Prices are going up, and many small and independent liquor stores are struggling to stay competitive.
While your instinct might be to slash prices and hope for the best, you know that won’t work in the long run. Liquor product pricing is a delicate balance, and you need to find smart pricing strategies that are good for business and for customers.
Follow this liquor pricing guide to understand average liquor store profit margins and get six expert tips on pricing strategy.
Liquor Store Profit Margins: What To Expect
To establish a baseline liquor pricing strategy, it’s helpful to understand the typical profit margins a liquor store can expect. Liquor stores typically have profit margins of 20% to 50%.
In terms of pricing, that means you’ll be marking up products 35% to 50% at a minimum. For limited release bottles and fine wines, that number will be even higher (more on that below).
But setting prices is arguably one of the most consequential choices you’ll make. You can’t just slap a fixed markup on everything and call it a day. You need to set prices that are profitable without driving your customers into the arms of the competition.
Liquor Store Product Pricing: 6 Tips
Finding the right price point for your products can be a challenge. In many cases, it’ll take some trial and error to find the right balance.
But if you follow our liquor pricing guide with these six tips, you’ll be armed with a solid foundation to maximize profits and keep customers happy.
1. Know the Competition
First things first: You’re not the only liquor store in town. People have plenty of choices when it comes to buying liquor, so it’s important to know your competition — and knowing their prices is only a small part of it.
Visit other stores and take note of various aspects like their selection, customer service, specialties, and atmosphere. Try to identify their strengths and weaknesses, and where your store fits in the market. The more you understand your brand and how your customers perceive it, the better you’ll be equipped to set appropriate pricing.
In other words, it’s not just about seeing the competition’s prices and trying to undercut them.
For example, if you run a wine store that has a curated selection and knowledgeable staff, you shouldn’t try and match your pricing with a more jack-of-all-trades liquor store. People will pay more for a better selection and shopping experience.
2. Understand Your Operating Costs
Location will play a big part in your pricing strategy, as larger stores or stores in more desirable areas will likely have much higher operating costs than those in smaller or more out-of-the-way spots.
Understand the store’s overall profitability by tallying up your expenses, including:
- Rent and utilities
- Staffing costs
- Licenses and business insurance
- Technology costs, including security systems, point of sale (POS) system, etc.
- Shrinkage losses
- Monthly inventory costs
- Marketing
Doing this will not only help you understand what kind of revenue you need to pull in to turn a profit, but it might help you identify opportunities to cut expenses before you raise prices.
That said, for most stores, the biggest expense will still be your inventory. Having an accurate view of your operating costs also gives you an honest picture of your cost per product (overhead + wholesale price). This will help you determine an appropriate markup.
3. Price Appropriately for Different Products
Some liquor store owners will do what’s easiest and put a standard markup on every product. Not only is this not great for your customers, but in some cases, you might be leaving money on the table.
Beer, wine, and liquor attract different types of customers, have different production costs, and have different potential profit margins. Understanding the profit margins by product type helps you dial in a pricing strategy that works for your business and your customers.
Here are some ballpark profit margins for beer, wine, and liquor:
- Beer: Aim for a profit margin of 20–25% for domestic brands and 30–45% for imported and craft beers.
- Wine: Table wines usually have about a 30–40% profit margin, but premium wines are closer to 45–55%, and luxury wines can have profit margins as high as 70%.
- Liquor: Spirits can be a bit all over the place. With well liquors, aim for a margin of 35–45%, 45–55% for premium spirits, and 50–75% for top-shelf brands.
An important note: The markup you apply to a product does not equal the same profit margin. For example, a bottle of wine that you buy wholesale for $10 and sell at $15 will have a 50% markup and a 33% profit margin.
Of course, these numbers are only a rough guideline, not a hard and fast rule. To get more exact recommendations, try out our suggested pricing tool.
4. Use Sales Data To Optimize Pricing
Having visibility into your store performance is invaluable when it comes to setting prices. Use the reports and analytics on your point of sale system to get an unbiased view of sales and inventory data.
Using this data, you can:
- Spot seasonal trends so you can adjust prices accordingly (and prevent overstocking less popular items).
- Determine your bestselling items and product categories.
- Understand your profit margins per item, supplier, or using custom product tags based on your specialities (e.g. craft distilleries, hazy IPAs, etc.).
- Monitor the effects of pricing changes, promotions, and events.
- Leverage customer loyalty data to see what types of products your repeat customers are most interested in.
It’s easy to get a little too obsessed with the numbers, and the reports on your POS system aren’t a replacement for good intuition. But if you have a hunch that you might have missed the mark on pricing certain products, you can use your reports to back up (or disprove) it.
5. Run Regular Sales and Discounts
Optimizing your pricing and optimizing your inventory go hand in hand. Sales and discounts aren’t just for big events and holidays, they can also be used to:
- Sell slow-moving inventory.
- Boost awareness of a new product or brand.
- Test out the effectiveness of different price points or strategies.
- Upsell customers on supplemental items that wouldn’t usually be sold on their own (e.g. bitters, mixers, etc.).
Don’t run discounts randomly. Use historical data to spot what types of products your customers are most interested in. Customers might be drawn in by the promise of a good deal on a particular item, but end up browsing and buying a few extra items while they’re there.
Related Read: Promoting Liquor Products: 7 Sales-Boosting Strategies To Try
6. Upsell Customers With Tailored Bundles and Selections
Prices have gone up lately across the board, which makes many customers more hesitant to splurge on nicer bottles. However, simply lowering your prices isn’t always a successful strategy — especially if you’re competing against bigger chains.
Instead, try offering expert advice and curated selections to boost customers’ confidence and upsell them. Use signage to highlight staff picks or unique selections (and maybe pair those picks with a discount).
You can also use your POS system to make custom product bundles, like cocktail sets or regional wine selections.
Many customers choose a smaller liquor store for personalized recommendations. Creating special product bundles and expert signage helps extend that curated atmosphere without putting all the burden on your staff.
Get Better Visibility and Insights With the Right Technology
Dialing in the right liquor pricing strategy isn’t easy — but it’s even harder if you’re spending most of your day preparing invoices and counting inventory.
Using industry-specific tools like Bottle POS saves liquor store owners and staff significant time on daily tasks while giving them an unbiased view of store performance. Armed with better processes and insights, you’ll be better equipped to make better pricing decisions that are better for your customers and your bottom line.
Try our build and price tool to create a POS package that will modernize your store, boost customer satisfaction, and help your business grow.
