When Moishe Mayer of The Wine Cave isn’t next to the wine he loves, he loves the wine he’s next to. This kind of passion is exactly what’s needed if you’re considering swapping a life of stable, recurring paychecks for an arduous, entrepreneurial path complete with razor-thin profit margins that comes with starting a business, specifically a liquor store. But learning to swallow down grim statistics is among the first lessons on your path toward learning how to open a liquor store.
Of course, most people won’t become Gary Vaynerchuk, the serial entrepreneur who turned his family’s liquor store into a $60 million business by 2011. More realistically, most small businesses fail. But going even further, liquor stores—along with specialty foods stores and grocery stores—are among the least profitable small businesses, according to SageWorks research.
But many of the people looking to learn how to open a liquor store aren’t about the dollars and cents—they’re about chasing the kind of passion The Wine Cave’s Mayer has. If that’s you, then you’ll want to learn the secrets of how to start a liquor store successfully so you can open your own version of The Wine Cave.
How to Open a Liquor Store—and Stay Open
Mayer shared what he’s learned over the last several years, so you can take his advice as you start assembling your liquor store business plan with some strategy, beyond the fundamental nuts and bolts:
1. The modern consumer is smarter than ever before, so be an expert in your field.
Before customers get to your doorstep, you can bet they’ve already done their research with customer review sites and product ratings. Shopping is no longer something that begins when a customer enters your store; often, the experience is almost done by then. With services like Drizzly and Minibar, many customers are even trying to avoid in-person interactions altogether.
Mayer says education is what makes the difference—whether they’re reading reviews, blogs, or something else. “[Before], people didn’t know about wineries. Now people check on ratings. People check on deals. People check on how the wineries are doing.”
When you’re thinking about how to open a liquor store, you’ll want to make certain you’re prioritizing your own education. If retailers are going to impress the demands of the wiser and financially savvier consumer, they’re going to have to reach a level of mastery in their field. To stand apart from other liquor stores on the block, Mayer points to his decade-plus of experience in the alcoholic beverage industry. He worked in wineries since the age of 17 before hosting tastings for companies for several years.
“I have a lot of people come especially to me because they know I understand a little [about] how the palate works,” Mayer says. And The Wine Cave’s Yelp reviews prove that if you’re looking for suggestions on what to pair with your next dinner or simply a taste of the next exotic spirit, Mayer knows how to pass the taste test.
“If someone comes into my store and they ask me for a wine for the first time, I’ll ask them if they put sugar in their coffee,” Mayer explains. “If they put sugar in their coffee, I know that they like sweeter wines so I will give them California wine. But if they don’t, I will give them a French wine. They’re more serious drinkers. They can drink black coffee.”
But when you open a liquor store, your knowledge needs to extend beyond just your product. Smart entrepreneurs are also aware of all the other factors that affect the financial health of their business. For instance, know your neighborhood. Who are the people you’re serving? Before signing a lease, consider contacting your local Chamber of Commerce to get a better view of your target market. Will you be serving college students or conservative suburbanites? This will greatly affect the way you do business.
2. Your inventory could be both your best feature—and your biggest downfall.
When you’re putting together your business plan for how to open a liquor store—or any store with stock, frankly—among your biggest factors will be inventory. But in the liquor store business, your inventory considerations will kill your business if you don’t know how having fully stocked shelves factors into the way customers perceive your shop among the landscape of others.
For instance, The Wine Cave is “stocked from top to bottom with booze, wine, Champagne, sparkling wine, reds, whites, pinots, malbecs, and anything and everything in between,” wrote one Yelper. Skimming through the reviews, Mayer’s liquor store is also lauded for having a wide selection of bourbon—a smart business move as brown spirits continue their rapid growth among American consumers. But this kind of inventory—more than 3,000 products—costs Mayer millions.
“In order to succeed in the liquor industry, you have to have a lot of money,” Mayer says. “In order to keep up with the big stores, you have to have the top deals. So you have to have millions of dollars in inventory and that’s why a lot of liquor stores don’t make any money.”
Justin Holman writes about the overbearing inventory costs on his blog, saying that “distributors hold all the power.” He writes:
As a retail liquor store owner I am only allowed to purchase inventory from a licensed distributor. Seems reasonable to keep tabs on who’s moving liquor around the state. But, here’s the catch. Every licensed distributor has a complete monopoly on every product they sell. So, any self-respecting liquor store should have various sizes of Jack Daniels on the shelf, right? I think I’ll call around and see who has the best deal on a case of 750 ml bottles of Jack, compare prices/terms and place the order, right? Wrong. If you want to buy Jack Daniels or any other product, whether it’s a brand of beer, wine or spirits, you have your choice of exactly one distributor who carries that product. So, negotiating price isn’t an option.
