How to Grow a Small Liquor Store into a Big Business by Liquor Store Profits

Liquor Profits Store Revenue Optimization

#21

How to Grow a Small Liquor Store into a Big Business Alex Flasinski, Store owner + online expert

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HOW TO GROW A SMALL LIQUOR STORE INTO A BIG BUSINESS WRITTEN BY: ALEX FLASINSKI

What is the difference between small liquor stores and larger liquor stores? As far as I am concerned, there is only one difference and it is the amount of inventory that the small versus the large liquor store has. So, what makes a small liquor store, a small liquor store? It does not necessarily have to do with the space. The space of your store isn't the determining factor of whether you are small or large, whether you are small or large is the amount of inventory you have. There is a pretty good reason for it. And it is not like somebody came up with this as a barrier to entry, but it just happened organically.

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As you know, if you have a liquor store, it's pretty hard to buy everything on top deal, but in order to stay competitive and in order to have the best prices, you have to buy everything on top deal. So, by buying everything on top deal means you need a lot of inventory. Right now, in Pike's, we have a little bit less than $1 million in inventory and it's nowhere near enough. I think we need double the amount that we have now to stay competitive with our competition. How do you do it, right? How do you start? I see a lot of people ask me questions that they want to buy a liquor store with a hundred thousand dollars inventory, $50,000 inventory, $200,000 inventory, whatever it may be. That is not a lot of inventory. Like I said, we have about a million right now and I remember about five years ago, we had about $150,000 in inventory. When I took over the business, the $150,000 inventory was pretty much steady for about 10-15 years. It went up and down a little bit, but it never went lower than like a hundred thousand and never went more than $200,000 a year. And of course, your inventory is going to fluctuate depending on the time of year, because in October, November, and December, you are selling more, hence you're buying more, right? So, your inventory is also going up. And so, how do you do it? There is no secret formula. It took us five years to get from $150,000 to about $1M. However you want to break that down, that is like $850,000 divided by five, about $150,000-$200,000 per year added into the inventory. And unfortunately, it does not come from the distributors and it does not come from your customers, but it comes very slowly from your customer. So, you are buying alcohol, you're selling it, you have your profit margin, you're paying yourself, you're paying your employees, you're paying your rent, you're improving your advertising. But the fact remains that to get bigger, you need to continue increasing your inventory. And so, you can only do this on a year by year basis. We are in a situation now where I'm tired of going slowly so I'm actively looking for an investor. We are looking for an investor to boost our inventory because, like I said earlier, I think we need about $2 million in inventory. About double what we have now, just because what we have is not enough. We're constantly running out of the stuff that turns.

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For example, right now I'm sampling a little bit of Foursquare 2008. This stuff is great, by the way. Anyway, this is easy to buy, right? Because the top deal and the distributor is one. But now that we have, we expanded our running section. For example, every new rum you bring in, every new whiskey you bring in, every new wine you bring in, that is not top deal from the company, there's a risk that you're not going to be able to sell it within 30 days, within one year. Okay. It might be a dud. And so, what are you going to do other than drink it? This one sells well, no doubt, and it is delicious. It puts you in a tight spot as far as inventory. It's safe to assume that if the distributor you are working with requires you to buy like 50 cases of something to get the top deal. It is safe to assume that it will generally sell itself at the right price. Whether that's Tito's obviously, or like Apothic Red, I'm looking around, like for example, Wray and Nephew, I had to buy a hundred cases of Wray and Nephew in order to get the top deal. So up until last year, it was outside the realm of possibility for Pike's, taking a hundred cases of Wray and Nephew is a large drop. That is like $20,000-$30,000 right there. Once you have that, I think it is your responsibility to price it low, to build the customer's trust and to have the regular drinkers of that stuff come and buy it from you. And in the meantime, since you are buying from the larger distributor, you always have the option of asking your sales rep or asking their merchandiser to give you some merchandise, like some hats, maybe some t-shirts. That is cool, but what they can do to push the brand is put it in your window display. They can order some special displays for most items. You can book tastings. You can just ask for support, so that's cool. What's not cool is ordering things like Foursquare 2008, it is a bad example. But, this 4

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kind of Japanese whiskey here, I bought this because we wanted a larger Japanese whiskey section. And I just wanted the customers to have more selection. Let's assume I pay $2,000 for two cases of this. We probably sold three or four bottles in the past year of it. Now I would not say it's a dud. Yes, it is not selling well enough, but without it, we wouldn't have that larger Japanese section. We probably would not sell as much of the other Japanese stuff that we do. But those $2,000 came straight from profit. It's not coming from revenue; it is but, the way I look at it is, you're generating revenue, but every time you want to go out and buy a new product, you have to go and buy that with your profit earned. It is not coming out of the revenue that is repeating. You are buying 30 cases of Tito's and you are selling 30 cases of Tito’s. But now, you want to buy the new Tito’s XXL, so you must go into your pocket and buy that. And that is how you step by step, increase your inventory without really thinking about it. Every time you're buying that new product in your store, every time you're expanding your selection, you have to put your profit into your inventory as opposed to just having the, for example, for 10 years we had $150,000 of inventory and it didn't really fluctuate much. Because we were not buying that many new products. The extent of buying our new products was, if a customer came in and asked for something. It was not in anticipation of a new trend. Like, for example, right now the rum trend, which by the way, you should be buying rum. If you have a liquor store. It is great, low deals, and there is a large community of rum buyers out there. Just like whiskey. Just not as popular as whiskey yet. In conclusion, it is exceedingly difficult to increase your inventory. And there's no other way than generating profit and deciding to, instead of paying yourself or buying a new house or whatever, you have to buy more inventory, which somebody else is going to pay for that inventory in the end. Anyway, you are probably going to plan on selling the

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business at some point or, walking away from it in some way, and your inventory is there to sell. So hopefully you do not buy too many of the wrong products. Another thing that I honestly believe in, and we do often is a clearance sale. So, if you do have inventory, you bought 10 cases of some wine or some rum that is just sitting, open a bottle, try it, and see if it is good. If it is good, have customers start trying it. if you have a website, put it on your clearance section on your website, make a clearance section in your store, physically, and sell the stuff that is not selling. It is obviously much easier said than done, especially with something like this Yamato Japanese whiskey that I showed earlier where the bottle costs $40. So, even if I am selling it at cost, it is just not that enticing. Hard work, blood, sweat and tears, and get that out of your store. Anyway, please let me know what everyone thinks. Please leave a comment. If you are a liquor store owner, what do you think about increasing inventory?

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EDITORIAL POLICY / DISCLAIMER: Liquor Profits - Store Revenue Optimizationâ&#x201E;˘ is an Editorial News Publication. Any company names or brand names mentioned and reported on, may be trademarks of their respective owners. Our publication or website is NOT endorsed by these in any way. We are sharing this content with our readers and the Liquor Store Profitsâ&#x201E;˘ Community for social and news editorial purposes only. Cover Image Licensed from: 123RF.com / Natdanai Pankong. Other Image Credit: Radub85, Foursquare 2008, Tito's, Apothic Red, and Yamato Japanese Whiskey