The Liquor Store Owner's Strategies to Success
Objectives / Executive Summary
This paper was created to provide guidance, tips and strategies for new and prospective owners of wine and liquor stores. The liquor store business is not for everyone, but for those prepared to meet the challenge this can be an exciting, rewarding opportunity, and one that generates a steady stream of customers year round.Intended Audience
This document is intended for entrepreneurs considering ownership of a liquor store, or those in the process of building/purchasing same.Presented by Comcash
This white paper is presented by Comcash, a company that provides state-of-the-art POS systems and software to restaurants, liquor stores, convenience stores and other retailers.
The Liquor Store Owner's Strategies to Success
As with any new business, the more time, research and knowledge an entrepreneur can acquire beforehand, the more likely he or she will ultimately create a stable, profitable venture.
However, those seeking to open a liquor store face additional challenges and hurdles that require careful and skillful planning to overcome. Besides operations, financing, hiring employees, advertising and marketing, all requirements of any retail operation, there are numerous government regulations that must be satisfied. Those with the patience and willingness to tackle the paperwork can be rewarded with a lucrative business that is less prone to economic downturns than other types of retail establishments.
The US beer, wine, and liquor store industry includes approximately 30,000 stores with a combined annual revenue of about $40 billion. There are no major, national industry players; in fact, the companies ranked 1-50 in the industry account for a total of just 20% of sales. Unlike the independent fast food operator who must compete with McDonald's and Wendy's, the independent liquor storeowner does not have a nationally known chain from which he must draw largely satisfied customers away.
Spirits or liquors account for 40 percent of sales, wine for 30 percent, and beer for 25 percent; other products include groceries, cigarettes, and cigars. The industry experienced flat growth in 2010, which still outpaced many other types of businesses still recovering from the recent recession. Increased profits are anticipated in 2011, a result of deregulation efforts that will allow stores to purchase more products in bulk and bypass some distributors, as well as the increase in discretionary income as the nation's economy continues to gradually improve.
Demand for liquor store product is driven by consumer tastes and entertainment trends as well as personal income. But effective marketing and competitive pricing drive the choice of retailer. A larger store may be able to offer deeper discounts, but a smaller store can succeed with personal attention to the needs of each customer, in-store events such as wine-tastings, and a market knowledge that will influence purchases of specialized products.
First Steps/Key Issues
As with any type of new venture, creating a business plan is a wise place to start. Not only will this plan compel an entrepreneur to consider every aspect of liquor store operations, it is an essential step prior to seeking financing from banks or venture capitalists.
Once the plan is completed and financing is acquired, the liquor storeowner must become educated on all federal, state, city and country rules and restrictions regarding the sale or distribution of alcohol. There will be reams of paperwork to fill out and licenses to acquire.
As most communities have restrictions on liquor store locations relevant to schools and other types of institutions, the entrepreneur must also be certain that his business satisfies all zoning requirements. It is the owner's responsibility to make certain all zoning conditions are met. If the store is going into a new shopping center under construction, it is wise to check with the developer to determine whether opening a liquor store is an acceptable use of the property in terms of zoning. There have been instances where a developer has rented to a liquor store, only to later discover that he was not authorized to do so. When that happens the owner may have some opportunity for legal recourse, but the best solution is to simply avoid the problem in the first place by exercising due diligence before land or property is acquired.
Most entrepreneurs seek help from an attorney to make certain they are in compliance with all laws and regulations. A lawyer can also help in negotiating contracts with distributors. However, those who choose to go it alone can research the laws that pertain to their business on the Internet. When doing so, do not overlook restrictions regarding the hours during which alcohol can be sold. These will vary by state, and will be the primary determiner of your hours of operation. Non-compliance with these laws is considered a criminal offense.
Once any legal issues are resolved, the entrepreneur will likely focus on acquiring the equipment and inventory for his business. A short list of necessary supplies would include:
- Liquor inventory
- Point-of-Sale System
- Coolers and shelves
Inventory will come from suppliers, which will inevitably result in yet another round of paperwork from the Alcohol and Tobacco Enforcement Agency. Find a supplier or distributor that can also provide other products customers expect to find in a well-stocked liquor store, including soft drinks, mixers, napkins, straws and cups.
Start the inventory process by calling wholesale food and beverage distributors to obtain lists of the products they have to offer. If possible, do business with suppliers closest to the store, which should help to expedite delivery and allow for faster replacement of items that sell out. Most stores deal with more than one distributor, as they may vary by the types of products sold. One may carry a wider selection of wines, while another may focus more on hard liquor. Distributors who also work with convenience stores, restaurants and grocery stores in the same area may be able to offer advice on which products are most popular with local customers. To begin the search process, type "wholesale food and beverage distributors" and the name of the city where the store will be located into a search engine.
Coolers, shelves and a computer are obvious necessities, but many new businesses do not consider the importance of an efficient, reliable point-of-sale (POS) system. Customers want to make their purchase and get on with their day; if there is a line at the register, they want the line to move quickly. The POS system should be fast and reliable. In addition to checkout functionality, it should also provide inventory management and back-office administration (data on vendors, products, customers) and reports that can impact marketing and management decisions.