This kind of business model means the bigger stores have an advantage since they’re able to afford larger bulk deals.
When you think about starting a liquor store, you’ll want to study your market’s buying habits to buy smarter. For instance, examine your receipts and inventory. What are you selling more of? Consider purchasing those products in bulk while running special offers on your slower-selling products to more quickly move your stock. You can also run special deals or host sample tastings of the slower-selling stock to cultivate interest.
3. Licensing is a state-by-state issue—don’t risk losing your business over the wrong permits.
Your dreams of opening a liquor store probably don’t include a long trail of application permits. But in the real world, that’s how business works. And obtaining those licenses requires a lot of research, time, and money.
The cost of liquor licenses vary by state—and, as you can guess, they can go well into the tens (or hundreds) of thousands of dollars. To add to the licensing headache, every city, county, and state has a different set of rules and laws. Find out what you’ll need from the Alcohol and Tobacco Tax and Trade Bureau (TTB), the entity responsible for enforcing laws “regulating alcohol production, importation, and wholesale businesses; tobacco manufacturing and importing businesses; and alcohol labeling and advertising” and licenses at the state and local level. If you don’t want to navigate the technicalities yourself, your best bet is to hire someone to do it for you—but you have to make sure you do it.
If you’ve gone through the trouble of figuring out how to open a liquor store, you don’t want to risk getting your business shut down for having the wrong permits—or no permits at all.
How to Open a Liquor Store: Additional Considerations
The factors from The Wine Cave’s Mayer will help you get a jumpstart on success, no doubt. But before you go all in on figuring out the details of how to open a liquor store, you’ll want to ask yourself a few more questions. Factor their answers into your liquor store business plan:
1. Will you buy an existing business or open a new liquor store?
You don’t have to open a liquor store from scratch; in fact, you have a few options. You can buy an existing shop going out of business, or even choose to franchise an existing liquor store, either from a larger company or a smaller business looking to expand.
Even if you’re still choosing to build from the ground up, you still might want to look around to see who is selling their business locally or semi-locally—and that’s because of inventory. As we mentioned before, with the high cost of inventory, you might be able to pick up valuable inventory at a discount if you purchase goods that someone is looking to liquidate quickly and in bulk. A little extra homework here could make a big difference for your startup costs.
2. Are you seeking investment or looking for business financing?
We might have said once or twice that there are pretty hefty upfront costs involved with opening a liquor store. When you draw up your business plan for how to open a liquor store, think about your source of business financing.
If you’re partnering with someone for an investment—maybe a fellow oenophile—make certain that you get your terms in writing (especially if it’s a friend or family loan).
As for traditional financing options, we’ll be candid: In an industry with a tough success rate and tight cash flow, you might have some difficulty convincing a lender to front you the cash for a small business loan at first. That said, you do have a few viable options for startup loans. A surprising one you might want to consider, especially if you have a strong credit score, is a 0% intro APR business credit card. Here, you can get the liquidity you need with the timeframe to get some momentum behind your new business before your balance comes due—there are even a couple of cards with 15-month intro periods. Check out our complete guide to finding liquor store financing.
3. What’s your point of difference in the market?
We’re sure you’ve chosen a location with a lot of liquor-loving customers. But if you selected that due to the presence of existing stores, your pick can backfire—that is, if you don’t select a point of differentiation.
What’s your thing? Do you carry the best rosé selection in the state, or import sherry no one’s ever heard of? Do you offer classes that teach the neighborhood the difference between pot still and column still whisky? Whatever passion led you to figure out how to open a liquor store, take it to the next level and use it to distinguish your store.
How to Open a Liquor Store: The Final Word
The common theme you might see here? Learning to start a liquor store takes money. This is a cash-intensive business, so before you go for it, make sure you’re equipped to find access to capital upfront, and commit to knowing that you’re going to have to put significant money in to get anything out.
But if you’re able to really face these entrepreneurial hurdles, give them a strategic think, and find that you still have a passion to open a liquor store, you’re well-positioned for one last piece of advice from The Wine Cave’s Mayer: Don’t forget—you’re still not the boss. The customer is the boss.
“If [your customers] walk in and they’re not happy … [then] there are no employees, there are no stores.”