Picture yourself walking into a casino. Bright lights, cash flowing, slot machines dinging away — the excitement of the environment is undoubtedly compelling. High risk, high reward is the name of the game.
If you're opening a liquor store for the first time, you might feel that same kind of excitement… and that same kind of risk.
But what if we told you that we could help mitigate some of that risk? Does medium risk, high reward sound a bit better?
There are a few key components or considerations that you can make prior to opening a store that can help you see success and an increase in revenue.
With our experience in the liquor industry, we've seen it all. We've supported countless small businesses in turning their revenue around and increasing their profits.
Is owning a liquor store profitable? By the end of this article, you'll have a better understanding of five key components that can help you ensure the answer to that question is "yes!"
Is Owning a Liquor Store Profitable? It Can Be.
No small business is ever guaranteed success.
20 percent of new businesses fail in their first two years of being open.
The liquor industry can be incredibly lucrative, but the promise of opportunity doesn't immediately translate into the promise of success.
Owning a liquor store can be a profitable endeavor if the right management and business strategies are implemented.
It's essential to consider the unique challenges associated with liquor stores, such as high theft risk, age verification concerns, regulatory compliance, and high competition.
Factors such as effective pricing strategies, inventory management, cost control, marketing, and promotions all contribute to the financial success of a liquor store. This all starts with utilizing data analytics to make informed decisions that can help exponentially increase profitability.
Here are some key components to ensuring profitable success in your liquor store.
1. Proper Inventory Management
Liquor stores profit by buying products and selling them at a higher cost. Efficient inventory management can increase profit and revenue by optimizing stock in versus stock out.
This includes regularly reviewing and updating your product mix to ensure that you carry the right products to meet customer demand.
Inventory management also means tracking what items sell well and identifying what products you should order less of. If there are certain brands or types of items that sell well, order more! Your store revenue is based on product in and product out, so use customer buying data to inform what your stock looks like.
Though spoilage is less likely to occur with alcohol than something like produce, liquor, beer, and wine still require climate-controlled environments and can eventually go bad.
You should also take seasonal stock into consideration. You may be able to purchase some seasonal products at a cheaper price if you buy them in the off-season. Efficient inventory management will allow you to plan and purchase accordingly.
Inventory management is one of the most central and impactful ways to increase revenue; you just have to let the data drive your buying decisions.
Where Do I Start?
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Start with an inventory review.
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Bottle POS' inventory management features give you visibility into product sale data and what your stock looks like.
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Analyze your products to determine the top-selling products, and what items don't move often.
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Next time you order inventory, consider those data points — buy more of what sells well, and not what doesn't.
2. Pricing Strategy
You must consider the cost of your products if you want to set a price that is both fair and profitable. However, product cost isn’t the only factor that will influence your pricing. When setting your price, factor in the following:
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Product cost
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Shipping cost
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Handling cost
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Taxes
You also must consider your competitors’ pricing when setting your own prices. Understand how much your customers are willing to pay for products, and set a competitive price that is in line with market rates, regularly adjusting them if necessary.
Your pricing strategy impacts your brand awareness and your customers' relationship with your store.
Higher prices can be associated with a more boutique or personalized experience, whereas a volume-based pricing strategy means a more transactional store vibe. Set your goals and intentions — and stick to them — but be ready to make adjustments as necessary, using real-time data to drive your decisions.
Where Do I Start?
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Take a look at your top-performing items, assess what competitors charge, and see if you can raise your price.
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Can you lower the price of items that don't sell well and still turn a profit?
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Consider the balance of supply and demand; if you know your customers will buy a specific item, consider charging more, and if you know they're reluctant to try something new, reduce the price or run a promotional sale.
3. Data Analytics
Using data and analytics to track sales, customer behavior, and other key metrics to inform business decisions is an almost-guaranteed way to increase your store revenue.
