having Zoom happy hours. We’ve helped them send stuff to everyone on their team and stuff like that. So we have seen a shift in that regard and that’s kind of what our corporate business now is. Is Zoom happy hours.  

Richie: [00:17:48] Interesting. Just like a distributed happy hour, basically.  

Lindsey: [00:17:51] Yeah, Minibar does it every Thursday. Zoom happy hour. Everyone makes their own drink actually at a cocktail class. Campari was nice enough to host a cocktail class for us last week. So we made apple L’Esprit and some other things, but we want people to go back out to bars and restaurants. They’re part of this industry. We want them to thrive. But obviously, when people feel comfortable to go back. So we want to be a resource, a responsible resource. We don’t want people on the road driving to liquor stores if they’ve been drinking. We want them staying home and being safe. We will remain and I think in times of a recession or a boom, people drink regardless, so we want to be that resource for them. But I do hope it goes back to both drinking at home as well as going to bars and restaurants to help those businesses recover.  

Richie: [00:18:40] What has been the cheapest and most expensive lesson you’ve learned over the last two months?  

Lindsey: [00:18:45] The most expensive, is seeing the cost of all of our infrastructure multiply by many times due to traffic. And there’s been a lot of bought traffic from other countries as well. I feel like maybe we’re a bit more on the radar than we were before this so we get some of that negative traffic. Now the cheapest, I feel like all this PR has been amazing and we’re so thankful for the industry, including us, because that’s helping not just us, but the entire industry move online, which we want. The more people know about the industry, the better we’ll do. So that’s really been fabulous because that was the biggest hurdle for us and the entire industry was awareness.  

Richie: [00:19:28] If you think about when 2020 is over and a year from now, 2021 and beyond, is part of you worried of  how do you replicate all these sales numbers in a non-pandemic or  how do you think about explaining this in two years or where to go from here?

Lindsey: [00:19:43] Yeah, I think it will be hard next April to show a ton of growth, but hopefully I think we can find a happy medium. I read Fred Wilson’s email about this and he kind of said, “take the average of what you were doing before and the peak and your new normal will be the middle.” So if it’s the middle ground, we’re very excited and happy to be going forward. That’s much higher than what our status quo was and so that will keep propelling the overall business.  

Richie: [00:20:15] I’ve talked to other founders about the fog of war pre-COVID you’re thinking in terms of months and years. It sounds like in the early days everyone’s looking at hours and days. How has that evolved? And what are you up to at this point, again, in terms of how far in advance you can think and plan?  

Lindsey: [00:20:31] Our tech sprints have gone back to a normal cadence, we’re not releasing new tools every day or two or like putting out fires. We still have tons of stores we can onboard, which is great. We’re still talking to tons of brands for advertising partnerships, but definitely we’ve been able to take a step back and look at the bigger picture and we’re not scrambling every day or every hour, which has been a nice change. And now we can prioritize what this has told us about our customer and things we need to build.  

Richie: [00:21:02] Has the customer changed? Like who the target is or who you’re flocking to? Versus maybe it was more about a younger, digitally savvy one before.  

Lindsey: [00:21:11] Yeah, it was probably more of a younger, digitally savvy one for us. Our customer is anyone that’s 21 plus and drinks responsibly, so our audience is very wide. But I do think more people are now utilizing it that maybe wouldn’t have before or didn’t know about it. And also, we’ve expanded our territories, so we’re offered in more areas now since we’ve had so many stories reach out to us. So I think as we expand more and more, our customer base will get less urban because we’re going to spread out and I think also there’ll be a lot of people leaving potentially like the dense urban areas as well.  

Richie: [00:21:49] And I assume that tilts more towards the shipping business and some more like local. 

Lindsey: Exactly.

Richie: I guess having gone through all this, what is your level of optimism on what the next year or two looks like in this category? We’re seeing a really interesting mix between people relying on the brick and mortar establishments, but buying and fulfilling digitally. You see that hybrid model, which you guys started working on seven years ago, lucky enough was the right mix for now vs. should you have just been a warehouse shipping alcohol?

Lindsey: [00:22:25] Yeah, I think we’re still totally bought into our model. There are pros and cons obviously since we don’t own the product and don’t have the warehouses and stuff like that, we make very little on an order. But on the flip side, it’s a highly regulated industry, so we can work with Anheuser-Busch and all those major brands because we’re not a retailer, because there are strict rules in terms of a three tier system. So there are definitely pros and cons. Also, not doing the logistics or holding inventory has allowed us to scale much faster because the costs are much lower. We don’t have to hire delivery feed or buy bikes or vans or buy all the inventory before we sell it. So I think we still fully believe in our model. Marketplaces are highly profitable. You just need to get to a certain scale and this has just helped us get there faster.  

Richie: [00:23:20] Before all of this happened from a headspace perspective, were you someone who believed a lot of the business was in your control and that your decisions had very clear outcomes and has that all change in terms of, again, something coming out of left field that not a lot of people in the business community at least anticipated, vastly reshaping industries, economies, etc.

Lindsey: [00:23:42] I’m a firm believer in hard work and innovation, but also luck plays a large part in the outcomes or global pandemics I guess in this case, we’re a bank draw back to business. We’re at the whims of the capital markets. So well our business is doing really well, is VC deploying less capital and will it be harder for us to get the money we need to continue to scale up marketing, people and stuff like that?  

Richie: [00:24:08] In terms of scenario planning, again, no one had this thing in their scenario that I know of from a business perspective going forward, how do you even think about that in the realm of possibility. Do you plan for this to happen again or do you just hope that it doesn’t for 100 years? Like, how do you even think about that? 

Lindsey: [00:24:26] I really hope it doesn’t. I feel like we’ve all risen to the occasion when it did. So I feel like we will be in better shape if it happens again or if there’s a flare-up in the fall. But I certainly hope it does not happen again. I will be cautiously optimistic.  

Richie: [00:24:43] But in terms of expecting the unexpected. Do you feel like your definition of that is so much broader than it ever was?  

Lindsey: [00:24:49] Yes, but our team is so nimble that I feel like in most cases they would be able to adapt and do a great job. You know, maybe we’ll miss a few sales or have a few issues, but that’s what happens.  

Richie: [00:25:02] Awesome. Thanks, Lindsey.