Self-checkout is routine at many retailers in America, but not for beverage alcohol. After all, liquor stores deal with a federally regulated substance. Customer ID checks remain common. Frictionless checkout would seem implausible.
But Downtown Spirits in Seattle, and its owner Marques Warren, have always embraced new technologies and cutting-edge techniques. So when opportunity arose in 2021 to utilize a checkout-free setup with Amazon, whose headquarters are close by, Warren was interested.
New Location Needed
The timing was perfect. As Downtown Spirits approached its ten-year anniversary that November, Warren received notice that his landlord intended to tear down the building. Relocation was necessary. Compounding the issue, this occurred at the busiest retail time of the year, and as Warren himself caught Covid-19 amidst the spiking Omicron wave.
Nonetheless, Warren drove around Seattle, sheltering in his car, looking out at potential relocation spots identified by his broker. Around the same time, he learned that Amazon had rolled out its checkout-free retail concept, known as Just Walk Out, which the company was licensing.
The tech was intriguing. Warren had always relied on real-time data and insights at Downtown Spirits, and at airport retail operations he owns. He reached out to Amazon. In early January they responded, and by the end of the month, negotiations were underway.
“That happened concurrently with the site selection” for the new Downtown Spirits location,” Warren recalls. “It played out nicely. I had already been with City Hive, and everyone on their team was helpful in helping us fully integrate the new customer experience into our web and mobile.”
Amazon assisted in designing the physical layout of the new store.
“The checkout-free Amazon technology is a pretty flexible system; it’s not cookie cutter,” Warren says. “They helped design a store that fits our brand. Amazon made that seamless. There was a dedicated Amazon team that managed the digital, and a dedicated Amazon team that managed the physical.”
Fast forward to summer 2023, and Downtown Spirits has reopened with Just Walk Out. Now at 1813 7th Ave, the new spot, totaling 3,900-square feet downtown, is a three-minute walk from Amazon’s headquarters campus.
“It was easier to do this in Seattle because a lot of the Amazon team is local,” Warren says. “And a lot of other Seattle stores in this area are also using this tech.”
How it Works
People enter the new store, pick out products and put them in a basket, and exit, all without any friction.
Here’s how it works: Using their Downtown Spirits app, Customers scan a QR code at a front gate for entrance. This scan accesses their Amazon wallet app, runs 20-30 fraud and abuse checks, and also verifies that funds are in the connected bank account.
Not everything can be digitized. An employee stationed at the front gate still checks IDs. “This greeter is liberally carding anyone who appears to be 40 or under,” Warren says. “It’s really the only friction point.”
If the gate detects red flags, it will not open, and instead directs consumers to see the greeter. “The greeter is cross-trained to handle these situations,” Warren says. “The greeter is also cross-trained in onboarding people onto the app system.”
Once inside, a system of cameras and sensors tracks everything a person picks up and puts into their basket. Items removed from the basket and placed back on the shelf are also detected. As customers exit the store through a gate, their transaction automatically processes. All of this also connects into the Downtown Spirits membership program.
Advantages are many. “Shrinkage goes down,” Warren says. “The customer just goes in and walks around and shops. I can redeploy my sales associates onto the floor helping, rather than standing behind a register. They can act as the experts that we’re training them to be.”
In downtown Seattle, populated by highly educated professionals working at world-class companies, maintaining a well-educated staff is important.
“People here do know what they’re talking about,” Warren says. “Having employees who can cultivate knowledge is key for us in cultivating customer trust.”
The store does include a small section with a cashier and alcohol staples, about 100 SKUs, for customers who do not want the walk-in/walk-out experience.
Altogether, the new store has a staff of 10, not including operational support. City Hive remains a critical resource in that regard, as does the Amazon team helping out.
“It was a huge transition for all of our systems,” Warren says. “We have a new ERP-system that’s cloud-based. That allows for more information sharing and operability between systems.”
Tech and data have long been tools of the trade for Warren. After running airport concessions since 1994, his company partnered with Hudson News on a joint venture in 2004, with 19 stores at Seattle-Tacoma International Airport.
“Seeing how a company of that stature operating, and bringing that into Downtown Spirits, has been a key aspect in our continued growth, Warren says. This includes how Hudson News utilized statistical tracking to optimize business, and embracing cutting-edge tech in general.
“We were the first store on Drizly in Washington in 2014,” Warren recalls. “I’m always leaning into tech. I’m big on reporting, looking at our KPIs and metrics. I’m looking at data, week in and week out.”
Expanding Business
At the same time that Warren was relocating Downtown Spirits and implementing Amazon technology — quite the undertaking already — another opportunity materialized.
“As the Amazon deal and site selection was playing out, I got a call from the owner of Esquin Wine & Spirits, the oldest independent wine retailer in Washington,” Warren says. “I was shocked because I didn’t even know the owner.”
But the owner, Chuck LeFevre, had heard of Warren. He was well aware of Warren’s reputation as a first-class, progressive retailer. That’s why LeFevre and his daughters, when considering selling their family business, had identified Warren as an ideal buyer.
“He asked if I was interested,” Warren says. “I said, ‘Yeah, but I’m busy right now with a lot of things’.”
