Beyond the Spirits Lotto
We're truly lucky to have such an enthusiastic and dedicated group of customers, perhaps none more passionate than the rare spirits audience. Their excitement is something special, and I want to highlight the incredible work our buying team has done to help build the department. From Susan Purnell and David Driscoll; to our current team, David OG and Andrew Whiteley. OG has been buying since 2011, and Andrew has been buying since 2018. Both have traveled far and wide to find those unique bottles and barrels that we're excited to share with our K&L community. Right now, they’re in Japan looking for more cool options we’ll get to offer later this year.
While they've been busy securing exclusive casks and special offerings, we've also faced the challenge of getting our hands on those super-limited, hard-to-find releases from distilleries. Everyone knows about Pappy Van Winkle, but it's just the tip of the iceberg. The demand for these rarities is huge, and the lengths people go to get them are just as impressive.
About ten years ago, we started noticing a significant increase in bot traffic. Every online retailer has to contend with bots trying to grab credit card information or breach the network. But a large percentage of our bot activity actually came from spirits enthusiasts who had the tech skills to build bots. We even found ourselves mentioned on bourbon forums where people posted a how-to on bot building. These whiskey bots were making millions of requests each day, scouring our site for new inventory drops, which has been a challenge to manage to say the least. We’ve invested heavily to combat the bots, not because we wanted to go to war with our customers, but because they were bringing the site down! They also punish the well-intentioned terrific customers who didn’t or couldn’t build their own script. We’ve integrated a combo of 3rd party cybersecurity and bot-mitigation services to help address the problem.
For a long time, we have held a spirits lottery each year, aiming to reward customers with access to many of these rare items. A list of bottles went out to customers, they replied with a wishlist of picks, we used a lottery approach to sort it out. It's a massive manual effort from our team but was well-received by customers who love the chance to get these bottles. Our alcohol-industry attorneys panic at the use of the word "lottery" -- we've been reprimanded for "offering things of value at no cost" which is a legal no-no in the alcohol industry. They argue that a winning ticket to buy a bottle of Eagle Rare 17 at $150 is “something of value” since it often immediately hits the secondary market at $2000+. We've never fully agreed with the legal opinion, as many of the bottles we sold this way did not get flipped again, they were just a way of saying “thanks” to a loyal customer.
This year, we've decided to end this flavor of the lottery, though not because of the legal reasons cited above. It was a decision that wasn't made lightly and has understandably disappointed many. The decision put our team, especially David OG and Andrew Whiteley, in a tough spot with customers who were expecting the lottery. In hindsight, we should have communicated this change sooner. While we never intended to mislead or boost sales unfairly from people who thought they were building lottery credits, we can see how it could have been interpreted that way. Rest assured, customer loyalty and access to these items will continue to go together, we just need an improved method. So we are currently sorting that out.
We have several exciting initiatives underway aimed at improving our approach over the long term. This includes a few key factors and goals:
We're focused on differentiating spend on new brands and lesser-known bottlings. K&L is committed to seeking out exceptional craft spirits that are priced fairly, many of which are relatively unknown when we first introduce them to our customers. We view these as being very different than the already-famous bot targets when it comes to lotto loyalty points.
We value all our customers immensely, but we plan to de-emphasize credits for buying instantly selling, allocated items. These are the items you may see with “1-bottle-limit” in the title, which sell out within minutes. This change is to prevent a cycle of spending that only justifies access to more of these "hot" items, creating an echo chamber. This is similar to our approach with Romanée-Conti and other ultra-rare Burgundy allocations, where securing an allocation creates significant purchase dollars, setting the stage for future allocations. There's a whole secondary market where individuals acquire these rare spirits only to resell them at huge multiples of the purchase price. That’s all good, it just that those dollars shouldn’t fuel additional access to the cherries.
K&L would love to provide new customers with some limited level of access, so they don’t feel impossibly shut out.
We’ve been criticized in the past for a “times are changing, so are we” messaging strategy. But indeed, times have changed! Looking into the data, I see 100 bottles sold of “1-bottle-limit” Willet 21-year-old single barrel for $199/bottle a few years back. Now that frequently trades at over $10k per bottle. Indeed, for this part of the market, times have definitely changed!
There’s no easy way to announce that the lottery has been discontinued, and it’s true we could have handled this better. We apologize. Hopefully, once the surprise and disappointment fade, the lotto enthusiasts will still come to view K&L as a spot that offers a compelling set of services, expertise, and selection. There are several exciting announcements we have in store for later this year. Beyond a better way to handle allocated spirits, we have concrete plans to allow collectors to trade these rare bottles. No, we are not planning to shift our allocations and auction them all directly ourselves through that upcoming platform. We respect the wrath of the spirits buying community, and that would be pouring gasoline on the fire.
We’re grateful for your business, your support means a lot to us. K&L remains committed to improving all our services, with the goal of offering you the finest spirits department possible. Stay tuned for more info…