Make it Your Own
For many entrepreneurs, the most enjoyable part of opening a new business is the creativity that can be expressed in the name, the interior design and the atmosphere. For a liquor store business, the location and the surrounding community should be taken into consideration; should the store have an upscale appearance, or is a more basic approach advisable?
The name can be anything the owner wishes, but something simple and memorable may encourage customer retention. Also, as many stores have an online presence, try to choose a name that is not already in use, even if it is by a store in another state. "Joe's Liquor" may be easy to remember, but joesliquor.com may already be claimed on the Internet. If possible, find a store name that can double as a domain name.
A store name is often accompanied, or incorporated into, an eye-catching logo that becomes a graphic representation of the business. Entrepreneurs who are not artistic should hire a professional designer to create a logo that will resonate with customers. A search online will return a list of graphic designers that can handle the job. If the budget is tight, a storeowner might offer the opportunity to an art or advertising student at a local college, who will be happy to take on the project at little or no cost in exchange for the real-world experience.
Signs for the store that will include the selected name and logo can be obtained from stores that specialize in signage, or from quick printers or even some office supply shops. Advances in printing technology have made sign creation faster, easier and cheaper. When purchasing a sign, ask about acquiring a "Grand Opening" banner or additional graphic materials at the same time.
There is a perception that liquor stores are magnets for crimes such a burglary and shoplifting. While other factors play into these grim statistics, an entrepreneur should still take all necessary precautions to protect his investment.
Personal security is important to liquor store patrons and employees. Customers feel more confident and secure when shopping in an establishment that feels safe. A security system that incorporates video surveillance can help to protect property and employees.
Research the products of several security suppliers and choose the one that best fits the needs of the store. Keep in mind that sometimes the most extreme measures, such as bars on the doors and windows, may send the wrong message. The best security is the type that is least intrusive to the store's appearance and to the customer experience.
Even with a surveillance/security system in place, there are questions to be considered. Will employees be working at high-risk hours? Will employees work alone, or will there always be more than one in the store at any given time? Employees should also be trained on what to do if confronted with a dangerous situation. Local law enforcement agencies, community organizations and security companies offer courses on this topic.
Some liquor storeowners keep a gun on the premises. This is a personal decision for each individual entrepreneur, but those that choose to do so should make certain that the gun is licensed and that they - and their employees - are trained on firearm safety and proper use.
Entrepreneurs should also purchase adequate liability insurance to protect their investment. Be prepared to pay higher premiums than other types of retailers.
Liquor stores also face economic challenges from drug stores, restaurants and other types of businesses that are boosting their alcohol sales to offset losses in other product areas. Entrepreneurs can combat these challenges with a higher level of product expertise and customer service.
Tips for Success
There are many important elements to consider when starting a liquor store business. Here are a few additional tips to becoming a successful retailer.Location
Once local zoning laws have been satisfied, find a location that best suits the proposed type of liquor store in development - a high traffic area for a business geared toward sales volume, a more upscale neighborhood for a boutique-type retailer designed to develop closer, service-oriented relationships with customers.
Your location will influence what products you buy from a wholesale supplier. In an upscale suburban neighborhood, you might want to offer a wider selection of fine wines. If you're near a university, you'll probably sell more beer kegs. The store's location will also impact pricing and security decisions.The Competition
Entrepreneurs should measure the strengths and weaknesses of their store against others and adjust accordingly. Customers will do this as well, so it is important to stay one step ahead. Try to find a void that is not being served in the market, whether that is exotic product offerings, exceptional product knowledge, the ability to fill special orders, or in-store events.
Spend some time thinking about how customers choose the places they shop - location? The comfort and convenience of the shopping experience? Hours? Pricing? The entrepreneur should focus on the factors where he or she has a competitive advantage, and promote them in the store's marketing campaigns, such as in-store displays, newspaper and magazine advertising, and website copy.The Website
Today, many customers won't venture into a new brick-and-mortar establishment until they first review its website. This is a powerful marketing tool that can be used to build mailing lists of loyal customers, promote special offers and events, and build confidence in a new business.
However, not every liquor store needs a website. The decision to create one will depend on the store's location and clientele. A local liquor store that services the immediate market with commodity liquor may not need a site. A boutique that has a wider market area should definitely have one, or it will not be found on Internet searches.
Create a website that is easy to navigate and answers any questions a customer may have about product inventory and services offered. Hire a professional designer to create the site, or order a website template from a provider that will adapt naturally to the liquor store industry. Websites can range from $500 for the basics, to $10,000 for an interactive website that collects names, offers advice and allows for viewing merchandise.Incentives
A new liquor store must find ways to attract customers whose needs are already being met by other providers. A grand opening party, a visit from a local celebrity, a coupon in a local paper or a discount for military or other types of customers are just some incentives that might bring results.Conclusion
Liquor stores comprise one of the most stable sectors of the retail landscape, with a proven profitability that compensates for the abundance or red tape and other challenges they require. It is imperative to shorten the learning curve on this type of business, so the store is ready to start generating income from day one.
Getting ready to open a liquor store? Comcash has a POS system that is already in use by thousands of satisfied retailers. Contact us for more information.
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