Around nine months later, Warren signed a letter of intent to purchase Esquin, which is located about 12-15 minutes from the new Downtown Spirits location. In early January, Warren officially took over Esquin, which has been in business since 1969.
Operating at 2700 4th Ave S, Esquin is 15,000 square feet. This includes a wine mini-storage business, of which Warren now owns 40%. Esquin boasts a 5,400-selection of wine SKUs (including many Washington wines) and 1,200 spirits.
“It has been a great experience. It was my first time acquiring a company,” Warren says. “Chuck is a very principled businessman. We resolved our differences amicably. We both want to see the Esquin brand grow and survive.”
“The team members I inherited were surprised that I had growth plans for Esquin,” he adds. “They thought I would just rebrand it as Downtown Spirits.”
Instead, Warren understood that the Esquin brand is “institutional knowledge” of the wine industry. So much so that he set up an Esquin-branded area inside Downtown Spirits for wine sales.
This is undoubtedly what LeFevre had in mind when he selected Warren as the optimal buyer for his fine wine-focused business.
“Marques is a forward-thinking retail leader and we are excited to have the future of Esquin under his stewardship,” says LeFevre, in a press release. “Wine is an important industry in our state: providing jobs in agriculture and trade, as well as serving as a vital part of the restaurant and hospitality industries . . . Wine and alcohol have become serious revenue generators for Washington, which is currently the second largest wine producing state in the country. I’m proud that my company has generated millions of dollars for the state through our business.”
Warren did recently refresh the Esquin brand appearance, going with an art deco look that reflects similar branding at Downtown Spirits. (The new Downtown Spirits location is in a 1930s art deco building. When moving in, Warren discovered original terrazzo-style flooring. He decided to retain that floor, polishing it up, rather than pouring down concrete, which was the original plan.)
“A lot of things align between the two brands,” Warren says. “Esquin is a very well-run company, with lots of professionals who we are happy to now have under our employ.
The purchase also included MadWine.com, a shipping-centric wine website.
“Chuck purchased it in 2005,” Warren explains. “It does a lot of shipping, predominantly in the state of Washington. It provides in-store pickup and local delivery. I’m planning on transitioning it from Shopify onto City Hive.”
“There’s substantial virtual inventory managed by MadWine,” he adds. “I want to grow it. I want to be one of the predominant regional shippers. We’ve always been an on-demand delivery service, with our team as the last-mile. MadWine is more focused on third-party. I’m digging into the complexities of that. I want to make the transition onto City Hive as seamless as possible.”
Warren has also begun using the larger Esquin location as a central distribution point, fulfilling Downtown Spirits from this nearby site.
Altogether, acquiring Esquin has been a rewarding challenge and immense business opportunity.
“Our purchase of Esquin is part of Downtown Spirits’ commitment to connecting customers with an expansive range of fine wines and the most knowledgeable sales team in the region,” says Warren. “With this acquisition, we’re excited to leverage Esquin’s long-cultivated traditions, business practices and deep connections with Northwest winemakers to create more opportunities for customers to access the best products.”
Continued Growth
Among all these recent accomplishments, perhaps most impressive for Warren and his company is their 2022 results.
“We’re one of the few stores that saw an increase in sales over 2021,” he says.
All across the industry, 2022 was a “hangover year,” Warren adds. After ballooning retail sales during the pandemic, fueled by on-premise closures and panic-buying among consumers, the post-Covid years have been a hard return to reality for many.
“Esquin is no exception,” Warren comments on his newly purchased business. “They have reverted back to their pre-Covid sales. But Downtown Spirits, we have continued our growth. We grew 13%, year over year, 2022 over 2021. Downtown Spirits did 50% more topline sales than Esquin.”
How did Downtown Spirits pull off such a feat amid a difficult 2022 for much of the industry? Warren’s answer should be unsurprising to anyone paying attention.
“The approach we take with our marketing is very tech-forward,” he says. “We lean into tech to solve our problems. City Hive has been instrumental in that, with the data you can get and targeting customers. Our membership program has been fantastic. I’m looking forward to offering it to the tens of thousands of additional customers I get from Esquin. This includes deliveries, and specials like monthly bourbon drawings. I’m looking to make our membership program there look more wine-focused, because that’s what Esquin is.”
Customers of the business can expect more of the decades-old brand that they have come to trust and love.
“There are other opportunities I’m pursuing,” he says. “Local developers are reaching out. People like the Esquin brand. There’s a lot to be said about what a local, historical brand brings to the table.”
In the meantime, Warren will enhance the Esquin model as he knows best: through technological upgrades that improve customer experience.
“Amazon has another technology, Dash Carts,” Warren explains. “Every item is automatically scanned as it goes into the basket. Then you just exit the store,” through the Dash Cart lane, and the payment is processed using the credit card associated with a customer’s Amazon account.
What’s nice about this tech is that “it doesn’t require a full buildout,” Warren says. “It can be built within an existing store. And it works with City Hive. My costs with Dash Cart are substantially lower, because I already did all the Amazon IT integration work. So why not deploy it at Esquin?”
“2023 will be a really strong year,” he adds.
Kyle Swartz is editor of Beverage Dynamics. Reach him at kswartz@epgmediallc.com. Read his recent piece, Vodka Trends in 2023.