Sales forecasting can help store owners predict future sales and plan accordingly, ensuring enough stock to meet demand. This strategy can also help you decide on campaigns or create marketing promotions to compensate for seasonality and reduced sales.
Customer behavior can reveal valuable insights into their buying habits, preferences, and demographics, which can help store owners create targeted marketing campaigns so they can get their customers to buy more and try more.
Bottle POS' data and reporting give you complete visibility into how your store is performing across multiple layers of your business, which can help owners make informed decisions about their product offering, pricing, stock, and promotions.
Where Do I Start?
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Get the right platforms in place to help you better manage your store and get visibility over store analytics. Bottle POS offers a robust data and reporting system that can get you moving in the right direction.
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Examine your sales data to see if you can negotiate lower buying costs from suppliers.
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If you have specific products that fly off your shelves, order more and see if you can negotiate a lower price for a larger volume.
4. Marketing & Promotions
Outside of your in-store processes, marketing and promotions can help you drive more traffic and increase sales. Create effective promotions and marketing campaigns to attract customers, increase sales, and build brand awareness.
Use customer data to determine whose buying activities you can best influence with promotions and marketing strategies. If your demographic is made up of primarily suburban moms who purchase red wines, let that drive your marketing efforts.
Data can also provide the optimal times to run promotions to increase foot traffic and drive impulse purchases, which can help boost overall sales. If you see that most of your traffic comes in at 4:30 pm on weekdays, offer testers of new products during that window.
Bottle POS offers email and SMS marketing that can help you get your promotions directly into the hands of your customers. Effective campaigns build a positive reputation for the store, ultimately leading to returning customers and increased profits.
Customer loyalty programs are also a great way to get your customers returning on a regular basis, and Bottle POS empowers you to customize your own rewards program.
Where Do I Start?
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Take a look at your sales data. When do you see the most sales and traffic, and when do you see the least?
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Do a test run of a “buy-one-get-one” type of sale during peak hours to capitalize on increasing your ticket sales per customer.
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Provide customers with coupons that are redeemable on days you see the least amount of traffic and see if you can increase sales on slower days.
5. Retail Shrinkage Control
A crucial component of running a profitable liquor store business that is often overlooked is shrinkage control. Buying product that goes bad or is pocketed by staff before selling is simply a waste of money and should be avoided at all costs.
Keeping track of your inventory effectively and monitoring product waste can help you lower costs, ultimately increasing your store's profitability. Implementing strict inventory management practices, such as regular inventory counts and monitoring levels in real-time, can help you prevent overstock and shrinkage.
In its simplest form, cost control means spending as little as possible to achieve maximum profit. If it doesn't sell, don't stock up on it.
Additionally, ensure you conduct thorough background reviews of all staff working in your store. You may also want to employ use of a POS system that tracks the transactions of each staff member to help monitor behavior and stop shrinkage from employee theft in its tracks.
Where Do I Start?
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Review your inventory and consider products that don't sell.
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If you're throwing away a considerable amount of a specific product, or if you see any trends with shrinkage, stop ordering those items and see how your cost versus revenue may start to balance out.
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Implement a robust POS solution that tracks transactions by employee ID to monitor employee sales and behavior.
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Find a POS system that integrates with other theft prevention solutions such as security cameras.
Is Owning a Liquor Store Profitable? It Absolutely Can Be.
Owning and operating your liquor store can absolutely be profitable. It may require extensive planning, management, and maintenance, but the rewards can be incredibly gratifying. Optimizing the components we mentioned can help your store achieve profitable success.
Utilizing a platform like Bottle POS can mitigate risk by helping you make data-driven decisions to support your store's success. Data analytics and reporting take the guesswork out of your business decisions.
Let Bottle POS be your swiss army knife in accounting for all five key components we provided. Robust inventory management, an extensive product database, customizable loyalty programs, and detailed reporting are just a few ways that Bottle POS can help make sure your store is as profitable as you want it to be.
Get in touch with us and we can show you how we've helped countless other businesses find their growth and success.
