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Is Owning a Liquor Store Profitable?

Is Owning a Liquor Store Profitable?
The Siliconreview
22 September, 2020

A liquor store is considered one of the most profitable types of businesses with no off-seasons. They differ from restaurants and bars because they sell alcoholic beverages for individuals to purchase and enjoy elsewhere. This type of business is often called wholesaling. Owners of liquor stores rake in a sizeable amount of profit depending on their business size and other variable factors.

Some of these factors include the sales, overhead, and location of the shop. This article provides information on the profit margin and ways to improve the profitability of your liquor shop.

Nowadays, in order to be profitable every liquor selling business needs a Liquor Store POS System.

What is the Average Profit Margin of a Liquor Store?

The profit your liquor store makes on an average depends on a plethora of variable factors. The most notable of these factors are location, sales, and overhead. Location plays a significant role in the profit of your store. 

For instance, liquor store stores in low-end locations made an average profit between $47,000 and $70,000 in 2011. At midrange locations, liquor stores made a profit of around $100,000 to $150,000.

Pros and Cons of Owning a Liquor Store

Before you decide to start your own liquor store business, here are some things to consider. Like all businesses, liquor stores have their pros and cons. Some of the pros include:

  • It is Recession Proof: Liquor stores thrive even during a recession. When the economy wobbles, the demand for alcohol skyrockets. People often turn to alcohol to relax a little bit, so no matter how bad the economy gets, your bottom line is safe.
  • Year-Round Demand: Liquor business, unlike other businesses, is not seasonal. Yearlong, liquor remains in high demand. You may find that some alcoholic beverages are more popular during a specific time of year, e.g., Gin in winter. However, the overall industry runs year-round with plenty of demand.
  • Low Competition Due to State Regulations: Each state limits the number of liquor stores in a geographic area, particularly in small towns. A probable reason for this is to keep people from being too tempted by easy access to alcohol. This state placed limitation is to your benefit as a liquor store owner. The limitation reduces the chances that other liquor stores will be opening near your location. Very few other retail businesses can be found with such limited geographical competition.

As stated earlier, all businesses have downsides/cons. For the liquor shop business, a few of the cons are

  • High Cost of Inventory: For this business, you will need substantial upfront investment for stocking up on inventory. The amount required can be daunting. One tip is always to ensure you check out the inventory age to determine if there's a reason it's still on the shelves. 
  • High Cost of License: Acquiring a liquor license can be a daunting and expensive process. As a result, we suggest that you carry out due diligence to understand your location's laws inside and out. Before you get too far into starting your store, make sure you understand the specifics, including the licensing cost for that location.

How Can I Increase the Profit of My Liquor Store?

Here are some tips on how to increase the profit of your liquor store.

Buy what is in Demand in Your Locality

Tailoring your buying strategy to products likely to sell well in the area you're operating in is a great way to boost sales. If your business is in an area populated with low-income households, focus on buying liquor that will sell easily. Liquor products like cheap beers and spirits will sell faster and more readily here. Look for distributors willing to give you a large discount for buying in bulk and pass some of the savings on to your customers. 

If you live in a high-income area and find that you're selling a high volume of mid-market wines and fine spirits, focus more on quality. You may consider consulting a wine writer or sommelier about the range of wines you should stock. 

Offer classes on popular products

You can teach customers about the specific products you offer. Mixology classes are a great way to pass your knowledge on to your customers. Customers can have a great time mixes some of their favorite brands under your tutelage.

Host Weekend Cocktail Parties

You can also host wine-tasting sessions. Cocktail sampling allows your customers to try something they might not otherwise consider. By offering these tastings on the weekend, you increase your chances of selling the product you're promoting. You can choose to partner with the liquor distributors about these events. They can suggest drink recipes and even send out a representative to help with the tasting.

Start a Wine or Beer Club

Consider selling other items that pair well with the liquor products you sell. If wine is a specialty item, you can offer various cheese, crackers, wine glasses, etc.

If your liquor store is a small one with an attached bar and or restaurant, you stand a higher chance of making more profit.

Run frequent promotions to increase feet traffic 

For this, you can give price reductions to customers buying in bulk. Your offers may include: Buy one bottle, get another half price, and slashing the cost of certain lines intermittently. Ensure your potential customers know of these offers by promoting them on a signboard outside your store or on your window posters.

Conclusion

Running a liquor shop is a profitable business. It has no off-seasons, and even in a recession, it is still a money cow. This article gives you some ideas on how to make your liquor shop business even more profitable. Simple things like wine tasting, promotion offers, and even starting a wine club could improve your average profit. Implement these ideas to increase the profits of your liquor shop.